Pre-reading Activities. Reading

Pre-reading Activities

1. In your Key Vocabulary, find synonyms and antonyms to the words below. Use a dictionary if necessary.

Give synonyms to:	Give antonyms to:
buy v (purchase)	temporary adj (durable)
buyer n (purchaser)	valueless adj (valuable)
exchange v (barter)	seller n (purchaser)
deal n (to conduct a transaction)

Reading

Read the text and get ready to define all the types and functions of money.

Money is any good that is widely used and accepted in transactions involving the transfer of goods and services from one person to another. Economists differentiate between three different types of money: commodity money, fiat money, and bank money.

Commodity money is a good whose value serves as the value of money. Gold coins are an example of commodity money.

Fiat money is money that has value only because of the government regulation or law. Dollar bills are an example of fiat money.

Bank money is the balance held in checking accounts and savings accounts. Bank deposits usually form the larger part of the money supply of a country.

Some people may think that money's function is limited to one use — to buy things. Money actually has three functions, which allow money to be exchangeable, durable, and valuable. Classically it is said that money acts as a medium of exchange, a unit of account, and a store of value.

The most important function of money is as a medium of exchange to facilitate transactions. Without money, all transactions would have to be conducted by barter, which involves direct exchange of one good or service for another. The difficulty with a barter system is that in order to obtain a particular good or service, a person has to possess a good or service of equal value, which the supplier also desires.

In order to be a medium of exchange, money must hold its value over time; that is, it must be a store of value. But as a store of value, money is not unique; many other stores of value exist, such as land, works of art, stamps.

Money also functions as a unit of account, providing a common measure of the value of goods and services being exchanged. Knowing the value or price of a good, in terms of money, enables both the supplier and the purchaser of the good to make decisions about how much of the good to supply and how much of the good to purchase.

Today money is considered one of the outstanding inventions of the entire history of mankind. The introduction of money has eliminated all the difficulties of a barter system, it has made easy to save wealth for future, and has played a significant role for the specialization in business through the division of labour. Although money itself creates nothing, it is very helpful in the process of production, consumption and exchange.

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