Denomination, payment, paper money, medium, advantages, barter economy, money economy
1. Money can be anything, that is generally accepted in ... for goods and services.
2. Equal ... of money should have the same value.
3. One of the principal ... of money over barter is its ability to be divided into parts.
4. The principal difference between a ... and my a ... is that in a barter economy you must find someone who has what you want and wants what you have.
5. Money, therefore, is the ... that enables exchanges to be made easily.
6. The money you are most familiar with, currency, consists of the ... and coins that you use almost daily.
Task VII. Answer the following questions:
1. What is money?
2. What qualities should the material for money possess?
3. What is the principal difference between a barter economy and a money economy?
4. What functions does money play in the society?
5. What is currency?
Task VIII. Translate into English:
1. Більшість країн використовує високоякісний пaпіp для виготовлення грошей.
2. Одна з головних переваг грошей над бартером — це те, що гроші можна ділити на частини.
3. Головна різниця між бартерною та грошовою економікою полягає в тому, що при бартерній економіці вам слід шукати когось, хто мав би те, що ви хочете, і хотів би те, що ви маєте.
4. Гроші дають нам змогу встановлювати ціну товару.
5. Гроші — це засіб, що дає нам можливість робити обмін.
6. Гроші дають змогу нам робити покупки коли-небудь у майбутньому, використовуючи вартість чогось, що ми продаємо сьогодні.
7. Валюта — це паперові гроші та монети, якими ми користуємося майже щодня.
Topic: The Money Market
Task I. Read and memorize the following words and word-combinations:
equities (syn. ordinary shares, shares, ordinary stocks) - звичайні акції
to deplete - виснажувати, вичерпувати
to incur - наражатися
consequently - отже, тому
opportunity costs -1) найвищий дохід пo альтернативному виду інвестицій;
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2) альтернативні видатки володіння грошима
to offset - відшкодовувати
obvious - очевидний
conversely - навпаки
temporary surplus - тимчасовий надлишок
Treasury bills - казначейські векселі
Task II. Read and translate the following text.
The money market comprises the demand for money and the money supply. The equilibrium in the money market is such a state of balance when the demand for money from households and businesses is satisfied by the quantity of the money supplied. The equilibrium in the money market is reached by changing bond prices.
People can hold their wealth in various forms - money, bonds, equities, and property. For simplicity we assume that there are only two assets: money, the medium of exchange that pays no interest, and bonds, which we use to stand for all other interest-bearing assets that are not directly a means of payment. As people earn income, they add to their wealth. As they spend, they deplete their wealth. How should people divide their wealth at any instant between money and bonds to gain the best profits possible and not to incur losses?
There is an obvious cost of holding money. The opportunity cost of holding money is the interest one would have gained if he/she had held bonds. It naturally follows that people will hold money rather than bonds only if there is a benefit to offset this cost, only if holding money is more profitable than holding bonds. It may happen only when interest rates on bonds are too low to make it profitable to hold bonds.
Suppose the money market is in equilibrium when the interest rate on interest-bearing assets (e.g. Treasury bills and other securities) is 6% and the amount of money demanded is $200 mln. Now suppose the interest rate goes down, say, to 4%. In this case interest-bearing assets are no longer profitable as they can't earn a sufficient return. Hence the demand for money will rise and will lead to a temporary lack of money in the money market. If they lack money, households and businesses are likely to sell bonds they possess for cash. That will cause an increase in the bond supply, which lowers bond prices and rises interest rates on interest-bearing assets. With a higher interest rate the amount of money people are willing to have in hand will decrease again. Consequently the money supply will adjust to a current demand to reflect a new higher interest rate.
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Conversely, the increase in the money supply creates its temporary surplus, which results in the demand for bonds and bond prices going up. The interest rate falls thus restoring balance in the money market, but at a new lower interest rate.
I. Answer the following questions:
1. What is a market?
2. What types of markets do you know?
3. What do you know about money markets?
4. What is the equilibrium in the money market? How can it be reached?
5. Explain in your own words the term "opportunity” costs?
6.What is the opportunity cost of holding money?
7. How does the money market work?
8. What is "financial intermediation"?
9. What types of banks do you know? Who are their customers?
II. Suggest Ukrainian equivalents to the following expressions:
interest-bearing assets are no longer profitable
to sell bonds they possess for cash
the supply will adjust to the current demand
we use to stand for all other interest-bearing assets
thus restoring balance
to offset this cost
equities
equilibrium
to go down
to earn income
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