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and definitions. Part 2 governs the actions of the first bank to accept the check (depository bank) and other banks that handle the check but are not responsible foritsfinalpayment(collectingbanks).Part3governstheactionsofthebankthatis responsibleforthepaymentofthecheck(payerbank).Part4governstherelationship betweenapayerbankanditscustomers.Part5governsdocumentarydrafts.These arechecksorothertypesofdraftsthatwillonlybehonoredifcertainpapersarefirst presentedtothepayerofthedraft.

Thebankingcrisisofthe1930’sledtothedevelopmentoffederalinsurance for deposits which is currently administered by the Federal Deposit Insurance Corporation. Funding for the program comes from the premiums paid by member institutions. The bank accounts of individuals at institutions which are insured are protected for up to an aggregated total of $100,000.

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THE MARKET, ITS DEFINITIONAND STRUCTURE

Amarketconsistsofalltheconsumerswhopurchaseaparticulartypeofgood orservice.Themarketmaybesub-dividedintoseparatesegmentseachofwhich canbeconsideredtobeaseparatemarketinitsownright.Itisveryimportant forabusinesstobeabletodefineitsmarket:1)Sothatitcanestimatethesizeof themarket.2)Sothatitcanforecastthegrowthofthemarket.3)Toidentifythe competitorsinthemarket.4)Tobreakthemarketdownintorelevantsegments. 5)Tocreateanappropriatemarketingmixtoappealtocustomersinthemarket. Therearedifferenttypesofmarkets,forexample:Business-to-Business(B2B) markets in which a businesses customers are other businesses; Business-to- Consumer (B2C) markets in which businesses sell to other customers.

Somemarketstakeplaceinaphysicallocatione.g.astreetmarket,whereas others may be virtual markets e.g. when people buy and sell through the medium of the Internet. The size of the market can be calculated in terms of the number of customers that make up the market, or the value of sales in the market.Abusiness can then calculate its market share in terms of the number of customers its sells to, or the total value of its sales.

Markets are typically structured into segments. Primary segmentation is between customers buying entirely different products. For example, an oil companymanufacturesawiderangeoffuelsandlubricantsforroad,rail,water andairtransportandforindustry,allofthemfordifferentgroupsofcustomers. Furthersegmentationcanbebasedondemographicandpsychographicfactors.

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Demographics segment people by clearly ascertainable facts their sex, their age, size of family, etc. Psychographics segment people by something less clearlyascertainableandoftendisputable:their«life-style».Aperson’slifestyle is built up from his or her attitudes, beliefs, interests and habits.

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EUROPEAN UNION

The European Economic Community (EEC) was established in 1958 by the Treaty of Rome in order to remove trade and economic barriers between member countries and to unify their economic policies. It changed its name and became theEuropeanUnion(EU)aftertheTreatyofMaastrichtwasratifiedonNovember 1, 1993. The Treaty of Rome contained the governing principles of this regional tradinggroup.ThetreatywassignedbytheoriginalsixnationsofBelgium,France, WestGermany,Italy,Luxembourg,andtheNetherlands.Membershipexpanded by the entry of Denmark, Ireland, and Great Britain in 1973; Greece in 1981; Spain and Portugal in 1986; andAustria. Sweden, and Finland in 1995.

Four main institutions make up the formal structure of the EU. The first, the European Council, consists of the heads of state of the member countries. The council sets broad policy guidelines for the EU.The second, theEuropean Commission, implements decisions of the council and initiates actions against individuals, companies, or member states that violate EU law. The third, the EuropeanParliament,hasanadvisorylegislativerolewithlimitedvetopowers.The fourth,theEuropeanCourtofJustice(ECJ),isthejudicialarmoftheEU.Thecourts ofmemberstatesmayrefercasesinvolvingquestionsontheEUtreatytotheECJ.

The Single EuropeanAct eliminated internal barriers to the free movement of goods, persons, services, and capital between EU countries. The Treaty on European Union, signed in Maastricht, Netherlands (the Maastricht Treaty), amendedtheTreatyofRomewithafocusonmonetaryandpoliticalunion.Itset goalsfortheEUof(1)singlemonetaryandfiscalpolicies, (2) common foreign and security policies, and (3) cooperation in justice and home affairs.

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Text 17

THE FUNCTION OF BANKS IN NATIONAL

ECONOMY

To be able to understand the role and the work of banks properly, we must first say what the term «national economy» means. It covers three principal fields: industry, commerce and direct services.

Industryprovidesenergy,rawmaterialsandgoods.Theextractiveindustry produces coal, oil, gas, iron ore and a number of other metals and minerals from the ground or seabed. These are needed by the manufacturing industry fortheproductionofmachinesandallthosegoods,whichthecustomersbuy: the car, the TV set, furniture, the dishwasher in the kitchen etc.

However, we do not get these goods direct from the factory but buy them in a shop or a department store. They are transported there and delivered to our homes by railroad, sometimes by ship or air, especially if they have been imported.

Thisbringsustoanotherfieldofeconomy,commerce,whichcanbedivided into trade and the service industries.

Trade is the buying and selling of any commodity. It can be divided into home trade and foreign trade.

A television set is transported several times before we can switch it on in our living room. Transport is, of course, a service which industry, trade and the consumer make use of. But it is only one of the service industries.

If the television set is damaged or gets lost while being transported, the insurance pays for this. Insurance is a service industry that specialises in covering risks of all kinds: damage, loss, fire, accidents – to give just a few examples.

Industry and commerce depend on precise, up-to-date information, which couldnotbeprovided,ifwedidnothaveourhighlydevelopedcommunication services like the telephone, telex and the post.

Youmayhavenoticedthatbankshavenotbeenmentionedyet.Wheredoes banking link up with the other sectors of a national economy? The simple answer is everywhere.

Banking:

•collects money from its clients in small or large amounts

•provides efficient means and methods of payment for goods and services

•finances industry, commerce and direct services

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•grants credits to consumers for the purchase of consumer goods

•sells foreign currencies

•has contacts with all important national and international money and capital markets, etc.

Text 18

MONEY

Moneyisanythingthatisingeneraluseinthepurchaseofgoodsandservices and in the discharge of debts. Money may also be defined as an evidence of debtowedbysociety.ThemoneysupplyintheUSconsistsofcurrency(paper money),coins,anddemanddeposits(checkingaccounts).Currencyandcoins are government-created money, whereas demand deposits are bank-created money. Of these three components of the money supply, demand deposits are by far the most important. Thus, most of the money supply is invisible, intangible, and abstract.

The two most important inherent attributes that money must possess in a modern credit economy are acceptability and stability. In earlier times in the evolution of money and monetary institutions in the United States, the attributes of divisibility, portability, and visibility were important. The two legal attributes of «legal tender» and «standard money» are not of as much importance today as in the past.

The four functions that money often performs are (1) standard of value, (2) mediumofexchange,(3)storeofvalue,and(4)standardofdeferredpayment. In a modern specialized economy, (2) and, most especially, (1) are the most important of these.

AlthoughitisagreedthatthevalueofmoneyhasfallenintheUSovertime, therearethreeinpartconflictingtheoriesofvaluethathavebeenadvancedto explainthisphenomenon:thecommodity,quantity,andincometheories.Most economists today espouse either the second or, more typically, the third of these.Anymoneycanretainitsvalueaslongasitsissuanceislimited;itneed not have a commodity backing. Inflation or rising prices have been explained by demand and/or supply theories in recent years, although historically the former has been thought to provide the more satisfactory explanation.

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Text 19

MONEYAND ITS FUNCTIONS

All values in the economic system are measured in terms of money. Our goods and services are sold for money, and that money is in turn exchanged for other goods and services. Coins are adequate for small transactions, while paper notes are used for general business.There is additionally a wider sense of the word «money», covering anything, which is used as a means of exchange, whatever form it may take. Originally, a valuable metal (gold, silver or copper) served as a constant store of value, and even today the American dollar is technically «backed» by the store of gold which the US government maintains. Because gold has been universally regarded as a very valuable metal, national currencies were for many years judged in terms of the so-called «gold standard».

Nowadays however valuable metal has generally been replaced by paper notes. National currencies are considered to be as strong as the national economies, which support them. Paper notes are issued by governments and authorized banks, and are known as «legal tender».

The value of money is basically its value as a medium of exchange, or as economistsputit,its«purchasingpower».Thispurchasingpowerisdependent on supply and demand. If too much money is available, its value decreases, and it does not buy as much as it did, say five years earlier. This condition is known as «inflation».

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INFLATION

The control of rising prices and the depreciating value of money has been an aim of economic policy for many years. In the past, it was thought that the control of inflation created unemployment and that inflation only occurred at times of full or near-full employment. In recent years, the problem has been much more serious because rising inflation has been accompanied by high levels of unemployment.

Asimpledescriptionofinflationistoomuchmoneychasingtoofewgoods. It poses a serious problem because it has so many bad effects. The first obvious one is that one’s money buys less and less as prices of goods and services continue to rise and one’s standard of living falls as a result. This is made

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worse by the fact that people of low and fixed incomes, for example pensioners, are most seriously affected and they are the least able to help themselves.

Itisarguedbysomeeconomiststhatsomeinflationisgoodfortheeconomy, sincedeflationleadstounemploymentanddepression,butclearly,ahighlevel ofinflationisinjuriousandmakeseconomicprogressdifficult,ifnotpossible. Successive governments, therefore, introduce policies which are designed to controlinflation.Thesefallintotwogroups.Thefirstaimstodecreasedemand for goods and services. It includes increases in taxation, restriction of credit, and raising of interest rates, all of which reduce consumers’spending power (demand). These measures are usually supported by reduced government expenditure which, in turn, decreases the amount of money circulating in the economy and is therefore a further control on demand.

The second group of measures aims to hold or reduce costs and therefore prices. The chief measure is the carrying out of an incomes policy designed to control wages and salaries at a specified level or specific ones to the level of increased productivity achieved.

Economiststalkof,anddistinguishbetween,cost-pushinflation-pricerises which occur because the costs of production are increasing more than output, and demand-pull inflation – price rises which occur as a result of increased demand. The two types of inflation are closely connected.

Control of inflation

In recent years many measures have been used in an attempt to control inflation. The main ones have been those which limit rises in incomes and prices. While prices and incomes policies do help to control inflation, they obviously do not provide a complete answer. The level of prices at home depends to some extend on the prices of imports, which are determined by factors outside our control, as well as on the value of home currency, which depends partly on the levels of other countries» currencies.

The only permanent answer to the control of inflation is an increase in productivity – and consequently total production – that is easier said than achieved. Many internal and external influences govern economic activity and performance.The government must try to influence and control these for thebestinterestsofthecountryanditspeople,throughmeasureswhichaffect the supply of money in the economy, taxation and other controls.

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Text 21

CUSTOMER NEEDS

Customers are people who buy products and services from other people (usually companies of one sort or another). What customers think, and feel about a company and/or its products is a key aspect of business success.

Attitudes are shaped by experience of the product, the opinions of friends, directdealingswiththecompany,andtheadvertisingandotherrepresentations of the company.

Irrespective of whether a business» customers are consumers or organisations, it is the job of marketers to understand the needs of their customers. In doing so they can develop goods or services which meet their needs more precisely than their competitors. The problem is that the process of buying a product is more complex than it might at first appear.

Customersdonotusuallymakepurchaseswithoutthinkingcarefullyabout theirrequirements.Whereverthereischoice,decisionsareinvolved,andthese may be influenced by constantly changing motives.The organisation that can understand why customers make decisions such as who buys, what they buy andhowtheybuywill,bycateringmorecloselyforcustomersneeds,become potentially more successful.

The supermarket industry provides a good example of the way in which differentgroupsofcustomerswillhavedifferentexpectations.Somecustomers just want to buy standard products at the lowest possible prices. They will therefore shop from supermarkets that offer the lowest prices and provide a reasonablerangeofgoods.Incontrast,somesupermarketshoppersareseeking such aspects as variety and quality. They will therefore choose to buy from an up-market supermarket. Additionally some customers will have special tastes such as wanting to buy FAIRTRADE products or organic fruit and vegetables. It is clear therefore that to be successful a business has to have a clearunderstandingoftheirtargetcustomersandtheexpectationsofthisgroup.

Most markets are made up of groups of customers with different sets of expectationsabouttheproductsandservicesthattheywanttobuy.Marketing oriented businesses will therefore need to carry out research into customer requirementstomakesurethattheyprovidethoseproductsandserviceswhich best meet customer expectations in the relevant market segment.

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