Money as a medium of exchange

Money is a medium of exchange in economy. It is a means of payment for goods and services and in settlement of debts. The price of a commodity is the number of units of money required to buy this commodity. The main functions of money are a medium of exchange and the measure of value. Without the use of money, trade would be reduced to barter, that is to direct exchange of one commodity for another.

The most important types of money are commodity money, credit money, and fiat money. The value of commodity money is about equal to the value of the material contained in it. The principle materials used for this type of money have been gold, silver and copper. Credit money are documents with promises by the issuer to pay an equivalent value in the standard monetary metal. Fiat money is paper money the value of which is fixed by government. Most minor coins in circulation are also a form of fiat money, because the value of the material of which they are made is usually less than their value as money.

Both the fiat and credit forms of money are generally made acceptable through a government decree that all creditors must take the money in settlement of debts. Fiat money is the form of banknotes is referred to as legal tender.

Banknotes are usually made from special high-quality paper, with watermarks, metallic strips, and other features against forgery. Highly sophisticated printing techniques are used, and banknote designs have elements that are hard to copy. Fronts and backs of notes are printed separately, and serial numbers added later.

Active vocabulary

debt [det] n долг

decree [dI'kri:] n декрет, приказ

circulation ["sE:kjV'leIS(q)n] n обращение

forgery ['fO:dZ(q)rI] n подделка

credit money ['kredIt"mAnI] кредитные деньги

commodity money [kq'mPdItI"mAnI] товарные деньги

fiat money ['faI1t"mAnI] неразменные бумажные деньги

Exercises

1. Read the following words. Mind the stress:

a) the first syllable is stressed

Medium, payment, settlement, credit, equal, standard, monetary, element, separately, fogery;

b) the second syllable is stressed

commodity, exchange, material, decree, technique, design, acceptable, equivalent.

2. Read and translate the words without a dictionary.

Barter, type, credit, material, document, standard, metal, creditor, banknote, technique, to copy.

3. Translate the words of the same root.

1. To circulate, circle, circulation, circulated.

2. Settler, settlement, settled, to settle.

3. To govern, government, governor, governess.

4. To accept, acceptable, acceptance.

5. Valuable, to value, valueless, value.

6. Creditor, to credit, creditable, creditworthy, credit.

4. Form Participle II from the following verbs.

To refer, to exchange, to fix, to use, to print, to add, to copy.

5. Transform the sentences from the Active into the Passive Voice.

1. One has used gold, silver and copper for this type of money.

2. The government fixes the value of the paper money.

3. One prints fronts and backs of banknotes separately and then adds serial

numbers.

4.The government decree makes the fiat and credit forms of money

acceptable.

6. Answer the questions:

1. What is the price of a commodity?

2. What are the types of money?

3. What is commodity money?

4. What materials were used for commodity money?

5. What is credit money?

6. What is fiat money?

7. How are banknotes made?

7. Translate into English.

1. Банкноты изготовляют из высококачественной бумаги с водяными знаками, металлическими полосами и другими знаками защиты.

2. Деньги подразделяются на три типа: кредитные деньги, товарные деньги, неразменные бумажные деньги.

3. Деньги – это средство оплаты за товары и расплаты с кредиторами.

4. Без денег торговлю сменил бы бартер, то есть прямой обмен одного товара на другой.

5. Стоимость товарных денег примерно равна стоимости материала, из которого они изготовлены.

TEXT C.