or company’s bank or building society account (the ‘payee’). In the latter case, money may be withdrawn in cash by a person or company writing out a cheque payable to themselves. Cheques may be ‘open’, in which case they may be used to draw cash, or ‘crossed’ with two parallel lines, in which case they cannot be presented for cash but must be paid into the account of the payee. See COMMERCIAL BANK.
cheque card see COMMERCIAL BANK.
Chicago school a group of economists at Chicago University, most notable of whom is Milton FRIEDMAN, who have adopted and refined the QUANTITY THEORY OF MONEY, arguing the need for governments to control the growth of the MONEY SUPPLY over the long term. Within the broad parameters set by stable money growth, the Chicago school stresses the importance of the market system as an allocative mechanism, leaving consumers free to make economic decisions with minimal government interference. See MONETARISM.
Chinese wall the segregation of the stockbroking, jobbing (see MARKET MAKER), fund management, etc., activities of a financial institution in order to protect the interest of its clients. For example, the same institution could be responsible for making a market in a particular financial security while at the same time offering investment advice to clients to purchase this security, with the danger that the advice given will not be impartial. See CITY CODE.
choice the necessity for CENTRALLY PLANNED ECONOMIES and PRIVATE ENTERPRISE ECONOMIES to have to choose which goods and services to produce and in what quantities, arising from the relative SCARCITY of economic resources (FACTORS OF PRODUCTION) available to produce those goods and services. See ECONOMICS, PREFERENCES.
c.l.f. abbrev. for cost-insurance-freight, i.e. charges that are incurred in transporting imports and exports of goods from one country to another. In BALANCE-OF-PAYMENTS terms, c.i.f. charges are added to the basic prices of imports and exports of goods in order to compute the total foreign currency flows involved. See F.O.B.
circular flow of national income model a simplified exposition of money and physical or real flows through the economy that serves as the basis for macroeconomic analysis. In Fig. 22 (a) the solid lines show how, in monetary terms, HOUSEHOLDS purchase goods and services from BUSINESSES using income received from supplying factor inputs to businesses (CONSUMPTION EXPENDITURE). In physical terms (shown by the broken lines), businesses produce goods and services using factor inputs supplied to them by households.
The basic model can be developed to incorporate a number of ‘INJECTIONS’ to, and ‘WITHDRAWALS’ from, the income flow. In Fig. 22 (b), not all the income received by households is spent – some is saved, SAVINGS is a ‘withdrawal’ from the income flow. INVESTMENT expenditure ‘injects’ funds into the income flow. Part of the income accruing to households is taxed by the government and serves to reduce disposable income available for consumption expenditure. TAXATION is a ‘withdrawal’ from the income flow. GOVERNMENT EXPENDITURE on products and factor inputs ‘injects’ funds into the income flow. Households spend some of their income on imported goods and services. IMPORTS are a ‘withdrawal’ from the income flow. On the other hand, some output is sold to overseas customers. EXPORTS represent a demand for domestically produced goods and services and hence constitute an ‘injection’ into the income flow. See also AGGREGATE DEMAND, EQUILIBRIUM LEVEL OF NATIONAL INCOME MODEL.
Fig. 22 Circular flow of national income model. (a) The basic model of the relationship between money flows and physical flows. (b) A more complex model, incorporating injections to and withdrawals from the income flow.
City code a regulatory system operated voluntarily by interested parties to the UK STOCK EXCHANGE that lays down ‘rules of good conduct’ governing the tactics and procedures used in TAKEOVER BIDS and MERGERS. The general purpose of the code is to ensure that all SHAREHOLDERS (both the shareholders of the firm planning the takeover and those of the target firm) are treated equitably, and that the parties City (of London) involved in arranging a takeover bid do not abuse privileged ‘insider’ information, or misuse such tactics as CONCERT PARTIES, DAWN RAIDS and CHINESE WALLS.
The City code is administered by the City Panel on Takeovers and Mergers, which is responsible for formulating rules of practice and for investigating suspected cases of malpractice. See also INSIDER TRADING.
City (of London) the centre of the UK’s FINANCIAL SYSTEM, embracing the MONEY MARKETS (commercial banks, etc.), CAPITAL MARKET (STOCK EXCHANGE), FOREIGN EXCHANGE MARKET, COMMODITY MARKETS and INSURANCE MARKETS. The City of London is also a major international financial centre and earns Britain substantial amounts of foreign exchange on exports of financial services.
City Panel on Takeovers and Mergers see CITY CODE.
claimant count unemployment measure a UK measure of UNEMPLOYMENT that is based on the number of people claiming unemployment-related benefits (see JOBSEEKERS ALLOWANCE) at job centre offices. The unemployment rate is then expressed as a percentage of ‘workforce jobs’ (the number of persons recorded as being in full-time and part-time employment) plus claimant unemployment. In 2004 (third quarter) the unemployment rate was calculated at 2.7% using this measure. Compare INTERNATIONAL LABOUR ORGANIZATION UNEMPLOYMENT MEASURE. See REGISTERED UNEMPLOYMENT.
classical economics a school of thought or a set of economic ideas based on the writings of SMITH, RICARDO, MILL, etc., which dominated economic thinking until about 1870, when the ‘marginalist revolution’ occurred.
The classical economists saw the essence of the economic problem as one of producing and distributing the economic wealth created between landowners, labour and capitalists; and were concerned to show how the interplay of separate decisions by workers and capitalists could be harmonized through the market system to generate economic wealth. Their belief in the power of market forces led them to support LAISSEZ-FAIRE, and they also supported the idea of FREE TRADE between nations. After about 1870, classical economic ideas receded as the emphasis shifted to what has become known as NEOCLASSICAL ECONOMIC ANALYSIS, embodying marginalist concepts.
Classical economists denied any possibility of UNEMPLOYMENT caused by deficient AGGREGATE DEMAND, arguing that market forces would operate to keep aggregate demand and POTENTIAL GROSS NATIONAL PRODUCT in balance (SAY’S LAW). Specifically, they argued that business recessions would cause interest rates to fall under the pressure of accumulating savings, so encouraging businesses to borrow and invest more, and would cause wage rates to fall under the pressure of rising unemployment, so encouraging businessmen to employ more workers. See LABOUR THEORY OF VALUE, KEYNES, PRIVATE ENTERPRISE ECONOMY.
clearing bank see COMMERCIAL BANK.
clearing house system a centralized mechanism for settling indebtedness between financial institutions involved in money transmission and dealers in commodities and financial securities. For example, in the case of UK commercial banking, when a customer of Bank A draws a cheque in favour of a customer of Bank B, and the second customer pays in the cheque to Bank B, then Bank A is indebted to Bank B for the amount of that cheque. There will be many thousands of similar transactions going on day by day, creating indebtedness between all banks. The London Clearing House brings together all these cheques, cross-cancels them and determines at the end of each day any net indebtedness between the banks. This net indebtedness is then settled by transferring balances held by the COMMERCIAL BANKS at the CENTRAL BANK (BANK OF ENGLAND).
A similar ‘clearing’ function is performed in the commodities and financial securities
