Text a Central Banks and Monetary Policy

Instead of taking deposits and making loans as normal banks do, a central bank – such as the Bank of England, the U.S. Federal Reserve or the Bank of Japan – acts as banker to the government and to the banking sector. It controls the economy by increasing or decreasing the country’s supply of money.

In fact, in most modern economies printed notes and coins are only a small percentage – often less than 10 percent – of the money supply. Central banks must print only enough currency to satisfy everyday needs of businesses and consumers. The U.S. Federal Reserve (informally Fed), for example, has the Bureau of Engraving and Printing up bills from time to time simply to replace worn-out money in the economy at large.

Since most “money” is actually nothing more than a savings or checking account at a local bank, the most effective way for a central bank to control the economy is to increase or decrease bank lending and bank deposits. When banks have money to lend to their customers, the economy grows. When the banks are forced to cut back lending, the economy slows.

Once a customer deposits money in a local bank, it becomes available for further lending. A hundred dollars deposited at a bank in San Francisco, for example, doesn’t lie idle for long. After setting aside a small amount of each deposit as a “reserve”, the bank can lend out the remainder, further increasing the money supply without any new currency being printed.

A bank’s supply of money for lending is limited only by its deposits and its reserve requirements, which are determined by the central bank. Central banks are known to often use these reserve requirements to control the money supply. When a bank is required to keep a certain amount of its funds on reserve with the central bank – 10 percent of deposits, for example– it is unable to lend these funds back to customers. When a central bank decides to increase the money supply, it can reduce this reserve requirement, allowing banks to use more of their funds to lend to businesses and consumers. This may well increase the money supply quickly because of a multiplier effect: as the new loans enter the economy, deposits increase – and banks have even more money to lend, which generates further deposits providing more money for further loans.

Another way of controlling the money supply is to raise or lower interest rates. When a central bank decides that the economy is growing too slowly – or not growing at all – it can reduce the interest rate it charges on the loans to the country’s banks. When banks are allowed to get cheaper money at the central bank, they can make cheaper loans to businesses and consumers, providing an important stimulus to economic growth. Alternatively, if the economy shows signs of growing too quickly, a central bank can increase the interest rate on its loans to banks, putting the brakes on economic growth.

Perhaps the most dramatic way of increasing or decreasing the money supply is through open market operations, where a central bank buys or sells large amounts of securities, such as government treasury bonds, in the open market. By buying them from a bank or a securities house the central bank pumps money into the economy because money held at central banks, such as the U.S. Federal Reserve, is not considered part of the money supply. When it is used to buy securities, usually government bonds, in the open market, the money supply is increased.

In a sense, the central bank creates money every time it dips into its vaults to buy bonds in the open market.

In addition to coordinating the country’s monetary policy, a central bank serves as a watchdog to supervise the banking system, in most cases acting independently of its government to provide a stabilizing influence on the country’s economy.

COMPREHENSION CHECK

Exercise 1. Explain in English what is meant by:

1) ... acts as a banker to the government

2) the money supply

3) ... setting aside a small amount of each deposit as a “reserve”

4) to control the economy

5) multiplier effect

6) ... are allowed to get cheaper money at the central bank

7) ... putting the brakes on economic growth

8) ... pumps money into the economy

9) ... dips into its vaults to buy bonds

10) ... a central bank serves as a watchdog to supervise the banking

system

Exercise 2. Complete the following sentences joining the suitable part.

1. The central bank keeps control of the country’s economy ...

... a) by supervising the day-to-day activity of local banks.

... b) by reducing the interest rate.

... c) by increasing or decreasing the country’s supply of

money.

2. If banks charge a very high interest rate on their loans to customers ...

... a) they increase the money supply.

... b) they generate further deposits.

... c) they slow down business and economic development of

the country.

3. “Money” is created when the central bank ...

... a) sells bonds in the open market.

... b) borrows currency from other countries.

... c) buys securities in the open market.

Exercise 3. Fill in the correct words from TEXT A choosing from the list below.

It is usual for banks to ____ deposits and ____ loans ____ consumers and businesses. But central banks act as bankers ____ the government. For example, Britain’s Bank of England is responsible for ____ the money as well as ____ the banking system and ____ monetary policy. In Germany, the central bank is noted for its active policy of strict monetary ____ limiting money ____ growth in order ____ inflation at all costs. ____ increasing or decreasing bank lending and bank ____ central banks control the ____ . A bank’s supply of ____ for lending is limited only ____ its deposits and its ____ requirements. A bank’s funds ____ reserve ____ the central bank usually amount to 10 percent of ____ . When the reserve requirement ___ reduced, new loans ____ the economy ____ more money for ____ loans. Money supply can be also ____ by raising or ____ interest ____ . The most unusual way of increasing or ____ the money supply is through open ____ operations. In this case the central bank ____ money into the economy or puts money into its ____ by buying or ____ government treasury ____ which ____ often called ____ .

to, supply, take, coordinating, bonds, economy, vault, decreasing,

control, by, reserve, on, selling, deposits, money, securities, are,

controlled, by, with, lowering, supervising, rates, further, generating, enter, pumps, printing, to control, deposits, market, is, to, make.

Word formation and vocabulary building practice

Exercise 4. Make up words with the help of “derivational trees”. Point out classes to which they belong (N, V, Adj, Adv). Consult an electronic English-Russian dictionary(ABBYY Lingvo Electronic Dictionary) for their meanings.

operate

-tion -ive -ing -or

-al -ly

create

-tion -ive -or

-ly -ty -ness

govern

-ment -ing -or -ness

-al -ship

supervise

-sion -or -ory -ing

Exercise 5. Translate into Russian in writing the following sentences containing the verb “operate” and its derivatives giving special attention to their shades of meaning and the use of their Russian equivalents.

1. He was operated on for appendicitis.

2. This company operates in several countries.

3. This new law operates in our favour.

4. She knows how to operate a personal computer.

5. The company’s overseas operations include banking and

insurance.

6. A set of programs inside a computer that controls the way it works

and helps it to handle other programs is called operating system.

7. The new equipment is not yet fully operational.

8. The head of credit and risk department of the bank decided to put

the recently bought computers into operation without delay.

9. The management board of the company decided to drastically

reduce operating costs.

10. You can’t telephone Moscow directly from here, you have to go

through the operator.

Exercise 6. Match the following words and their derivatives in A with the words in B. Translate the resulting word combinations into Russian in writing.

A B

to govern governmental governing government governor(s)	corrupt the country one’s passions party/ board of the central bank board of… body/agency/department federal/ local/ national/ central wisely/ skillfully crisis the use of foreign currency principles
create creation creator creative	a job/a vacancy confusion thinking ... of this machine abilities
supervise supervision supervisory supervising	to relax/ to tighten the housing project instructor body/ council/committee under smb’s ...

Грамматический обзор 1

Причастие настоящего времени (Present Participle или Participle I) совпадает по форме с герундием (Gerund), но отличается от него по функциям в предложении. Причастие и герундий имеют категории залога (Active/Passive) и вида (Non-Perfect /Perfect).

The - ing Participle and Gerund (V_ing)

	Active	Passive
Non-Perfect	writing	being written
Perfect	having written	having been written

Причастие настоящего времени выполняет в предложении следующие функции:

1. обстоятельства (adverbial modifier) и переводится на русский язык деепричастием совершенного или несовершенного вида:

Solving the problem, I understood that my approach was not strictly scientific.

Решая эту задачу, я понял, что мой подход не был строго научным.

The Present Perfect Participle указывает на действие, которое происходило до действия глагола-сказуемого:

Having published his first book on economics, he began to work for one of the government agencies in Washington.

Опубликовав свою первую книгу по экономике, он начал работать в одном из правительственных учреждений в Вашингтоне.

2) определения (attribute) и переводится на русский язык причастием или глаголом в личной форме в составе придаточного определительного предложения:

Не came up to the policeman standing at the comer.

Он подошел к полицейскому, стоявшему (который стоял) на углу.

Герундий (Gerund) выполняет в предложении следующие функции (см. примеры):

1) подлежащего (subject)

Standing here makes me very tired. Coordinating the country's monetary policy is one of the important functions of the central bank.

To, что я стою здесь, меня очень утомляет. Координация денежной политики страны является одной из важных задач центрального банка.

2) дополнения (object), прямого или предложного

I like swimming very much.	Я очень люблю плавание.
Once a customer deposits money in a local bank, it becomes available for further lending.	Как только клиент кладет деньги в банк, они становятся доступными для дальнейшего креди­тования.

3) обстоятельства (adverbial modifier)

The bank can lend out the remainder of the deposit, further increasing the money supply – without any new currency being printed.	Банк может выдать кредит за счет остатка вклада, увеличивая тем самым денежную массу, но не печатая допол­нительно денежных знаков.
By buying large amounts of securities the central bank pumps money into the economy.	Покупая в больших количествах ценные бумаги, центральный банк "накачивает" экономику деньгами.

Герундий переводится на русский язык отглагольным существительным, инфинитивом, деепричастием, придаточным предложением, герундию могут предшествовать предлоги, притяжательные местоимения или существительные в притяжательном падеже:

Примечание 1. В словосочетании "running students" (students who run) первое слово – причастие настоящего времени (V_ing).

B словосочетании "running shoes" (shoes for running) первое слово – герундий (V_ing).

Примечание 2. Помните, что герундию могут предшествовать предлоги, притяжательные местоимения и существительные в притяжательном падеже:

He insisted on my being present at the conference.	Он настоял на том, чтобы я присутствовал на конференции.
I'll never forget my friend's helping me with my English.	Я никогда не забуду, что мой друг помог мне по английскому.

Exercise 7. Translate into Russian in writing. State the function of the underlined parts of the sentences. The first has been done for you.

He was accused of having spent a lot of money. “having spent” (a lot of money) – Ving – Perfect Gerund Active, функция предложного дополнения.

Его обвинили в том, что он растратил много денег. Его обвинили в растрате большой суммы денег.

1. He was accused of having spent a lot of money.

2. Coming up to the door I found it locked.

3. Having lived in the country for many years, he spoke English without

a foreign accent.

4. On arriving at the hotel I was given a message.

5. He insisted on my being present at the conference.

6. The conference taking place in Paris is devoted to population growth.

7. I object to being criticized so stupidly.

8. His being a foreigner prevented him from getting a good job.

9. Most governments pay for their budget deficits by selling government

bonds.

10. He needed some writing paper of good quality.

11. Sliding scale is a system of pay, taxes, etc., calculated by rates

which may vary according to changing conditions.

12. The heart of capitalism is private ownership, and a limited liability

company allows people to own almost anything - from skyscrapers

to television stations - without risking their personal assets should

the company go bankrupt

.

Exercise 8. Translate into English using -ing forms (participles or gerunds) where possible. Make use of a few tips on translation after each paragraph.

1. Центральные банки отличаются от обычных банков, которые принимают вклады и выдают кредиты клиентам. Деятельность и функции центральных банков обычно заключаются в том, чтобы контролировать экономику в целом и банковскую систему государства.

to differ from… ordinary/normal to take deposits to make loans (to…) to consist in (controlling…}

2. Самый эффективный способ контроля экономики состоит в том, чтобы увеличить или сократить объемы типичных банковских операций – выдачу ссуд и принятие на хранение вкладов. Это обстоятельство приводит к сокращению или увеличению денежной массы через механизм “ резервных требований”.

…is to increase or decrease… to consist in (increasing…) the amount of … banking operations this leads to/results in ( -ing form) … through the mechanism of…

3. От рядовых банков требуется, чтобы они держали около 10 % своих фондов в виде резерва в центральном банке. Когда центральный банк решает увеличить денежную массу, он сокращает резервные требования для рядовых банков, что позволяет им использовать больше средств для выдачи кредитов предприятиям и клиентам, а это приводит к увеличению денежной массы и способствует экономическому росту.

…banks are required to… to keep on reserve with to decide to reduce the reserve requirements to lend (out) customers/clients/consumers this results in/causes/leads to… to stimulate/encourage the economy/economic development

4. Центральные банки могут также управлять денежной массой путем повышения или понижения процентных ставок. При высоких процентных ставках экономический рост начинает замедляться, при низких, наоборот, экономика быстро растет.

to control …by increasing or decreasing interest rates to slow (down) alternatively to grow/to go up rapidly

5. Самый существенный способ управления денежной массой состоит в проведении центральным банком операций на открытом рынке. Центральные банки покупают или продают на открытом рынке большие количества государственных ценных бумаг, таких, как казначейские долгосрочные облигации.

to operate /to conduct operations/to carry out operations in …. government securities government treasury bonds

6. Итак, центральный банк выполняет функции банкира для правительства и всей банковской системы.

to act/to serve as…

Грамматический обзор 2

Модальные глаголы (Modal Verbs) употребляются для выражения отношения между подлежащим предложения и действием с точки зрения желательности, необходимости, возможности. Они также указывают на реальность или нереальность какого-то утверждения, на уверенность или неуверенность говорящего относительно того, о чем идет речь.

Существенные особенности глаголов must, can состоят в том, что они:

1. не имеют неопределенной формы (инфинитива), т. е. их нельзя употребить с инфинитивной частицей to,

2. у них нет окончания -s в 3 лице единственного числа,

3. у них нет форм будущего времени, а глагол must не имеет также и формы прошедшего времени,

4. эквивалентами модальных глаголов must и can являются to have to, to be able to, соответственно. Изучите внимательно таблицы, в которых дается употребление глаголов must и can и их эквивалентов для выражения необходимости, долженствования и возможности в будущем, настоящем и прошедшем времени (necessity/obligation/ и ability/ possibility).

	Can = shall/will be able to + Vinf can + Vinf = am/is/are able to + Vinf could + Vinf = was were able to + Vinf	(future ability/possibility) (present ability/possibility) (past ability/possibility)
	Must = shall/will have to + Vinf must + Vinf = has/have to + Vinf had to + Vinf	(future necessity/obligation) (present necessity/obligation) (past necessity/obligation)
He must read his report at the conference on Wednesday.			Он должен прочитать свой доклад на конференции в среду.
Не had to read his report…..			Он должен был прочитать свой доклад на конференции в среду.
Не will have to read his report ..... .			Ему придется прочитать свой доклад на конференции в среду.
Не can read his report at .........…. .			Он может прочитать свой доклад на конференции в среду.
He will be able to read his report at			Он сможет прочитать свой доклад на конференции в среду.
Не could read his report at ........... .			Он смог прочитать свой доклад на конференции в среду.

К модальным глаголам относятся: should, ought to, needn’t (BrE). Сравнительное употребление модальных глаголов с различными значениями можно увидеть из следующей таблицы.

Obligation	You must be at work by 9 o’clock. They mustn’t be rude to their customers.
Possibility	You can change money in the departure lounge.
Permission	You can leave now. You can’t leave your bag here.
Advice	You should ask at the airline office. You ought to send back these documents. She shouldn’t work so hard. You oughtn’t to drive if you’re tired. Should I buy some traveller’s cheques?
Necessity	He needn’t check in his hand luggage. You needn’t stay here for long.
Ability	We can help you. I can’t find my ticket.
Probability	You should have received /ought to have received their business plan by now.

С точки зрения правильного употребления самым интересным является глагол need. Он может выступать в качестве:

1) смыслового, «правильного» глагола со значением «требовать», «нуждаться»:

e.g. He needs to know “economical” English for his future work in the company.

e.g. Do you need to go now?

e.g. I don’t need to talk to the manager.

e.g. He needed some time to take that decision.

2) модального или неполного модального глагола (в этом случае имеет форму настоящего времени и употребляется в вопросительных и отрицательных предложениях, описывая какой-то частный, а не общий случай):

e.g. You needn’t work today (Нет необходимости работать сегодня)

e.g. He need not come so early.

e.g. Need I come so early?

Помните, что положительная форма needn’t это need to, она не является модальным глаголом: He needs to speak to the boss straightaway.

Exercise 9. Fill in the blanks with the appropriate forms of the modal verbs “can”, “must” and their equivalents.

1. The scientist ____ repeat the experiments because he had made a

number of mistakes (necessity).

2. He ____ read his report at the conference next week (ability).

3. Did you ____ evaluate the results of your research before the

experiments had been completed? (necessity)

4. The students ____ to get the necessary books from the library

(possibility, future/ past).

5. The researcher ____ (not) complete his research in such bad

conditions (possibility, present/ past).

6. Before reporting the discovery the team of researchers ____ test

their hypothesis in numerous experiments (necessity, past).

Exercise 10. Fill in the blanks with the appropriate modal verbs to express strong obligation (must, have to) or mild obligation and advice (should, ought to).

1. You ____ compile all available information before you start writing

your term paper.

2. You ____ do this exercise again, there are many mistakes in your

written work.

3. The experimental methods ____ be widely used in economics.

4. The students ____ be very careful in handling computers at

yesterday’s laboratory classes.

5. The manager ____ be consulted on this matter.

6. You ____ (not) work so hard, you know.

Exercise 11. Put the correct numbers from the list by the following sentences according to modal verb and concept. The first has been done for you.

Concept

Modal verb

Request Offer Intention Obligation (strong) Obligation (mild) Prohibition No obligation Ability Permission

1) could, 2) can, 3) would, 4) will, 5) will, 6) shall, 7) will, 8) have to, 9) must, 10) should, 11) ought to, 12) mustn’t, 13) can’t, 14) don’t have to, 15) can, 16) could, 17) can, 18) may, 19) could

She can read English, but she can’t read German.

Could you do something for me? I have a problem.

I think you should write and apologize for the damaged book.

What time do you have to start the auditing?

He could give me all the information I needed.

Will you show me how to operate this calculator?

Could I use your phone for a moment?

All must be very careful when reading this text.

You mustn’t drive if you’ve been drinking.

You can’t leave your luggage here, it’s not allowed.

Shall I get another book for you?

Would you please read this sentence again?

Present Probability

can/ could/ may/ might/ must +

be + Ving be + Adj

e.g. He can’t/ couldn’t be tired after doing such an easy exercise. – Не

может быть, чтобы он устал после выполнения такого легкого

упражнения.

e.g. Where is John? – He must be talking to the dean about his failure in

two subjects. – Где Джон? – Он, должно быть (вероятно), беседует с деканом по поводу своего провала по двум предметам.

e.g. They may/ might be meeting her at the station. – Вероятно, они

встречают ее на вокзале.

Past Probability

must/ may/ might/ can/ could + have + V3 ( Active)

must/ may/ might/ can/ could + have been + V3 (Passive)

e.g. Mary must have translated this article yesterday. – Мэри, должно

быть, перевела эту статью вчера.

Грамматический обзор 3

Инфинитив (The Infinitive), так же, как и герундий, является неличной формой глагола и обладает семантическими свойствами, как существительного, так и глагола.

Многие конструкции с инфинитивом и герундием трудны для освоения, так как они часто не имеют прямых аналогов в русском языке.

Инфинитив (V_inf) и герундий (V_ing) проявляют семантические свойства существительного при выполнении ими функций подлежащего и дополнения в предложении:

1. To study English is not easy. = Studying English is not easy. (функция подлежащего)	1. Изучать английский нелегко. = Изучение английского – не легкое дело.
2. He began to learn/learning English at school. (функция дополнения)	2. Он начал изучение английского в школе.

Семантические свойства инфинитива и герундия как существительного, так и глагола могут одновременно проявляться в предложениях типа:

I like to do my work very quickly. = I like doing my work very

quickly.

После глагола like инфинитив и герундий (to do, doing) имеют функцию дополнения (свойство существительного), но сами, в свою очередь, управляют дополнением my work, в чем проявляется их “глагольность”.

Таблица форм инфинитива приводится ниже. Название каждой формы определяется пересечением на ней термина по горизонтали (Indefinite, Continuous, Perfect или Perfect Continuous) и по вертикали (Active или Passive).

Например: (to) be doing – Continuous Infinitive Active

(to) have been done – Perfect Infinitive Passive