VI. Answer the questions:

1. What is the aim of monetary policy?

2. Why is it important to control the money supply?

3. What is the role and responsibility of the Central Bank?

4. How does the Central Bank manage money supply?

5. Dwell on open market operations.

6. What consequences does monetary policy have for businesses?

7. Explain the creation of money by commercial banks. What does a money multiplier show?

8. Why does the Bank impose a reserve requirement? What's the effect of the Bank imposing a reserve requirement?

9. Why does a reserve requirement act like a tax on banks?

10. What is a discount rate? How does it work?

Литература

Основная: 1, 3, 5.

Дополнительная: 2, 4, 6, 7.

Topic 13.

Import and export

International trade is the exchange of goods and services between different countries. Depending on what a country produces and needs, it can export (sell goods to another country) and import (buy goods from another country).

Whenever a country imports or exports goods and services, there is a resulting flow of funds: money returns to the exporting nation, and money flows out of the importing nation. Trade and investment is a two-way street, and with a minimum of trade barriers, international trade and investment usually makes everyone better off.

In an interlinked global economy, consumers are given the opportunity to buy the best products at the best prices. By opening up markets, a government allows its citizens to produce and export those things they are best at and to import the rest, choosing from whatever the world has to offer.

Some trade barriers will always exist as long as any two countries have different sets of laws. However, when a country decides to protect its economy by erecting artificial trade barriers, the result is often damaging to everyone, including those people the barriers were meant to protect.

Governments can control international trade. The most common measures are tariffs (or duties) and quotas. A tariff is a tax on imported goods, and a quota is the maximum quantity of a product allowed into a country during a certain period of time. These measures are protectionist as they raise the price of imported goods to «protect» domestically produced goods.

International organizations such as the WTO (World Trade Organization) and EFTA (European Free Trade Association) regulate tariffs and reduce trade restrictions between member countries.

Companies can choose from various methods to establish their products in a foreign market. One option is to start by working with local experts such as sole agents or multi-distributors, who have specialist knowledge of the market and sell on behalf of the company. This often leads to the company opening a local branch or sales office. Another option is to sell, or give permission to use, patents and licenses for their products. Companies may wish to start by manufacturing in the export market, in which case they can either set up a local subsidiary or a joint venture with a local partner.

Many of these documents can be replaced with computerized procedures. Standard 'aligned' export documentation is also used: the required information is entered on a single master document and then photocopied to produce all the required documents.

Many import or export deals are arranged through an exporter's agent or distributor abroad – in this case the importer buys from a company in his own country and this company imports the goods. Alternatively, the deal may be arranged through an importer's buying agent in a buying house acting for the importer, or through an export house based in the exporter's country. In this situation, the exporter sells directly to a company in his own country, who will then export the goods.

Prices for exports may be quoted in the buyer's currency, the seller's currency or in a third 'hard' currency (e.g. US dollars, EURO or Swiss Francs). The price quoted always indicates the terms of delivery, which conform to the international standard Incoterms. The terms of delivery that are most common depend on the kinds of goods being traded and the countries between which the trade is taking place.