money markets and banks, the central bank influences the whole financial system, this influence affecting the national economy in general.
damp – угнетать
eliminate – уничтожать, искоренять
expansionary – экспансионистская
extinguish – уничтожать, гасить
latter – последний
(из упомянутых)
lend – ссужать, давать взаймы
ordinary – обычный, ординарный
test – тест; тестировать
demand side – относящийся к спросу (букв.: стороне спроса)
supply-side – относящийся к предложению
speed up – ускорять(ся)
savings bank – сберегательный банк
savings and loan association – кредитно-сберегательная ассоциация
credit union – кредитный союз
hold deposits – держать депозиты
reserve requirements – резервные ограничения
equal to prescribed deposits – равный предписываемому объему депозитов
in other cases – в других случаях
open-market – относящийся к открытому рынку
interventions – интервенции
discount rate – ставка рефинансирования
Exercise 4
Answer the questions:
1. What financial institution is monetary policy carried out by?
2. What side of macroeconomics (the demand or the supply side) are the monetary policies on?
3. What is the main objective of the monetary policy?
4. What happens in case a central bank carries expansionary monetary policy?
5. What financial institutions are a central bank's customers?
6. What is a reserve test?
7. What do commercial banks have to do in order to acquire reserve balances?
8. How can a central bank extinguish reserve balances?
9. What is a discount rate?
10. How does the setting of the discount rate affect the national economy?
What Is Keynesianism?
1
– Why is a physician held in much higher esteem than a Keynesian economist?
– A physician makes an analysis of a complex illness whereas a Keynesian economist makes you ill with a complex analysis!
2
If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.
physician – врач, терапевт
whereas – в то время как
esteem – уважение
hold in much higher esteem – питать большее уважение
make ill – делать больным
in which case – в коем случае
Keynesian Economics
Keynesian economics is a theory of total spending in the economy (called aggregate demand) and of its effects on output and inflation. The main points of the theory are as follows.
First, the Keynesians think that aggregate demand is affected by a great variety of public and private economic decisions. Of the public decisions most important are monetary and fiscal measures taken by the government and the central bank (i.e., spending and tax). Quite recently Keynesians believed that monetary policy was powerless, and advocated fiscal measures as the means to fine-tune the economy. Today the majority of both Keynesians and monetarists believe that both fiscal and monetary policy affect aggregate demand.
Secondly, changes in aggregate demand have their greatest short-run impact not on prices, but on real output and employment. The famous Phillips curves show that inflation changes only slowly when unemployment changes. Monetary policy produces real effects on output and employment only if some prices are stable and do not adjust instantly.
Thirdly, Keynesians suppose that prices and, especially, wages respond slowly to changes in supply and demand, resulting in shortages and surpluses, especially of labour.
Contrary to monetarists's view Keynesians do not think that the typical level of unemployment is ideal. With them unemployment is more of a problem than inflation. Keynesians also state that macroeconomic fluctuations significantly reduce economic well-being, that recessions or depression are economic maladies, not efficient market responses to unattractive opportunities, as the monetarists suppose.
Hence Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems. So, Keynesians developed the notion of a fiscal/monetary mix to control spending and the balance of payments simultaneously. Well-timed changes in taxes and government spending were to be balanced to control the economy. If this macro measures didn't work out as intended, the goverment should administer price and wage controls. Keynesians identified themselves as engineers who adjust the controls and, when necessary, design new controls to maintain just the right mix of policies.
In order to know how to develop policies, Keynesians worked out forecasting models
