3.
MONEY AND BANKING
Money represents the sixth sense that
makes it possible for us to enjoy the other
five
Study and Learn the Words:
English
to trade sth for sth
English
equivalents
to exchange sth
that you have for
sth that sb else has
to go on the spree
a petrece, a avea
chef
cu condiia c
articole de prim
necesitate
banii-marf
valuta, moned
surs, putere de
via
cas, adpost
transacie, afacere
pentru zile negre
cont bancar
prevedere,
precauie
provided that
necessities (n)
commodity money
currency (n)
lifeblood (n)
shelter (n)
transaction (n)
for a rainy day
bank account
precaution (n)
demand (n)
necesitate,
trebuin
yardstick (n)
to assign value to
sth
in terms of money
standard, criterion
to price sth
yard
unit for measuring
length, equal to
0,9144 of a meter
unit for measuring
weight, equal to a
0,454 of a kilogram
to keep sth
pound (abbr. lb)
to hold on to sth
savings account
to accommodate
purchases
odd amounts
even amounts
denomination (n)
Romanian
exprimai n bani
,
,
iard
livr
cont de economii
sume impare
sume cu so
valoare
()
to make purchases
multiples
handled (adj)
multiplu
folosit, uzat
to counterfeit
a falsifica, a
contraface
to be uneasy about
sth
genuine (adj)
Russian
to be unsure about
sth
authentic, real, not
a copy
The word money is uncountable and is used with the verb in singular:
E.g. How much money is there in my account?
Idioms with Money: match the meaning of the words in bold with their
definition in the right.
1. For my money, he is one of the best financiers in our company.
2. People in our Republic pay good money to visit Paris.
3. His prediction was right on the money.
4. He will win the competition for the contract, Id put money on
it.
5. There is no such thing that he cant afford, because he is made
of money.
a) very rich
b) accurate
c) in my opinion
d) Im sure about it
e) a lot of money
Here are some sayings about money. Comment on them in pairs:
- Money makes the world go round
- Money is the root of all evil
- Time is money
- The only way to double your money is to fold the banknotes and put
them into your pocket
- Money talks
- Easy come, easy go
3.1. What is Money?
Money is considered to be one of the greatest inventions of humanity along
with the alphabet and wheel. Its role in a societys life is still very important. As
Shakespeare wrote: Gold makes white out of black and a hero out of a coward.
So what is money?
Money is anything used by a society to purchase goods and services or
resources. The members of the society receive money for their products or
resources; then they either hold that money or use it to purchase other products
or resources, when and how they see fit.
Before money was in general use, people traded goods and services for
other goods and services. This system of the exchange of goods and services
without the use of money is called barter system. For example, one family may
raise vegetables and herbs on a plot of land; and another may weave cloth. To
obtain food, the family of weavers trades cloth for vegetables, provided that the
farming family is in need of cloth.
The trouble with barter is that the two parties in an exchange must need
each others product at the same time, and the two products must be roughly
equal in value. It may work well when few products, primarily the necessities of
life, are available. But even very primitive societies soon developed some sort
of money to eliminate the inconvenience of trading by barter.
Over the years, different groups of people have used all sorts of objects as
money whales teeth, stones, beads, seashells, salt, furs, tobacco, copper
crosses, and such metals as gold and silver. Such items are known as
commodity money.
The first coins made of gold and silver appeared in China in the IXth century
BC.
Alexander the Great (356-323BC) was the first emperor who engraved his
image on the coin of his empire. Later almost all the other monarchs followed
suit.
The use of paper money began in the early XVIIth century. Today, the most
commonly used objects are metal coins and paper bills, which together are
called currency.
Money has been called "the root of all evil." It has also been described as
the "lifeblood of commerce." But however you may look upon it, money remains
in great demand. Many economists give three main reasons, or demands, for
money:
1. The need for money for payment of wages, rents, debts, and the costs of
food, clothing, and shelter. This type of need is called a transaction demand.
The money is needed for transactions of daily life. The transaction demand is
the strongest among lower income people. They need almost all their money
for the necessities of life. People with higher incomes can set aside part of their
income for investments and savings.
2. The need for money for expenses that may arise in the future. The
money is set aside for a rainy day, usually in a bank account; it is not usually
invested in long-term or risky projects since the money must be at hand when
needed. The demand for this rainy day money is called a precautionary
demand. It is held as a precaution in the event of future needs.
3. The need for money for investment purposes. People may want to invest
money in business, land, buildings, or antiques. These investments are risky.
But people who invest in them are using their money to earn money. The
demand for this money is called investments demand. There is always a
chance of losing money in such investments. When the demand for money is for
very risky projects, it is called a speculative demand.
The Functions of Money
We have already noted that money aids in the exchange of goods and
services for resources. And it does. But thats a rather general way of stating
moneys function. Let us look at three specific functions of money in any society:
1.
Money Serves as a Medium of Exchange A medium of
exchange is anything that is accepted as payment for products and resources.
This definition looks very much like the definition of money. And it is meant to,
because the primary function of money is to serve as a medium of exchange.
The key word here is accepted. As long as the owners of products and resources
accept money in an exchange, it is performing this function. Of course, these
owners accept it because they know it is acceptable to the owners of other
products and resources, which they may wish to purchase. For example, the
family in our earlier example can sell their vegetables and use the money to
purchase cloth from the weavers. This eliminates the problems associated with
the barter system.
2. Money Serves as a Measure of Value A measure of value is a
single standard or yardstick that is used to assign values to, and compare the
values of, products and resources. Money serves as a measure of value because
the prices of all products and resources are stated in terms of money. It is thus
the common denominator that we use to compare products and decide which
we shall buy. Imagine the difficulty you would have in deciding whether you
could afford, say, a pair of shoes if it were priced in terms of yards of cloth or
pounds of vegetablesespecially if your employer happened to pay you in
toothbrushes.
3. Money Represents a Store of Value
Money that is received by an
individual or firm need not be used immediately. It may be held and spent later.
Hence money serves as a store of value, or a means for retaining and
accumulating wealth. This function of money comes into play whenever we hold
on to moneyin a pocket, a cookie jar, a savings account, or whatever. Value
that is stored as money is affected by fluctuations in the economy. One of the
major problems caused by inflation is a loss of stored value: as prices go up in
an inflationary period, money loses value. Suppose you can buy a Sony stereo
system for $1,000. Then we may say that your $1,000 now has a value equal to
the value of that system. But let us suppose that you wait a while and dont buy
the stereo immediately. If the price goes up to $1,100 in the meantime because
of inflation, you can no longer buy the stereo with your $1,000. Your money has
lost value because it is now worth less than the stereo.
Important Characteristics of Money
To be acceptable as a medium of exchange, money must be fairly easy to
use, it must be trusted, and it must be capable of performing its functions.
Together, these requirements give rise to five essential characteristics:
Divisibility The standard unit of money must be divisible into smaller units
to accommodate small purchases as well as large ones. American standard is
the dollar, and it is divided into one-hundredths, one-twentieths, one-tenths,
one-fourths, and one-halfs through the issuance of coins (pennies, nickels,
dimes, quarters, and half-dollars, respectively). These allow people to make
purchases of less than a dollar and of odd amounts greater than a dollar.
Portability Money must be small enough and light enough to be carried
easily. For this reason, paper currency, is issued in larger denominations
multiples of the standard unit. Five-, ten-, twenty-, fifty-, and hundred-dollar bills
make our money convenient for almost any purchase.
Stability Money should retain its value over time. When it does not (during
periods of high inflation), people tend lo lose faith in their money. They may
then turn to other means of storing value (such as gold and jewels, works of art,
and real estate). In extreme cases, they may use such items as a medium of
exchange as well. They may even resort to barter.
Durability The objects that serve as money should be strong enough to
last through reasonable usage. No one would appreciate (or use) dollar bills that
disintegrated as they were handled or coins that melted in the sun.
Difficulty of Counterfeiting If a nations currency were easy to counterfeitthat is, to imitate or fakeits citizens would be uneasy about accepting it
as payment. Even genuine currency would soon lose its value, because no one
would want it. Thus the countries that issue currency do their best to ensure
that it is very hard to reproduce.
I. VOCABULARY PRACTICE
A) Find in the text the words that are the synonyms of:
1. on condition that=
6. to rise=
2. problem=
7. worn-out (adj)=
3. necessity=
8. to forge=
4. to help=
9. difficult=
5. outright (adv)=
10. banknote=
B) Explain the meaning of the following phrases of words:
1. to be roughly equal in value
2. to come into play
3. to be in great demand
4. to be at hand
5. to follow suit
6. to be fairly easy to use sth
7. to last through reasonable usage
C) Give English equivalents:
1. mijloc de schimb/
2. msurare a valorii/
3. numitor comun/
4. lot de pmnt/
5. conservarea valorii/
6. banknotele se emit n valoarea mai mare/
7. a-i pierde ncrederea/
8. proprietatea imobiliar/
9. moneda veritabil/
10. oamenii cu un venit mai sczut/ .
II. COMPREHENSION
A) Give answers to the following questions:
1. What is money and what do you know about its history?
2. What is barter and what is the trouble with it?
3. What is commodity money and who used this money?
4. Why do people need money?
5. Name the functions of money and characterize them.
6. Enumerate the characteristics of money. Which one seems the most
appealing to you and why?
7. Why should the standard unit of money be divided into smaller units?
Associate the following coins with the Moldavian ones:
a) a penny
d) a quarter b) a nickel
e) a dime c) a half-dollar 8. Why is paper money issued in larger denominations?
9. When do people tend to lose faith in their money? What do they do in
this case?
10. What do people usually do with handled or deteriorated bills or coins?
11. Why do issuers of currency make it very hard to be reproduced?
12. Money counterfeiting is it a criminal or a civil case? What happens
to counterfeiters according to the appropriate articles of law in our
country? Do you agree with the punishment stipulated in these
articles?
B) Find in the text the words to the following definitions:
1. coins and paper money ________________
2. the means of exchanging sth for sth without using money
________________
3. the necessity to save money for a time when you will really need it
_________
4. anything that is accepted as payment for products and resources
__________
5. the quality of being steady and not changing in any way
_________________
6. a means for retaining and accumulating wealth _______________________
III. DISCUSSION
1. What role does money play in your life?
For instance, you have been offered 2 jobs:
I) a part-time, attractive, low-paid job
II) a full-time, dirty (from the ethical point of view), rather well-paid job
What would you choose and why?
2. If you possessed a large amount of money, what would the advantages
and disadvantages of the following be?
putting it under the mattress
buying a lottery ticket
visiting a casino
depositing it in a bank
buying gold
investing it in your own business
buying a Van Gogh painting
buying shares of a corporation
investing it in real estate
going on a spending spree
Choose out of these 3 items that would characterize your actions
concerning your money. Give your reasons. Use the following structure:
If I possessed a large amount of money I would
3. How much money do you need to consider yourself to be a rich
person? Is it possible to earn this sum of money in an honest way in
our Republic?
4. When you see a person for the first time, can you detect whether the
person is rich, with average income, or poor. If yes, than how?
5. Can everything be bought with money?
6. What would be the consequences of a world without money? Would
there be no poverty? Could we use a barter system instead?
IV. FOCUS ON GRAMMAR
Fill in prepositions:
1. Our company decided to trade our services ______ the products of our
commercial partners.
2. The trouble ______ wax is that it melts _____ the sun.
3. Money eliminates the problems associated ______ the barter system.
4. I bought his share of business ______ $20000.
5. When people lose faith ____ their money, they may resort _____ barter.
