5. Banks are the only financial intermediaries.
6. The clearing system represents one way in which society reduces the costs of making transactions.
7. The more liquid an asset, the higher the return received.
8. The monetary base is the quantity of notes and coins in circulation with the non-bank private sector.
9. The more cash that the public wishes to hold, the higher is the money supply.
10. Building society deposits are so liquid that they ought to be included in the definition of money.
X. Complete the sentences with prepositions:
1) Hongkong Bank’s net interest income increased a)….. 19 % last year.
2) Chrysler might run b) …. money to pay interest c) …. its bonds.
3) Your accountant will make d) ….. your accounts and prepare your tax return.
4) Total public spending will rise e) ….. real terms f) ….. 4 % this financial year and will
continue g) ….. this pace in the year to spring 2010.
5) Interest h) ….. the instruments i) ….. the interest rate basket is usually received more
frequent by than annually and most often j) ….. intervals of three months.
6) Construction lending has been badly hit by restrictions k) ….. loans.
7) Where can I exchange my dollars l) ….. pounds?
8) Investors have doubled their money after swapping the bonds m) … a package of cash and shares.
9) Some states allow card payments n) … certain taxes.
10) Basically, commercial banks – the ones that people use to keep their savings o) … and to borrow their money p) … the country’s central bank.
XI. Read the text and choose the correct word or words from A, B, C or D to fill in each gap:
Money: its functions and characteristics
Money is something that ___1___ all of us take for granted in so far as we need it to carry out our daily lives. Riding on a bus, purchasing a soft drink or an ice-cream are simple yet very frequent examples of when we hand ___2___ a few coins or a note to whoever ___3___ these things for us. The process is so simple in fact that we have no need to even think about it. Having said that, all of us (except possibly for Bill Gates of Microsoft) would like more money, but is a different ___4___ as we saw earlier.
The money we pay for purchases is usually our national currency, such as dollars, euros, rubles, rupees and so on. The coins and paper notes themselves have little or no intrinsic value – their value to us stems directly from the fact that sellers have complete ___5___ in the money we are giving to them and so exchange it for the goods and services we ___6___. This confidence in turn ___7___ them to buy supplies for their shop or petrol for their bus and so on. In the simple way described above, we have shown the functions of money.
The practice of using money is absolutely ___8___ for the ___9___ operation of businesses and international transactions in the modern global economy. In the absence of the sort of money we know, people would have rely on barter.
From the economist’s standpoint, money has three necessary functions. If any of these functions break down and cannot be met, people lose confidence in money. When this occurs, economic collapse is the only outcome.
| 1 | A | accidentally | B | extremely | C | virtually | D | controversially |
| 2 | A | on | B | up | C | round | D | over |
| 3 | A | is preventing | B | is providing | C | is prohibiting | D | is forbidding |
| 4 | A | note | B | matter | C | notice | D | indicator |
| 5 | A | confidence | B | hesitation | C | anxiety | D | doubt |
| 6 | A | give up | B | fail | C | require | D | call |
| 7 | A | gives over | B | ceases | C | is able | D | enables |
| 8 | A | inherit | B | essential | C | inherent | D | accessory |
| 9 | A | quiet | B | calm | C | smooth | D | rough |
XII. Tasks for thought.
1. Identify each of the following items as legal, token, commodity, or IOU money or, indeed, as not-money:
a) gold
b) 1 pound coin
c) cigarettes
d) cheque for 100$
e) petrol .
f) camera accepted in part-exchange
g) a building society deposit
h) pigs, turkeys, and cocoa nuts
2. Eight individuals in a baiter economy have and want the following goods: Alice has some haddock (пикша) but would like some apples; Barry has some gin but fancies blackcurrant jam; Carol is in possession of doughnuts (пончики) but wants coconuts; Daniel has obtained some jellied eels but really wants doughnuts; Eva has some figs but would prefer jellied eels; Gloria has coconuts but yearns for gin; Henry has apples but would like haddock. Can you work out a series of transactions which would satisfy all concerned?
3. Which of the following characteristics are necessary for an asset to function as money?
a) backed by a precious metal;
b) Authorized as legal tender by the monetary authorities
c) Generally acceptable as a medium of exchange;
d) Having value in future transactions.
4. Which of the following would be regarded as an asset to a customer of a commercial bank?
a) A current account bank deposit;
b) A special deposit;
c) trade bills held by the bank as reserve assets;
d) The bank's deposits at the Bank of England;
e) an overdraft;
f) Loans advanced by the commercial bank in US$.
5. Assess the liquidity and likely return of each of the following financial assets:
a) cash
b) equities
c) bonds
d) bills
e) industrial shares
XIII. Translate from Russian into English.
1. Все ценности в экономической системе измеряются деньгами. Товары и услуги продаются за деньги, а эти деньги обмениваются на другие товары и услуги. Термин «деньги» в широком смысле этого слова означает все, что используется как средство обмена.
2. Первоначально ценный металл служил средством сбережения. Даже сегодня американский доллар «поддерживается» запасом золота. Многие годы национальные валюты оценивались с точки зрения «золотого стандарта».
3. Бумажные деньги, выпущенные эмиссионными (issuing) банками, являются законным платежным средством. Стоимость денег определяется их стоимостью как средства обмена или их покупательной способностью. Эта покупательная способность зависит от спроса и предложения.
4. Банки связаны с потоком денег, поступающих в экономику и изымаемых из нее. Банки получают деньги от своих вкладчиков в двух формах: на текущие счета и на депозитные счета. По депозитным счетам банк выплачивает проценты, если клиент оставляет деньги в банке на определенный срок.
5. Если банк предоставляет кредит или ссуду, то эта операция приносит ему доход в виде процента. Норма этого процента всегда выше, чем те проценты, которые банк платит своим вкладчикам.
6. Сегодня главной функцией банка является посредничество между вкладчиками и заемщиками. Интересной формой работы банков является система взаимозачетов. В этой области наблюдается жесткая конкуренция между европейскими и американскими банками.
XIV. Translate the following text into English:
Цифра года. 36, 4 рубля за доллар
Исторический рекорд падения стоимости российского рубля по отношению к доллару США был зафиксирован 7 февраля 2009 года: стоимость доллара, установленная Банком России, достигла 36, 4 руб., тогда как на начало года она составляла лишь 29, 4 руб. На международном валютном рынке доллар также рос относительно остальных валют. Впрочем, процесс сдачи американской валютой завоеванных позиций был таким же быстрым и неожиданным. Резкое снижение доллара началось в марте и продолжилось вплоть до июня. За это время стоимость доллара в России упала до 30,51 руб. После небольшого откоса к уровню 32.69 руб. в середине августа началась вторая волна со второй половины августа по ноябрь. Годовой же минимум по отношению к рублю долларом был достигнут 13 ноября – 28,67 руб./$.
Схожие движения доллара наблюдались и в других валютных парах, где он весной также значительно подешевел. Наиболее сильно курс доллара снизился в то время, когда звучали упреки Центробанков, в первую очередь китайского, в адрес американского правительства, накачивающего экономику необеспеченными деньгами. Ряд ЦБ усомнились в живучести доллара, заявив о намерении сократить его долю в своих резервах. Продажи доллара были настолько массивными, что всего за две недели торгов в начале марта он “похудел” на 8,8 % относительно евро. По мере ослабления доллара инвесторы спешили избавиться от него, перекладывая средства в более надежные активы – золото и нефть. Цены на них закономерно пошли вверх.
Не менее впечатляющим был и рост фондовых индексов. Российские индексы значительно опередили по темпам роста своих западных конкурентов.
XV. Speaking
1. Discuss why you think that people want to hold money rather than use funds to earn a return.
2. How do you expect the increased use of credit cards to affect the money supply?
3. There is rather a high level of inflation in the country. From your point of view, what measures should the Central bank undertake to slow down the inflationarv process?
UNIT 14 CENTRAL BANKING
I. Find the following word-combinations in the texts and translate them into Russian
a) to affect the supply of money; monetary base; reserve requirement; open market operations; value of the money multiplier; to earn high interest rates; lucrative lending opportunities; discount rate; lend up to the hilt; flood of withdrawals: to hold some excess cash reserve
b) to determine money demand; interest-bearing assets; to undertake transactions; transaction motive; to cash in our bonds; to have money available; to forego interest; to stave off unforeseen crisis; the asset motive; to earn a good rate of return; to bear interest
II. Find in the text English equivalents for the following word.
a) денежная масса; денежная основа; коэффициент резерва наличности; требуемая резервная норма; учетная ставка; предусмотрительный банк; возможности давать ссуду; увеличить денежную массу; население; восстановить прежний уровень выдачи ссуд; отзыв вклада
b) выбрать переменную; девятикратное увеличение; означать, стоять за; компенсировать издержки; увидеть товар по сниженной цене; перехватить товар за полцены; непредвиденное обстоятельство; непредвиденная выгодная покупка; избежать катастрофы; предсказуемый уровень дохода
III. Say what is meant by:
the money supply is partly a liability of the Bank and partly a liability of commercial banks; money multiplier; a reserve requirement acts like a tax on banks; special deposits; the transaction motive for holding money; the precautionary motive for holding money; to meet contingencies; industrial shares are quite risky
IV. Listening.
1. Listen to the lecture to answer the questions in the textbook.
2. Listen to the lecture again taking notes to give a summary of it.
V. Match the words (1 – 5) with their corresponding definitions (a – e):
| 1. interest rate 2. reserve requirement 3. discount rate 4. opportunity cost 5. receipt | a) the rate charged by a Central Bank for lending to other banks. Charges in this rate will influence interest rates in the economy as a whole b) the real cost of doing something, including the cost of things that you cannot do because of the choice you have made c) the percentage rate used for calculating interest over a particular period of time d) a written statement showing that you have received money, goods, or services e) an amount of money the government says that banks must possess, or leave with the Central Bank, calculated in relation to the amount of the loans that it makes |
VI. Match the words in the left-hand column with their synonyms:
1) monetary base a) to compensate
2) to study b) to attain
3) to foresee c) to count
4) distinction d) therefore
5) to guarantee e) base money
6) to withdraw f) difference
7) to achieve g) to contemplate
8) to make up h) to hope
9) hence i) to assure
10) to add up j) draw out
VII. Fill in the gaps in the following text with suitable words.
stock, exchange, banker, adjusting, authority, accounts, national, budgetary, handle, fund, receipts, assets, bonds, issuing, to settle, monetary
The central bank is a country's leading bank which acts as 1)______to the government and the banking system and acts as the 2)______ responsible for implementing the government's 3)______ policy. Central banks such as the Bank of England in the UK 4)______ the government's financial 5)______ in conjunction with the treasury, taking in 6) ______ from taxation and the sale of government 7)______, and making disbursements to the various government departments 8)______their activities. The central bank acts as the government's broker in its borrowing and lending operations, 9)_______ and dealing in
government 10)______ and treasury bills to underpin its year-to-year 11)______ position and management of the country's 12)______ debt.
Commercial banks hold accounts with the central bank and, in its role as banker to the banking system, the central bank makes it possible for banks 13)_____ their indebtedness with one another by 14)______ their accounts as appropriate.