UNIT II

MONEY AND ITS FUNCTIONS

OBJECTIVES:

 money and its functions: terminology traceability and practice

 Future and Future in the Past
 reading, writing, summarizing skills training
 oral presentation

I. Answer the questions bellow:

1. Explain the role of money in economic system.
2. What forms of money do you know?
Money: History and Functions

Reading comprehension
Money didn't exist in ancient times, so people had to trade with each other - or barter - to obtain
the items they needed. The first trades were probably animal skins for grain, or cotton for
livestock.
As the exchanges were cumbersome, some common commodities, such as grains, started to
assume the role of money. In early Egypt, for example, barley, an important source of food,
became the accepted means of payment for goods and services.
But the rare and beautiful metal, gold, had become the universal symbol of wealth and power, as
it was portable and durable, it was an ideal form of money. When King Croessus of ancient Lydia
(now Western Turkey) had gained control of Asia's richest gold mines for the Persian Empire, he
wanted others to recognize his newfound power and ordered the first gold coin to be made.
But soon the need for a less cumbersome system of making payments was met by the
goldsmiths: people would deposit their gold coins at their local goldsmith's, and, in return, the
goldsmiths would give them a receipt which eventually began to circulate as money because they
could always be redeemed for the gold itself. Gradually, governments printed currency, as
banknotes, and backed it up with the gold they held in official reserves making gold a standard
for currencies. But with the world at war, and people seeking for security, they started to
exchange their currency for gold, and the governments, which soon saw their reserves run
seriously low, were forced to abandon the gold exchange standard.
Today gold has assumed the role of a commodity such as wheat or cotton. And like any other

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commodity, its price is determined in a free market by the forces of supply and demand.
II. Answer the following questions after reading the text:
1. Name the type of trade in old times.
2. What were the old forms of money?
3. Explain the role of goldsmiths in the development of money.
4. Mention the money development stage which is not included in the text.

III. Read the following text and draw out the two main ideas:
The Euro
Since January 1st, 1999 the euro has been operating as a recognized currency on the world
markets and has been widely used, especially by commercial banks and other companies, in non-
cash payment transactions. On January 2002 the euro banknotes and coin were put into
circulation. Their design and production was, from the outset, planned as a cooperative venture
of the European Union. The graphic symbol of the euro was inspired by the Greek letter epsilon
and refers to the first letter of the word Europe. The parallel lines represent the stability of the
euro. The official abbreviation for the euro has been registered with the International
Organization for Standardization ISO.
The euro banknotes depict the architectural styles of seven periods in European cultural history
Classical, Romanesque, Gothic, Renaissance, Baroque and Rococo, the age of iron and glass
architecture, and the modern 20th century architecture and emphasize three main architectural
elements - windows, gateways, and bridges. The windows and gateways on the front of each
banknote symbolize the spirit of openness and cooperation in Europe. The 12 stars of the
European Union are also featured, representing the dynamism and harmony of the contemporary
Europe. The reverse of each banknote features a bridge typical of the respective age of European
cultural development. These bridges range from early constructions to the sophisticated
suspension bridges on the modern era and are used as a metaphor for communication among the
people of Europe as well as between Europe and the rest of the world. The European System of
Central Banks is responsible for framing and implementing the single monetary and exchange
rate policy.

LISTENING COMPREHENSION

Watch the following movie https://www.youtube.com/watch?v=BRfpZG8irD8 and fill in

the blanks the missing vocabulary or ideas:
They say that the best things in life are ……………., but there are lots of things we need and
want that we have to pay for. We use money to buy things, but what is money? Money is
something that we ………… ………. …. …………. . When you think about money, you
probably think about the notes and coins you use every day. Then how did people buy things
before notes and coins were invented? People used to …………. or trade the things they had.
This was called ………………., but there were lots of problems. What if the people couldn’t
agree on what their goods were ………….? What if the person you wanted to buy from didn’t
want any of your things? What if people wanted to store their …………….. rather than use it?
Many goods didn’t last, Imagine if all your savings just rotted away, and have you ever tried to
carrying ten chickens around in your pocket? Throughout history, people have used a wide range
of different things as money, from ……….. ………. to precious metals like copper and gold and
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even rum! But not everything can be used as money. So what can make something money?
Money needs to have three main features. First it needs to be widely recognized and accepted as
… ………. ….. ………. for things. When you use a five-dollar note to pay for an ice-cream, the
ice-cream seller is willing to accept is, because she knows that she can use it to buy something at
another business. In another words, money needs to be …………. by people, Second, it ………..
……. ……….. of things. In the same way, we use metres to measure length; we use money to
measure how much something is worth and the third that makes something money is that it
provides a way to ………. ……… over time. That is, money doesn’t need to be spent
immediately, You can hold on to it in the form of …………. and spend it in the future. Let’s
think back to our farmer and fisherman and imagine they chose to use money instead of
bartering. They would have a handy way to pay for things, something everyone accepted and
trusted. They could also use it to measure the value of their goods and …………. ……….. and
they could store that value if they didn’t want to spend it straight away. It’s also important for
money to be difficult to …….. …. ……………. If money were easy to copy, we wouldn’t
confident in using it. In most places around the world banknotes have special features which
make it difficult to copy for criminals. In Australia, for example, banknotes include things like a
top-to-bottom clear window containing …………….., tiny text, called microprint that you can
only see under a magnifying glass and even invisible fluorescent ink that can only be seen under
UV light. Because these features are very hard to copy, we can trust that out money is real, not
fake. Today, money isn’t just about notes and coins or currency. There are lots of different ways
that people pay for things. In recent times, ……….. ……….. … ………….. have become
popular. Our money is often held in accounts, for example, in a bank. We use a ……..
………… , smartphone, or even smartwatch to tap and pay and the money is transferred from
our account to the account of the business we are paying. People also use ……… ……….. to tap
and pay with borrowed money which they have to pay back later. So you know what money is,
its role and the different forms of money.

VOCABULARY PRACTICE
I. Find the words defined: cash; capital; change; cheque; property; coin; bill, credit card;
salary; banknote, Bill, wage
1. ………… money which is made of paper.
2. ………. money which is made of metal.
3. ………..: what you get if a shirt costs £17.99 and you give the shop assistant 20£.
4. …………. a printed piece of paper which you write on. You can buy things with this. You
can also get money for it at a bank.
5. ……….. ………: a plastic card you can use to buy things. You pay the money for what you
bought after one or two months.
6. ……… coins and paper money.
7. ………: a form or draft of a proposed statute presented to a legislature, but not yet enacted or
passed and made law.
8. ………..: a statement of money owed for goods or services supplied; account of charges
9. ……….. any form of wealth employed or capable of being employed in the production of
more wealth; assets remaining after deduction of liabilities; the net worth of a business.

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10. ………….. a fixed compensation periodically paid to a person for regular work or services.
11. …………: money that is paid or received for work or services, as by the hour, day, or week
12. ………….: that which a person owns; the possession or possessions of a particular owner:

II. Forms of money. Complete the sentences:

1. The pound, the dollar and the leu are called ………….
a) cash; b) monies; c) reserves.
2) The currency that is used in a foreign country is called …………. …………..
a) money; b) cash; c) foreign currency.
3) Money that you borrow from a commercial bank is called ………...
a) capital; b) loan; c) subsidy.
4. Money in notes and coins is called …………….
a) monies; b) capital; c) cash.
5) The whole amount of money received by a company or a person is called ………………..
a) income; b) wages; c) salary.
6. The money that you have to receive back when the price is lower than the denomination of the
banknote you give to the shop assistant is called …………………..
a) cash; b) compensation; c) change.
7. Money earned by someone for a current month's (professional) work is called …………….
a) income; b) wage; c) salary.
8) A manual worker receives …………….
a) income; b) wage; c) salary.
9). Retired persons receive ……………….
a) pension; b) aid; c) subsidy.
10) When setting a new company you need ………………
a) loan; b) fund; c) capital.
11) You pay a loan to a bank regularly in ………………….
a) a) fee; b) income; c) installment.
12. You pay a fee to doctors, lawyers, private schools
a) revenue; b) fee; c) capital.
13) Producers are sometimes helped to sell cheaper through ……………….
a) loans; b) reserves; c) subsidy.
14) A person can have a part of a business called ………………
a) deposit; b) budget; c) stake.
15) Money kept in a deposit for paying pensions is called ………………..
a) fund; b) deposit; c) budget.

SPEAKING

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I. Find a title for each fragment. What do they represent?

1. ______________________________
The use of money as a medium of exchange makes possible a great extension of the principle of
specialization. In an advanced society the use of money allows to exchange hours of labor for an
amazing variety of goods and services: two weeks' labor for a holiday abroad just as easily as we
can exchange it for a piece of furniture or a year's rent on a flat. Such exchanges are taken for
granted yet they would be inconceivable without the use of money.

2. ______________________________
The first step in the use of money was probably the adoption of some commodity as a unit of
account or measure of value. Money, most likely, came into use within the barter system as a
means whereby the values of different goods could be compared. The direct exchange of goods
for goods raise all sorts of problems regarding valuation: "How many bushels of corn are equal
in volume to one sheep, if twenty sheep exchange for three cows and one cow exchanges for ten
bushels of corn? This problem of exchange rates is easily solved when all other commodities are
valued in terms of a single commodity which then acts as a standard of value. Money now serves
as such a standard and when all economic goods are given money values (i.e. prices), we know
immediately, the value of one commodity in terms of any other commodity.

3. __________________________________
Once a commodity becomes universally acceptable, in exchange for goods and services, it is
possible to store wealth by holding stock of this commodity. It is a great convenience to hold
wealth in the form of money.
Consider the problems of holding wealth in the form of some other commodity, say wheat. It
may deteriorate, it is costly to store, it must be insured, and there will be significant handling
costs in accumulating and distributing it. In addition, its money value may fall while it is being
stored. The form of money has become very apparent in recent years - during periods of inflation
when the exchange value falls.

4. ___________________________________
An important function of money in the modern world, where so much business is concluded on
the basis of credit, is to serve as a means of deferred payment. When goods are supplied on
credit, the buyer has immediate use of the goods, but she does not have to make an immediate
payment. He can pay for them, 3, or perhaps 6 months after delivery. In the case of hire purchase
contracts, the buyer takes immediate delivery but pays by means of installments spread over 1, 2,
or 3 years.
A complex trading organization based on a system of credit can only operate in a monetary
economy. A seller would be most unlikely to accept any promise to pay in the future that was
expressed in terms of a commodity other than money. It will have no idea how much of that
commodity it will need in the future and if it does not want it, it will be faced with the trouble
and risks involved in selling it. It is prepared to accept promises to pay in terms of money,
because, whatever the patterns of the future be they can be satisfied if it has money.

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 WRITING
I. Imagine a future human society without money in a 50 word essay.
II. Fill in the missing vocabulary in the following business letter. Answer then the
letter

Dear Sir or Madam,

I am writing to arrange an interview with one of your advisers to discuss my business start-
up. I’ve analysed the market carefully and I believe that I have a good business plan. I can
give you a few details of my progress so far.
I’ve had several meetings with my bank and a loan (1) ……………. (arrange). I’ve found
some office space in a good location, although some work (2) ………………… (will/need)
there before I can move in. I’ve reviewed my equipment needs and in fact some specialized
items (3) ………………… (order) at the moment. My business cards (4) ……(print) and
will be ready in a week or so. This week I’m busy decorating the office, and it (5)
……………(should /finish) by the end of the month.
I know that soon I’ll have to advertise the new business, and perhaps you could advise me on
this matter. Finally, I’d like some help planning my staffing needs – extra staff (6)
…………… (might/need) over the Christmas time.

GRAMMAR BITE

I. Pass the following sentences from Present to Past Tense. Make the necessary changes in the
secondary clause:
1. He explains that the balance sheet will be the main document showing the estate of our
business.
2. He says that the new service will enable customers to make payments from their accounts
by credit transfer.
3. He learns that the process of globalization that enables investment in financial markets
will be carried out on an international basis.

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 4. They are sure that the goodwill of their company will become a saleable asset.
5. He declares that he will calculate again his gross income.
6. The shop assistant assures us that he will bring any items made of gold, silver or
platinum, stamped with hallmark.
7. The general manager promises to keep a house journal for all the employees to inform
them about the policy of the company.
8. He explained that the wages of the employees would reflect partly a return of the human
capital for the future.
9. The wholesaler claims that he will be allowed goods according to the import license.
10. The politicians pretend that indexation policy will mitigate the effects of inflation.

TRANSLATION
A.
La frăție, frate, la negoț, pe cumpărate.
Averea omului este măsurată de felul în care știe să o folosească.
Banii care vin prea ușor, se duc tot atât de ușor.
Uneori dacă dai bani cu împrumut îți faci un dușman secret; refuză-l, vei avea un dușman pe față.
Nu cheltui acolo unde poți economisi, dar nu economisi acolo unde trebuie să cheltuiești.
Banii sunt o informație în mișcare.
B.
Ca urmare a lărgirii negoțului s-a trecut de la sistemul simplist al trocului (barter) la folosirea
anumitor mărfuri ca măsură a valorii, ca un echivalent general pentru restul produselor, așa încât
să fie facilitată (facilitate) și accelerată (stimulate) circulația bunurilor între comunitățile
omenești. Drept instrumente pentru efectuarea plăților au fost folosite de-a lungul timpului
diferite produse ca vite, blănuri și unele obiecte cu o valoare simbolică recunoscută (generally
admitted), de pilda pietre deosebite sau scoici, ajungându-se până la urmă la o utilizare
generalizată a metalelor, care vor începe mai apoi să fie bătute ca monede, (coin) pentru o cât
mai lesnicioasă mânuire (easy handling). Banii nu vor rămâne prea multa vreme doar mijloace
de intermediere între participanții la viața economică. Intrucât ofereau putința să se cumpere
orice și oricând, banii au devenit întruchiparea (embodyment) bogâției și puterii, fiind căutați,
înmulțiți și tezaurizați (stock) tot mai avid (greedy). Un fapt important în evoluția relațiilor
economice și sociale îl constituie, neîndoielnic, extinderea (development) împrumutului; într-o
prima fază numai de produse destinate consumului (consumer goods), în special cereale, iar
ulterior și de unelte ale muncii și de instrumente bănești (payment instruments). Imprumuturile
apar acordate (grant) încă de la începuturi contra (against) unui anumit preț - dobânda - ceea ce
asigura o substanțiala sursă de caștig creditorilor, respectiv deținătorilor de disponibilități
(resources) în mărfuri și bani care încheiau asemenea tranzacții (understanding, contract).

C)
Fărâmițarea statală, îndelungata stăpânire străină însoțită de stoarcerea necruțătoare a resurselor,
nesfâșitele războaie purtate pe locurile acestea, au determinat o stare de înapoiere economică,
fiind frânată dezvoltarea unor structuri productive asemenea celor formate deja în țările avansate
din Europa apuseană. In prima jumătate a secoului trecut, în țara Românească și Moldova

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industria era slabă, în agricultură persistau rămășite feudale, piața internă continua să fie îngustă.
Doar Transilvania se afla într-un stadiu relativ mai avansat.
Dificultăți deosebite creau dezordine în circulația bănească, întrucât se foloseau bani proveniți de
pretutindeni, în jur de 80 de monede străine diferite: era urmarea faptului că lipsea un sistem
monetar național, chiar după înfăptuirea Unirii, o lacună căreia i se va pune capăt abea în 1867,
când s-a instituit sistemul bănesc al leului și au început să circule instrumente monetare emise în
țară.

Dincolo de Carpați situația era numai în aparență mai bună, populația românească resimțind din
plin repetatele crize monetare izbucnite în Imperiul habsburgic.
In condițiile date, acumularea internă a capitalului rămânea insuficientă pe intreg teritoriul, iar
sistemul de credit avea să păstreze, până destul de târziu, trăsături desuete, rămase de la
cămătaria medievală. Implicit, a fost favorizată penetrarea capitalului străin, care își va consolida
cu timpul pozițiile în economia românească.