Text 2. Money. Functions of Money

Vocabulary

to associate	объединять(ся), общаться
foremost	передовой
to pose	формулировать, излагать
coincidence	совпадение
yardstick	критерий

 

When people hear the word “price” they usually associate it with the word “money”. Money performs several functions but first and foremost is a medium of exchange. It makes trade easier. It is used for buying and selling goods and services. Exchange can occur on the basis of barter, that is, swapping goods for goods. But barter can pose serious problems to the economy because it requires a coincidence of wants between the two transactors. If this coincidence of wants does not exist, trade is blocked.

The second function of money is the unit of account. Society uses the monetary unit as a yardstick for measuring the relative worth of a wide variety of goods, services and resources. This use of money is a common denominator means that price of each product should be started only in terms of the monetary unit. Also money is used as a unit of account in calculating the size of the GDP and for transactions involving future payment. Debt obligations of all kind are measured in the monetary unit.

Finally, money serves as a store of value. Because money is the most liquid – meaning the most spendable – of all asserts, it is very convenient way to store wealth.

 

Exercise 7. Ask your group mate 5 questions according to the text.

Exercise 8. Make up a mini-dialogue using the information from the text.

Exercise 9. Answer the questions of the questionnaire and read the results of your attitude to money.

1. When you get a present of money (e.g. for your birthday), how much of it do you save?	a) all of it b) most of it c) some of it d) none of it
2. How many of the following things did you buy last month? - jeans - a CD - a computer game - a T-shirt	a) none of them b) some of them c) most of them d) all of them
3. When you go out with your friends, how much money do you take with you?	a) none b) not very much c) quite a lot d) all the money I have
4. If you see two things in a shop you really like, do you buy...?	a) neither of them b) one of them c) sometimes both of them d) always both of them
5. Someone asks you to give something to a charity that you like, how much money do you give?	a) none b) a little c) quite a lot d) all the money I've got with me

Answer key:

- Mainly 'a' answers: you are very careful with money!

- Mainly 'b' answers: you are quite careful with money.

- I mainly 'c' answers: you aren't very careful with money.

- Mainly’d’ answers: you are generous but need to take more care with your money!

Exercise 10. Read the text and give the title to it.

Text 3. Credit

Vocabulary

trust	давать в кредит, доверие
to reimburse	возмещать
to arrange	организовывать
to encompass	охватывать
account	счет
to delay	откладывать
to purchase	совершать покупки
mortgage	ипотека

 

Credit (from Latin credo translated as " I believe" ) is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately, but instead arranges either to repay or return those resources (or other materials of equal value) at a later date. The resources provided may be financial (e.g. granting a loan), or they may consist of goods or services (e.g. consumer credit). Credit encompasses any form of deferred payment. Credit is extended by a creditor, also known as a lender, to a debtor, also known as a borrower.

Credit does not necessarily require money. The credit concept can be applied in barter economies as well, based on the direct exchange of goods and services. However, in modern societies credit is usually denominated by a unit of account. Unlike money, credit itself cannot act as a unit of account.

The word credit is used in commercial trade in the term " trade credit" to refer to the approval for delayed payments for purchased goods. Credit is sometimes not granted to a person who has financial instability or difficulty.

Consumer debt can be defined as ‘money, goods or services provided to an individual.’ Common forms of consumer credit include credit cards, store cards, motor (auto) finance, personal loans (installment loans), consumer lines of credit, retail loans (retail installment loans) and mortgages.

 

Exercise 11. Translate the words and word combinations into Russian.

Trust, reimburse, equal value, loan, consumer credit, lender, debtor, borrower, unit of account, trade credit, financial instability, store cards, installment loans, retail loans, mortgage.

Exercise 12. Read the sentences from the text. Decide whether each sentence is true, false or not stated in the given text.

This sentence is

- true; - false; - not stated.

Credit is the trust which allows one party to provide resources to another party.

This sentence is

- true; - false; - not stated.

Credit is extended by a creditor to a debtor.

This sentence is

- true; - false; - not stated.

Credit is always money.

This sentence is

- true; - false; - not stated.

Credit is sometimes granted to a person who has financial instability or difficulty.

This sentence is

- true; - false; - not stated.

Common forms of consumer credit include credit cards, motor finance, personal loans, and mortgages.

 

Exercise 13. Fill in the gaps.

1. Credit is the ____ which allows one party to provide resources to another party where that second party does not ____ the first party immediately, but instead arranges either to repay or ____ those resources at a later date. 2. ____ encompasses any form of deferred payment. 3. Credit is extended by a ____, also known as a ____, to a ____, also known as a ____. 4. Unlike money, credit itself cannot act as a ____ of ____. 5. ____ is sometimes not granted to a person who has ____ ____ or difficulty.

 

Exercise 14. Answer the questions.

1. What is a credit? 2. What kind of credits do you know? 3. Who is a lender and a borrower? 4. Does credit necessarily require money? 5. Can credit itself act as a unit of account? 6. What common forms of consumer credit do you know?

 

Exercise 15. Read and discuss the text.

Text 4. The Bank of England

Vocabulary

gilt-edged stock	золотой запас
responsible	ответственный
to provide	снабжать, обеспечивать
the Ministry of Defense	Министерство обороны
the National Debt	национальный долг
Treasury Bills	казначейские векселя
the Old Lady of Threadneedle Street	пожилая дама с улицы Треднидл

 

This is Britain’s central reserve bank. It controls other British banks, issues banknotes and acts as the government’s banker. The City has the greatest concentration of banks in the world and it responsible for about a quarter of international bank lending.

The Bank of England was founded in 1694 to provide the government with money to fight a war.

The Bank holds the government’s bank account. It takes money from taxes and by selling gilt-edged stock, which is like selling shares in a company. The Bank of England supplies money to pay the government’s bills, such as social security benefits or money needed by the Ministry of Defense for weapons.

The Bank controls the interest rates by selling Treasury Bills to High Street or merchant banks which need money, then the Bank raises or lowers the interest rate on these bills and the other banks must use the same rate when they lend to their customers.

The government borrows money through the Bank of England by selling gilt-edged stock which pay out interest twice a year. These stocks have raised £ 135 billion for the government and make the major part of the National Debt. The Bank also prints and distributes banknotes.

Before the Bank of England, the business of banking was largely in the hands of the goldsmiths who made extensive loans to merchants and to the Crown.

In the 18th century the Bank developed essentially as a government bank. Four-fifths of its business and profits came from the government connection. So the Bank effectively managed the entire national debt. This increased, largely as a result of a series of wars in which Britain was involved. For example, during World War I one of the Bank’s main function was to manage the government’s borrowings.

Now the Bank of England is considered to be rather conservative and this fact is reflected in the Bank’s nickname – “The Old Lady of Threadneedle Street”.

 

Exercise 16. Agree or disagree with the statements.

1. The Bank of England is Britain’s central reserve bank.

2. It doesn’t control other British banks, issues banknotes and acts as the government’s banker.

3. The Bank takes money from taxes and by selling gilt-edged stock.

4. The government borrows money through the Bank of England by selling gilt-edged stock and never gives the money back.

5. The Bank can’t print and distribute banknotes.

 

Exercise 17. Fill in the gaps with the given words and translate the text.

commission	credit rating	withdraw	debited	banker's draft	in full
statement	issued	credit transfer	slip	financial institutions	cash dispenser
outstanding	salaries	standing order	interest

 

Banks offer many services to businesses and their customers. Here are some of the most common:

Many people now have a card which enables them to (1) ____ money from a (2) ____. You feed your card into the machine and key in your PIN (personal identification number) and the amount of money you want. If you have enough in your account, the money requested will be (3) ____ to you up to a daily limit. Your account is automatically (4) ____, for the amount you have drawn out.

Provided you have a sound (5) ____, you can get a credit card from a bank and other (6) ____. To obtain goods or services, you present your card and sign a special voucher. When it receives the voucher, the credit card company pays the trader (less a (7) ____ and then sends you a monthly (8) ____. Depending on the type of card you have, you will either have to pay (9) ____ or be able to pay-part of what is owed and pay (10) ____on the balance left (11)....

If you need to make fixed payments at regular intervals, e.g. for insurance premiums, you can arrange a (12) ____ (sometimes known as a banker's order) so that the bank will do this for you.

If you have several bills to pay, you can do this by (13) ____You write one cheque for the total sum involved, fill in a (14) ____for each bill and hand everything to the bank cashier.

The transfer system is also used by employers to pay (15) ____ directly into employees' bank accounts.

If you are dealing with a supplier for the first time, a (16) ____may be used as payment. This is a cheque guaranteed by a bank and therefore it is not likely to " bounce".

 

Exercise 18. Find the English equivalents to the English words and phrases.

плата за товары и услуги, естественная форма, с незапамятных времен, покупательская способность, принимает вклады, сбербанк, безопасное место, ряд услуг, банкомат, дают возможность, владельцы карточек, снять наличные деньги, своя выгода, основные пользователи.

 

Exercise 19. Give the correct form of the link verb “to be”.

1. Money ___ anything that ____accepted in payment for goods or services. 2. Money ____ known since time immemorial. 3. Our principal forms of money ____currency and demand deposits(checking accounts). 4. Bank ____a financial institution that accepts demand deposits and makes commercial loans. 5. Banks and saving banks ____essential to the smooth operation of our economic system. 6. The most important functions of banks ____to provide a safe place for the deposit funds and to serve as a source of loans. 7. There ____usually an annual fee to use the credit card. 8. ATM ____a computerized telecommunications device that provides customers a method of financial transactions in a public space without the need for a human clerk or bank teller. 9. Importers, exporters and travelers ____ major users of these services.

 

Exercise 20. Translate the sentences into English.

1. Кредитная карта выдается банком. 2. Иностранная валюта продается в банках. 3. Деньги принимаются в качестве платы за товары и услуги. 4. Деньги – это способ обмена. 5. Разные предметы использовались в качеств денег: скот, зерно, какао бобы, улитки, соль. 6. В 7 в. до н.э. появились монеты. 7. Бумажные деньги в Европе были напечатаны в 1661 г. 8. Банк – это финансовое учреждение, которое принимает вклады и выдает кредиты. 9. Некоторые банки выдают клиентам кредитные карты. 10. Банкоматы дают возможность вкладывать и снимать деньги без банковского агента.

 

Exercise 21. Discuss the following situations with your group mates. Try to explain why they are true or false.

1. Banks create monetary base money when they issue loans. [False]

Banks cannot create base money. A borrower receives a credit in the form of a deposit which he can withdraw as cash, i.e. base money, on demand. Conversely a cash deposit into a bank converts the money into a credit, which in effect is a loan to the bank.

2. The central bank controls the size of the monetary base. [False]

The amount of cash in circulation depends only on how much the public chooses to hold in lieu of bank deposits. If the central bank failed to replenish aggregate reserves lost to the withdrawal of cash by depositors, it would imperil the liquidity of the banking system.

3. A bank loses reserves whenever it pays out cash or transfers funds by wire for its depositors. [True]

Both of these transactions reduce a bank's official reserves. A bank gains reserves when it receives a check written on another bank, or when a customer deposits cash in his account.

4. Banks lend the money they receive from their depositors. [False]

A deposit received by a bank becomes a part of its reserves, which it may hold to back increased lending, or it may use to purchase other interest-earning assets. When banks lend they create new deposits without affecting existing deposits, and thereby increase the money supply. Conversely when bank loans are paid off, the money supply decreases.

5. A bank's own money is at risk when it issues a loan. [True]

Like other financial intermediaries, banks place their own capital at risk through lending. If a bank cannot collect on the loan, its own capital is reduced by the amount of the loss. A bank with inadequate capital will be placed under supervision or closed by its regulator.

Exercise 22. Have a look at the economic prognosis. Do you agree with the predictions? Why not? Give your own predictions about the world economic situation in 10 -15 years.

 

Exercise 23. Test.

1. What is money?	a. a medium of exchange, a measure of value and a store of value b. a medium of exchange, a unit of account and a store of value c. all said above
2. What is “value of money”?	a. the amount of goods and services that can be bought with it b. appropriate prices. c. a mean of savings
3. What is bank?	a. an organization where people or businesses can invest or borrow money and change it to foreign money. b. an organization where people or businesses can buy stocks and securities. c. an organization where people or businesses can take credit.
4. What are the functions of banks?	a. to provide a safe place for the deposit funds and to serve as a source of loans b. to provide a financial institution’s customers a method of financial transactions in a public space without the need for a human clerk or bank teller c. to buy or sell foreign currencies for their own benefit or for their clients.
5. Name the functions of money.	a. a medium of exchange, a unit of account and a store of value b. a medium of exchange, a measure of price and a store of value c. a medium of exchange, a measure of value and a store of price
6. What is not considered to be a common form of consumer credit?	a. credit cards b. motor (auto) finance c. marriage loan

 

 

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