II. Answer the following questions to the text:

1. What is the introduction and use of money marked by?

2. What was the main reason for money to be introduced?

3. How can you explain the pattern “commodity – money – commodity”?

4. How many functions does money perform? What are they?

5. What is money used for in the form of coins, notes and bank deposits?

6. What is the second function of money?

7. When does demand for money arise?

8. The last function of money is a means of the payment, isn’t it?

Text 6 Market EconomIes

I. Read and translate the text.

In a true market economy the government plays no role in the management of the economy, the government does not intervene in it. The system is based on private enterprise with private ownership of the means of production and private supplies of capital, which can be defined as surplus income available for investment in new business activities. Workers are paid wages by employers according to how skilled they are and how many firms wish to employ them. They spend their wages on the products and services they need. Consumers are willing to spend more on products and services, which are favoured. Firms producing these goods will make more profits and this will persuade more firms to produce these particular goods rather than less favoured ones.

Thus, we can see that in a market economy consumers decide what is to be produced. Consumers will be willing to pay high prices for products they particularly desire. Firms, which are privately owned, see the opportunity of increased profits and produce the new fashionable and favoured products.

Such a system is, at first view, very attractive. The economy adjusts automatically to meet changing demands. No planners have to be employed, which allows more resources to be available for production. Firms tend to be highly competitive in such an environment. New advanced products and low prices are good ways to increase sales and profits. Since all firms are privately owned they try to make the largest profits possible. In a free market individual people are free to pursue their own interests. They can become millionaires, for example. Suppose you invent a new kind of car. You want to make money out of it in your own interests. But when you have that car produced, you are in fact moving the production possibility frontier outwards. You actually make the society better-off by creating new jobs and opportunities, even though you become a millionaire in the process, and you do it without any government help or intervention.

II. Answer the following questions to the text:

1. What is the system of a market economy based on?

2. Does the government play any role in the management of a market economy?

3. Who decides what is to be produced in a market economy?

4. Where do the private firms see the opportunities to increase their profits?

5. Private firms tend to be highly-competitive in the conditions of a market economy, don’t they?