over – здесь: превышать
percentage point – процентный показатель
on average – в среднем
compound annual rates – совокупный годичный показатель
in excess of – превышающий
interest rates – процентные ставки
foreign-exchange value – обменная стоимость
flight from money – бегство от денег
tax rates – налоговые ставки
foreign decisions – решения относительно международных проблем
trend rate – обычный для экономики показатель
well aware – хорошо понимающий, хорошо сознающий
Географические названия:
Chile – Чили
Israel – Израиль
Brazil – Бразилия
Argentina – Аргентина (также the Argentine)
Italy – Италия
Japan – Япония
Turkey – Турция
Vietnam – Вьетнам
Yugoslavia – Югославия
Exercise 2
Answer the questions:
1. Under what general conditions is inflation produced?
2. What does a government have to do if it wants to put an end to inflation?
3. Why did the Fed increase money growth in the US in the late sixties?
4. What is the relation between inflation and the interest rates?
5. Why do people «fly from money» in the periods of high growth of money?
6. What factors play key roles in the currency depreciation process?
7. What is the relation between inflation and output?
8. In what way do deflation and output interrelate?
9. What is the trend output rate?
10. What effect does monetarism have on real economic policies?
Monetarism in Action
A little old lady sold pretzels on a street corner for 25 cents each. Every day a young man would leave his office building at lunch time. As he passed her pretzel stand, he would leave her a quarter, but would never take a pretzel. This went on for more than five years. The two of them never spoke. One day as the young man passed the old lady's pretzel stand and left his quarter as usual, the pretzel woman spoke to him: «Sir, I appreciate your business. You are a good customer, but I have to let you know that due to inflation the price of pretzels has increased to 35 cents.»
– Why do Economists provide estimates of inflation to the nearest tenth of a percent?
– To prove they have a sense of humour.
Inflation allows you to live in a more expensive neigbourhood without moving.
appreciate – высоко оценивать
estimate – оценивать (обычно заранее), прогнозировать
pretzel – маленький соленый хрустящий крендель
quarter – монета в 25 центов
pretzel stand – лоток с кренделями
the nearest tenth of a percent – ближайшая десятая доля процента
sense of humour – чувство юмора
Exercise 3
Answer the questions:
1. Why didn't the young man take a pretzel?
2. What was the inflation rate in the five years the story about pretzels is speaking of?
3. Why is it possible to live in a more expensive house in the times of inflation?
Monetary Policy
Monetary policy is the most important instrument of government policies. It is carried out by the central bank whose actions are affecting economic activity.
Monetary policies are on the demand side of macroeconomics. They stimulate or discourage spending on goods and services. Monetary policy is used to damp, perhaps even eliminate, fluctuations in aggregate demand. It is not a supply-side instrument. Central banks have no tools to affect productivity and real economic growth.
If a central bank is carrying out expansionary monetary policy, the aggregate spending (purchase of goods and services by consumers, businesses, and governments) increases. In its turn, these new demands raise output and employment, as well as prices. They also speed up inflation.
A central bank is usually called a «bankers' bank», whose customers are not ordinary citizens but commercial banks, savings banks, savings and loan associations, and credit unions. They hold deposits in and borrow from the central bank and are supposed to follow the central bank's reserve requirements and other regulations.
Banks are to hold reserves equal to prescribed percentages of their deposits. These reserves are regularly tested, reserve tests being the main tool of monetary policy. In order to pass the reserve tests commercial banks need the central bank's funds, and so, the latter controls the supply. To acquire reserve balances banks sell their securities to the central bank. In other cases the central bank can extinguish reserve balances by selling its securities
