Text 2. Money

In the modern world we take money for granted. However, pause for a moment and imagine what life would be like without money. Suppose that you want to consume a particular good or service, such as a pair of shoes. If money did not exist, you would need to barter with the cobbler for the pair of shoes that you want. Barter is the process of directly exchanging one good or service for another. In order to purchase the pair of shoes, you would need to have something to trade for the shoes. If you specialized in growing peaches, you would need to bring enough bushels of peaches to the cobbler’s shop to purchase the pair of shoes. If the cobbler wanted your peaches and you wanted his shoes, then a double coincidence of wants would exist and trade could take place. But what if the cobbler did not want your peaches? In that case you would have to find out what he did want, for example, beef. Then you would have to trade your peaches for beef and the beef for shoes. But what if the person selling beef had no desire for peaches, but instead wants a computer? At some point it would become easier to make the shoes yourself or to just do without.

Money evolved as a way of avoiding the complexities and difficulties of barter. Money is any asset that is recognized by an economic community as having value. Historically, such assets have included, among other things, shells, stone disks (which can be somewhat difficult to carry around), gold, and bank notes.

Regardless of what asset is recognized by an economic community as money, in general it serves three functions:

1. money is a medium of exchange;

2. money is a measure of value;

3. money is a store of value.

Money is a medium of exchange. Used as a medium of exchange, money is accepted as payment for goods and services (and debts), which means that parties to a transaction no longer need to barter one good for another. You can sell your peaches for money and purchase the desired shoes with the proceeds of the sale. As a medium of exchange, money tends to encourage specialization and division of labour, promoting economic efficiency.

Money is a measure of value. As a measure of value, money makes transactions significantly simpler because it serves as a yardstick for measuring the prices of goods and services.

Using money as a measure of value reduces the number of prices determined in markets and vastly reduces the cost of collecting price information for market participants. Instead of focusing on such information, market participants can focus their effort on producing the good or service in which they specialize.

Money as a store of value. Money can also serve as a store of value, since it can quickly be exchanged for desired goods and services. It can be held for future purchases; it is a repository of purchasing power over time. Many assets can be used as a store of value, including stocks, bonds, and real estate. However, there are transaction costs associated with converting these assets into money in order to purchase a desired good or service. These transaction costs could include monetary fees as well as time delays involved in the liquidation process.

In contrast, money is a poor store of value during periods of inflation, while the value of real estate tends to appreciate during such periods. Thus, the benefits of holding money must be balanced against the risks of holding money.

Exercise 11. Answer the questions.

1. What is barter? What are its advantages and disadvantages? 2. What can be used as money? 3. What are the functions of money? Describe them. 4. Why did cavemen not need money? Explain your opinion.

Exercise 12. Translate into English.

Cпоживати товари та послуги, обмінюватися товарами, купувати, подвійний збіг бажань, актив, мати цінність, сторони угоди, засіб обміну, незважаючи на, поділ праці, міра вартості, засіб нагромадження, операційні витрати, грошова комісія, зростати в ціні, акції, облігації, нерухомість.

Exercise 13. Complete the sentences with the following word-combinations: store of value, barter system, unit of account, medium of exchange, double coincidence of wants.

1. The difficulty with a … is that in order to obtain a particular good or service from a supplier, one has to possess a good or service of equal value, which the supplier also desires. 2. In a barter system, exchange can take place only if there is a … between two transacting parties. 3. Money effectively eliminates the double coincidence of wants problem by serving as a … that is accepted in all transactions, by all parties, regardless of whether they desire each others' goods and services. 4. Money also functions as a … , providing a common measure of the value of goods and services being exchanged. 5. Money may not be the best … because it depreciates with inflation.

Exercise 14. Match the terms to the definitions.

Term	Definition
1. consume	a) a useful or valuable thing, person, or quality
2. barter	b) a general increase in the prices of goods and services in a country
3. asset	c) to buy goods and services to use yourself
4. transaction	d) exchange (goods or services) for other goods or services without using money
5. real estate	e) property in the form of land and buildings
6. inflation	f) an instance of buying or selling something; a business deal

Exercise 15 .Solve the problem.

There are three goods produced in an economy by three individuals:

Good	Producer
apples	orchard owner
bananas	banana grower
chocolate	chocolatier

If the orchard owner likes only bananas, the banana grower likes only chocolate, and the chocolatier likes only apples, will any trade between these three persons take place in a barter economy? How will introducing money into the economy benefit these three producers?

Exercise 16 .Put the verbs in brackets into the correct form to complete unreal conditional sentences.

1. Imagine what life (be) like without money. 2. If money (not/exist), you (need) to barter. 3. In order to purchase the pair of shoes, you (need) to have something to trade for the shoes. 4. If you (specialise) in growing peaches, you (need) to bring enough bushels of peaches to the cobbler’s shop. 5. If the cobbler (want) your peaches and you (want) his shoes, then the double coincidence of wants (exist). 6. As the number of goods in our economy (grow), the number of good-for-good prices (grow) rapidly.

Exercise 17. Translate into English.

1. Бартер - це процес прямого обміну одного товару або послуги на інші. 2. Гроші - це будь-який актив, який визнається економічним суспільством як такий, що має цінність. 3. У бартерній системі обмін може відбутися лише за умови подвійного збігу бажань між двома сторонами угоди. 4. Гроші заохочують спеціалізацію та поділ праці, сприяючи економічній ефективності. 5. Використання грошей як міри вартості зменшує кількість цін, визначених на ринку, а також значно зменшує вартість збору цінової інформації для учасників ринку. 6. Учасники ринку можуть зосередити свої зусилля на виробництві товарів та послуг, на яких вони спеціалізуються. 7. Акції, боргові зобов’язання та нерухомість можуть також використовуватись як засіб нагромадження. 8. Гроші є поганим засобом нагромадження в періоди інфляції, в той час, як нерухомість зростає в ціні у такі періоди. 9. Виконуючи функцію засобу обміну, гроші ефективно усувають проблему подвійного збігу бажань. 10. Гроші виступають як розрахункова одиниця і надають загальну міру вартості товарів та послуг.

Exercise 18. Learn the following words and word combinations.

payments system	система розрахунків, платежів
evolve	розвиватися, еволюціонувати
precious metals	дорогоцінні метали
commodity money	товарні гроші
legal tender	законний засіб платежу
convertible	конвертований; що може бути перетворений (замінений)
fiat money	декретні гроші; паперові гроші; нерозмінні (на дорогоцінні метали) гроші
counterfeiting	підробляння, підробка
drawback	недолік, вада, дефект
bulk	велика кількість
theft	крадіжка, викрадення
receipt	квитанція , розписка про отримання
checking account	чековий рахунок, поточний рахунок
debit card	дебетна картка, платіжна картка
stored-value card	картка з певною сумою грошей
smart card	смарт - картка, пластикова картка з мікропроцесором
deduct	відраховувати

Exercise 19. Read, translate and give the gist of text 3.