Unit 2.Money

Reading

1. Find Russian equivalents to English words and expressions:

• the means of payment;

• medium of exchange;

• a standard of value;

• a unit of account;

• a store of value;

• a standard of deferred payment;

• a barter economy;

• to hand over in exchange;

• a double coincidence of wants;

• a monetary unit;

• an interest-bearing bank account;

• to pay interest;

• hard currency;

• soft currency;

• commodity money;

• token money;

• legal tender;

• IOU money;

• a bank deposit.

2. Insert the missing letters:

The m_ _ns of pa_ment; e_ _hange; a stand_ _d of val_e; a unit of a_ _ount;

a sto_e of value; a standard of def_ _red pa_ment; a double c_ _n_idence of wants; c_rren_y; c_mmodity money; depo_it.

3. Match the words and their definitions:

1. an interest-bearing bank account	a. средство обращения
2. soft currency	b. счет в банке с выплатой процентов
3. hard currency	c. средство погашения долга
4. to hand over in exchange	d. мера стоимости
5. to pay interest	e. неконвертируемая валюта
6. a standard of value	f. передать, вручить в обмен
7. a unit of account	g. средство платежа
8. a double coincidence of wants	h. приносить процентный доход
9. token money	i. средство сохранения стоимости
10. the means of payment	j. твердая (конвертируемая) валюта
11. a standard of deferred payment	k. двойное совпадение потребностей
12. commodity money	l. единица учета
13. a store of value	m. символические деньги (дензнаки)
14. a monetary unit	n. деньги – товар
15. medium of exchange	o. денежная единица
16. a bank deposit	p. законное платежное средство
17. legal tender	q. вклад в банке

4. Discuss the following questions before you read the text:

• Can you give a definition of money?

• What functions of money do you know?

• What does IOU stand for?

• Why do people accept money?

5. Read the following text and find out whether you are right or not:

Money and its Functions. Although the crucial feature of money is its acceptance as the means of payment or medium of exchange, money has other functions. It serves as a standard of value, a unit of account, a store of value and as a standard of deferred payment. We discuss each of the functions of money in turn.

The Medium of Exchange. Money, the medium of exchange, is used in one-half of almost all exchange. Workers exchange labour services for money. People buy and sell goods in exchange for money. We accept money not to consume it directly but because it can subsequently be used to buy things we do wish to consume. Money is the medium through which people exchange goods and services.

To see that society benefits from a medium of exchange, imagine a barter economy.

A barter economy has no medium of exchange. Goods are traded directly or swapped/or other goods.

In a barter economy, the seller and the buyer each must want something the other has to offer. Each person is simultaneously a seller and a buyer. In order to see a film, you must hand over in exchange a good or service that the cinema manager wants. There has to be a double coincidence of wants. You have to find a cinema where the manager wants what you have to offer in exchange.

Trading is very expensive in a barter economy. People must spend a lot of time and effort finding others with whom they can make mutually satisfactory swaps. Since time and effort are scarce resources, a barter economy is wasteful. The use of money – any commodity generally accepted in payment for goods, services, and debts – makes the trading process simpler and more efficient.

Other Functions of Money. Money can also serve as a standard of value. Society considers it convenient to use a monetary unit to determine relative costs of different goods and services. In this function money appears as the unit of account, is the unit in which prices are quoted and accounts arc kept.

In Russia prices are quoted in roubles; in Britain, in pounds sterling; in the USA, in US dollars; in France, in French francs. It is usually convenient to use the units in which the medium of exchange is measured as the unit of account as well. However there are exceptions. During the rapid German inflation of 1922 – 1923 when prices in marks were changing very quickly, German shopkeepers found it more convenient to use dollars as the unit of account. Prices were quoted in dollars even though payment was made in marks, the German medium of exchange.

The situation in Russia nowadays reminds of that of in Germany.

Money is a store of value because it can be used to make purchases in the future.

To be accepted in exchange, money has to be a store of value. Nobody would accept money as payment for goods supplied today if the money was going to be worthless when they tried to buy goods with it tomorrow. But money is neither the only nor necessarily the best store of value. Houses, stamp collections, and interest-bearing bank accounts all serve as stores of value. Since money pays no interest and its real purchasing power is eroded by inflation, there are almost certainly better ways to store value.

Finally, money serves as a standard of deferred payment or a unit of account over time. When you borrow, the amount to be repaid next year is measured in pounds sterling or in some other hard currency. Although convenient, this is not an essential function of money. UK citizens can get bank loans specifying in dollars the amount that must be repaid next year. Thus the key feature of money is its use as a medium of exchange. For this, it must act as a store of value as well. And it is usually, though not invariably, convenient to make money the unit of account and standard of deferred payment as well.

Different Kinds of Money. In prisoner-of-war camps, cigarettes served as money. In the 19th century money was mainly gold and silver coins. These are examples of commodity money, ordinary goods with industrial uses (gold) and consumption uses (cigarettes), which also serve as a medium of exchange. To use a commodity money, society must either cut back on other uses of that commodity or devote scarce resources to producing additional quantities of the commodity. But there are less expensive ways for society to produce money.

A token money is a means of payment whose value or purchasing power as money greatly exceeds its cost of production or value in uses other than as money.

A $10 note is worth far more as money than as a 3x6 inch piece of high-quality paper. Similarly, the monetary value of most coins exceeds the amount you would get by melting them down and selling off the metals they contain. By collectively agreeing to use token money, society economizes on the scarce resources required to produce money as a medium of exchange. Since the manufacturing costs are tiny, why doesn't everyone make $10 notes?

The essential condition for the survival of token money is the restriction of the right to supply it. Private production is illegal.

Society enforces the use of token money by making it legal tender. The law says it must be accepted as a means of payment.

In modem economies, token money is supplemented by 10 U money.

An IOU money is a medium of exchange based on the debt of a private firm or individual.

A bank deposit is IOU money because it is a debt of the bank. When you have a bank deposit the bank owes you money. You can write a cheque to yourself or a third party and the bank is obliged to pay whenever the cheque is presented. Bank deposits are a medium of exchange because they arc generally accepted as payment.

6. Agree or disagree:

1. Although the crucial feature of money is its acceptance as the means of payment or medium of exchange, money has no other functions.

2. Money, the medium of exchange, is used in one-half of almost all exchange.

3. Money is the medium through which people exchange goods and services.

4. A barter economy has the medium of exchange.

5. In a barter economy, goods are traded indirectly.

6. Trading is very cheap in a barter economy.

7. In Russia prices are quoted in pounds sterling; in Britain, in roubles; in the USA, in US francs; in France, in French dollars.

8. Money is a store of value because it can be used to make purchases in the future.

9. Money serves as a standard of deferred payment or a unit of account over time.

10. A bank deposit is IOU money because it is a debt of the bank.

7. Translate the following expressions into Russian and use some of them in the sentences of your own:

• exchange labour services for money;

• hand over in exchange a good or service;

• a double coincidence of wants;

• spend a lot of time and effort;

• make mutually satisfactory swaps;

• a barter economy is wasteful;

• commodity generally accepted in payment for goods;

• prices arc quoted and accounts are kept;

• the rapid German inflation;

• its purchasing power is eroded by inflation;

• it's usually but not invariably convenient;

• cut back on other uses;

• exceeds its cost of production;

• by collectively agreeing;

• the survival of token money;

• society enforces the use of token money;

• token money is supplemented by IOU money;

• interest-bearing bank accounts.

8. Fill in the gaps with the words and expressions from the text:

1. The crucial feature of money is its acceptance as __ or __.

2. People buy and sell goods __ for money.

3. In a barter economy goods are traded directly or __ other goods.

4. People must spend a lot of __ finding others with whom they can make mutually __.

5. Society considers it convenient to use __ to determine __ of different goods and services.

6. The unit of account is the unit in which prices are __ and __ are kept.

7. During the rapid German inflation German shopkeepers found it __ to use dollars as __.

8. Money is a store of value because it can be used __.

9. Nobody would accept money as payment for goods supplied today if the money was going __.

10. Since money __ and its real __ power __ by inflation, there are almost certainly better ways to store value.

11. UK citizens can get bank loans __ the amount that __ next year.

12. When you borrow, the amount to be repaid next year is measured in __.

13. __ are ordinary goods with __ (gold) and __ (cigarettes), which also serve as a medium of exchange.

14. To use a commodity money, society must either __ other uses of that commodity or devote __ to producing __ of the commodity.

15. A token money is a means of payment whose __ as money greatly __ its cost of production or value in uses other __.

16. By __, society economizes on the scarce resources required to produce money as __.

17. The essential condition for the survival of token money is __ to supply it.

18. Society enforces the use of token money by making it __.

19. In modem economies, token money __ by __.

20. An IOU money is a medium of exchange based on __ .

21. __ is IOU money because it is a debt of the bank.

9. Translate the following words combinations without using a dictionary:

• средство платежа;

• средство обращения;

• мера стоимости;

• средство погашения долга;

• в обмен на;

• обмениваться товарами и услугами;

• бартерная экономика;

• обесцененный;

• покупательная способность;

• промышленное использование;

• денежные знаки;

• денежная стоимость;

• ограничение права;

• долговое обязательство

10. Study the following words:

• various – различный

• a measure – мера

• value – стоимость

• a means of – средство

• an exchange – обмен

• an employer – наниматель

• relative относительный

• convenient – удобный

• a tax-collector – сборщик налогов

• a disadvantage – неудобство

• to be worth – стоить чего-либо

• a coin – монета

• doubtful сомнительный

11. Read the text and answer the questions after it:

Money has various uses in modern world: it is a measure of value of goods and services, a means of exchanging such goods and services and a way to store up buying (purchasing) power so that one can use it later. As a measure of value, it is obviously of the very greatest use. If I work in an office, how can my employer know what to pay me for my services if there is no generally recognized measure of value? He may decide to pay me a certain number of loaves of bread each week, but then I shall have to exchange some of these loaves for other things that I need: and how am I to know how many loaves of bread I should give for a pair of shoes or for the rent of my house, for example? Money gives us a very useful means of measuring such relative values.

Money is also of great use as a means of exchanging goods and services. If, for example, I am a shoe-maker, it will not be all convenient to me always to have to exchange the shoes I make for other goods and services. A doctor may want to buy a pair of shoes from me, for example, but I may not need medical care, so he will then have to find something else that I want, or to look for another shoe-maker who needs him. Without money the tax-collector would come back to his office with an extraordinary collection of objects.

Considered as a means of storing up buying power, money has good and bad points. It can more easily be kept a long time than such things as food, which rots, or buildings which slowly fall to pieces, or machines which rust.

But modern money has some very serious disadvantages as means of storing up buying power. In the old days, when money was in the form of gold and silver coins, the metal in each was really worth amount stamped on the coin. But the paper in modern paper money and even the metal in most coins are worth very much less than the amount written on them/ As a result, the buying power of modern money can change very greatly in a short period of time.

Questions:

1. What are the main uses of money?

2. What can you say about modern money and its disadvantages?

3. Why is saving money sometimes necessary?

4. What is the meaning of money you know?

12. Make up sentences of your own using the following expressions:

• various uses

• a measure of value

• goods and services

• will not be all convenient

• tax-collector

• good and bad points

• serious disadvantages

• paper money

• buying power

10. Fill in the gaps:

a)

money economy money systems precious metals exchange

system of exchange a system of barter

Almost every society now has a_____________ based on coins and paper notes of one kind or another. However, this has not always been true. In primitive societies________________was used. Barter was a system of direct exchange of goods. Somebody could_______________ a sheep, for example, for anything in the market place that they considered to be equal value. Barter however was a very unsatisfactory system because people's precise needs seldom coincided. People needed a more practical_________________, and various_______________ developed based on goods, which the members of a society recognized as having a value. Cattle, grain, teeth, shells, features, skulls, salt, elephant tusks and tobacco have all been used. ___________________gradually took over because, when made into coins, they were portable, durable, recognizable, and divisible into larger and smaller units of value.

b)

monetary worth paper money coin actual metal content

A___________________ is a piece of metal, usually disc-shaped, which bears lettering, designs or numbers showing its value. Until the 18th and 19th centuries coins were given_________________ based on the exact amount of metal contained in them, but most modern coins are based on face value, the value the governments choose to give them, irrespective of the___________________. Coins have been made of gold (Au), silver (Ag), copper (Cu), aluminum (Al), nickel (Ni), lead (Pb), zinc (Zn), plastic and in China even from pressed tealeaves. Most governments now issue _________________ in the form of notes, which are «promises to pay». Paper money is obviously easier to handle and much more convenient in the modern world. Checks, bankers, cards and credit cards are being used increasingly and it is possibly to imagine a world where «money» in the form of coins and paper currently will no longer be used.

c)

exchange economy barter is selling

double coincidence of wants

As long as specialization was limited, desirable trades were relatively easy to uncover. As the ________________ developed, however, greater specialization in the division of labor increased the difficulty of finding goods that each trader wanted to_________________. Rather than just two possible types of producers, there were, say, a hundred types of producers, ranging from potters to shoemakers. The potter in need of new shoes might have trouble finding a shoemaker in need of pots. _______________ depends on a double coincidence of wants, which occurs only when traders are willing to exchange their product for what the other______________. The cobbler must be willing to exchange shoes for the pots offered by the potter, and the potter must be willing to exchange pots for the shoes offered by the cobbler. Not only might this_______________________ be hard to find but after the two traders connect they would also need to agree upon a rate of exchange - that is, how many pots should be exchanged for a pair of shoes? Increased specialization made the barter system of exchange more time-consuming and cumbersome.

11. Make up a plan of the text «Money» and retell the text, according to your plan. Use the following words and expressions:

It is proved, obviously, evidently, apparently, there is no doubt, beyond question, indisputably, unquestionably, it is clear that…, considering, on the one hand, on the other hand, hence, it is evident that…, it is known that…, we are quite familiar with…, it should be pointed out…, in fact, thus, it is well known, consequently, therefore, so.

12. Translate the sentences into English without using a dictionary:

1. В современной экономике деньги выполняют пять функций:

• мера стоимости (заключается в том, что в деньгах мы выражаем стоимость всех других товаров);

• средство обращения (с помощью денег мы меняем один товар на другой, обмен товаров, совершающийся с помощью денег, называется товарным обращением);

• средство накопления;

• средство платежа, расчета (деньги выполняют эту функцию тогда, когда расчет за товары и услуги производится не сразу - кредитование и оплата труда).

2. Под денежным обращением понимается процесс непрерывного движения денег в наличной и безналичной формах, обслуживающий процессы обращения товаров и услуг, движения капитала.

3. Чтобы яснее представить преимущество денежного обращения перед обменом одного товара на другой (то, что называется бартером), достаточно отметить, что для бартера надо найти покупателя для своего товара, и чтобы этот покупатель имел товар, в котором вы нуждаетесь.

4. Денежное обращение ликвидирует недостатки бартерного обмена:

   1. Акт продажи и покупки за деньги может быть отдален друг то друга. Вы можете продать свой товар, получить за него деньги, а затем купить за них нужный вам товар в удобное вам время и в удобном месте.

   2. Деньги дают возможность осуществить несравненно больший выбор товаров и партнеров по торговым сделкам.

   3. Самое главное их достоинство - то, что они выступают в качестве всеобщего эквивалента стоимости, и именно поэтому обладают всеобщей покупательной способностью, а, следовательно, служат универсальным средством обмена.

5. Под безналичными деньгами понимаются средства на счетах в банках, различные депозиты (вклады) в банках, депозитные сертификаты и государственные ценные бумаги. Эти вклады называются также банковскими деньгами.

13. Render the text: