2. Replace the parts in italics by synonyms

implements monetary policy; plays a major role; operates monetary policy; extra lending; if the worst comes to the worst, they are short of cash; to affect the money supply; in excess of the reserve ratio

3. Fill in the gaps with the words and expressions from the text

1. Monetary policy is a method of controlling the economy that centres on __ the amount of money __ in the economy and so __ and __.

2. In some countries the Central Bank operates monetary policy __ government policy, but the UK's Central Bank implements monetary policy __ the government.

3. Monetary policy has three main aspects: controlling __, controlling __, managing __.

4. The aim of the authorities when controlling the money supply is __, and hence __, by businesses and individuals during __.

5. It is hoped to limit the level of __ in the economy and thus to remove or reduce __.

6. During a recession monetary policy is aimed at __ to __ spendings.

7. The three most important instruments __ the money supply are __, __ and __.

8. Open market operations refer to the Bank trading government bonds __, which is when they are bought from and sold to __.

9. When the Bank sells __ in the open market, the Bank __ the money from population and __ the money supply.

10. When the Bank buys government bonds in the open market, it __ the amount of money __ and hence __.

11. Banks have to hold a proportion of their assets __ in case customers demand ___.

12. The required reserve has to be __, which is easily __ into cash.

13. __ is a minimum ratio of __ to __ that the central bank requires commercial banks to hold.

14. If cash of commercial banks __ the required amount, they must immediately __ cash, usually from __, to restore their __.

15. Commercial banks can make loans, i.e. they can __ and increase __.

16. The money multiplier (m) shows __, which can be created by one dollar of __, the required reserve ratio __.

17. The money multiplier is __ to the required reserve ratio, it means that the larger __ is the smaller __ is; the less money __ and the less __ is.

18. Since sight deposits will be 20 times cash reserves, the banking system will create $20 million of __ against its $1 million __.

19. A reserve requirement acts like __ by forcing them to hold __ of their total assets as __ and __ as loans earning __.

20. When the central bank imposes a reserve requirement __ the reserve ratio, the effect is to reduce __, reduce __, and reduce __.

21. When a particular reserve requirement is already __, any increase in will reduce

22. The discount rate is __ that the Bank __ when the commercial banks want __.

23. Banks have to balance __ they will get on extra lending with __ if there is __, which push their cash reserves __.

24. Commercial banks may as well lend up __ and __ their cash reserves __ to the minimum.

25. If the worst __ and commercial banks __, they can always __ the Bank.

26. The Bank announces that it will lend to commercial banks only at __.

27. If the Bank imposes a penalty rate, a commercial bank may conclude that __ making the extra loans.

28. There is too high a risk that __ will then force the bank to __ the Bank at the penalty interest rate.

29. It makes more sense to hold __ against the possibility of __.

30. By setting the discount rate at __ in excess of __ of interest rates, the Bank can __ commercial banks __ to hold __.

31. Since banks have to hold more cash as reserves, __ is reduced, less money can __ and __ is lower.