8. Money and financial institutions

Text A

Basically, money is what money does. This means that money can be any substance that functions as a Medium of Exchange, a Measure of Value, and a Store of Value.

As a medium of exchange, money is something generally accepted as payment for goods and services

As a measure of value, money expresses worth in terms that most individuals understand.

Money also serves as a store of value. This means goods or services can be converted into money that is easily stored until some future time.

The different forms of money are in use in the United States today. The most familiar are coin and currency. The term coin refers to metallic forms of money. The term currency refers to paper money issued by government. While money has changed in shape, kind or size over the years, modern money still shares many of the same characteristics of primitive money. Modern money is very portable when people carry checkbooks. For example, they really are carrying very large sums of money since checks can be written in almost any amount.

Modern money is very durable. Metallic coins last a long time under normal use and generally do not go out of circulation unless they are lost. Paper currency also is reasonably durable. Modern money also rates high in divisibility. The penny which is the smallest denomination of coin, is more than small enough, for almost any purchase. In addition, checks almost always can be written for the exact amount. Modern money, however, is not as stable in value. The fact, that the money supply often grew at a rate 10 to 12 per cent a year was considered as major cause of inflation.

1. to be any substance — бути будь-якою річчю

2. to be accepted as — бути прийнятим як ...

3. payment — плата, платіж

4. to be converted into — бути конвертованим у ...

5. to be very portable — тут: легко переносити

6. to be very durable — тут: довго використовуватися

7. ... last a long time under normal use — за нормального використання довго перебувають в обігу

8. to go out of circulation — виходити з обігу

9. to rate high in divisibility — високо цінити за можливість поділятися

10. denomination of coin — вартість монети

11. money supply — грошова масса

Text B

Banks fulfil two distinct needs in a community. For one they provide a safe place for people to deposit their money. For another, they lend excess funds to individuals and business temporarily in need of cash. In effect, banks act as functional institutions that bring savers and borrowers together.

To gain a clear understanding of the way in which a bank operates, let us examine the bank’s liabilities and assets.

Its liabilities are the debts and obligations to others. Its assets are the properties, possessions, and claims on others. These liabilities and assets generally are put together in the form of a balance sheet — condensed statement showing all assets and liabilities at a given point of time.

The balance sheet also reflects net worth — the excess of assets over liabilities, which is a measure of the value of a business.

Most bank deposits return to the community in the form of loans. The bank, however, might invest some of the cash in bonds. The bonds would be a good investment for two reasons. One is that they earn the interest and therefore are more attractive than cash. The other is that they have a high degree of liquidity, that is they can be converted into cash in a very short period of time. The liquidity adds to the bank’s ability to serve its customers. When the demand for loans increases, the bonds can be sold and the cash loaned to customers.

In time, the bank would grow and prosper diversifying its assets and liabilities in the process. It might use some of its excess funds to buy state or local bonds. It might loan some funds on a short-term basis to other banks. Then, too, a bank might use some of its assets to buy an interest in another business. The bank also might try to attract more depositors by introducing different kinds of accounts. Once the bank attracts more funds, it can make more loans and more profits.

1. to deposit their money — для збереження вкладів

2. to lend excess funds — надавати кредит

3. ... in need of cash — коли потрібні гроші

4. ... that bring savers and borrowers together — що з’єднує кредиторів і дебіторів

5. to gain a clear understanding — щоб мати чітке уявлення

6. liabilities — пасив

7. assets — актив

8. the excess of assets over liabilities — перевищення активів над пасивами

9. ... they earn the interest — на них нараховується відсоток

10. liquidity — ліквідність