Lesson 2 money

Words to master:

token - знак, символ

marketable - товарний; ринковий

to compel - змушувати

to emerge - виникати

utility – вигода, користь

commodity – предмет споживання

transaction – погодження, договір

perishable – скоро плинний, нестійкий

fiat money – паперові гроші

coercion – насилля, фізична сила

invention - винахід

exchange - обмін

denominate - визначати

debt – борг

Read and translate the text:

Money

Money is any marketable good or token used by a society as a store of value, a medium of exchange, and a unit of account. Since the needs arise naturally, societies organically create one or several money objects when none exists. In other cases, a central authority creates a single money object and compels its use; this is more frequently the case in modern societies with paper money.

Commodity money was the first form of money to emerge. Under a commodity money system, the object used as money has inherent value. It is usually adopted to simplify in a barter economy; thus it functions first as a medium of exchange. It quickly begins functioning as a store of value, since holders of perishable goods can easily convert them into durable money.

In modern economies, commodity money has also been used as a unit of

account. Gold-backed currency notes are a common form of commodity money.

Fiat money is a relatively modern invention. A central authority (government) creates a new money object that has minimal inherent value.

Essential characteristics of money

Money has all of the following three characteristics:

1. It must be a medium of exchange and must circulate either due to coercion or faith. When people are coerced to use or they trust an object in order to do their exchanges and trades, then this object is considered to be money.

2. It must be a unit of account

When the value of a good is frequently used to measure or compare the value of other goods or where its value is used to denominate debts then it is functioning as a unit of account.

3. It must be a store of value

When an object is purchased primarily to store value for future trade then it

is being used as a store of value. Most non-perishable goods have this quality.

Many goods or tokens have some of the characteristics outlined above.

However no good or token is money unless it can satisfy all three criteria.

Find English equivalents to the following word combinations. Notion: not all the words are present in the text. Some of them you have to translate using a dictionary.

Ознака, засіб заощадження, засіб обігу, одиниця розрахунку, засіб

обміну, потреби зростають, існувати, змушувати/підкорювати, з’являтися,

ринкова цінність, взаємозалежний, товар-гроші, полегшувати, бартерна

економіка, товар, який швидко псується, гроші, що забезпечені золотом,

паперові гроші (2), визнання, користуватися попитом, засіб платежу,

цінність, борг, “я вам винен”, в порівнянні до, купувати, товар, що не

псується.

Answer the questions:

1. What is money?

3. What was the first unit of exchange?

4. When did the first medium of exchange begin to function?

5. How many characteristics does the money have? What are they?

6. What characteristics does it have as a medium of exchange?

7. What characteristics does it have as a unit of account?

8. What characteristics does it have as a store of value?

9. Why do we need money?