The monetary rule

The policy prescription of the monetarists is simply to increase the money supply at a constant rate. When there is a recession, this steady infusion of money will pick up the economy. When there is inflation, a steady rate of monetary growth will slow it down.

You might ask why the money supply should be increased at all during inflation. There are two answers. First, the monetarists would tell you that if we didn't increase the money supply at all, we would be going back to the old, failed monetary policies of the past - the start-and-stop, start-and-stop policies that only made the business cycle worse. Second, over the long run the economy does need a steady infusion of money to enable economic growth.

The monetarists' steady monetary growth prescription is analogous to the feeding policy of the American Army. Every day, in every part of the world, at every meal, the soldiers walk along the chow line and receive, in addition to the main course and dessert, two pieces of white bread, two pats of butter, and one pint of whole milk. The main course is also dished out in equal portions. The food servers do not dole out portions whose sizes vary with that of the eater. They look from the serving pan to the eater's tray, slopping out serving spoonfuls of whatever it is that the Army decided to cook that day.

So, we have a 6-foot 6-inch 300-pound person getting the same size portion as does a 5-foot 6-inch 130-pound person. My theory is that the Army wants everyone to be the same size - a theory that seems to be borne out by the single uniform size that is issued. If everyone eats the same portion, presumably they will all end up this same size.

Perhaps the monetarists got the idea of increasing the money supply by a constant percentage by observing Army chow lines. They believe our economic health will be relatively good - if not always excellent - if we have a steady diet of money.

15.2. Find in the text the English equivalents of the following words and word-combinations:

1. припис, рецепт

2. вливання

3. піднімати

4. сповільнювати

5. давати змогу (право)

6. аналогічний, подібний

7. черга за їжею

8. основна страва

9. кружальце (масла)

10. видавати неохоче (скупо)

11. .розливати, розхлюпувати

12. отримати уявлення

13. кінчати(ся)

15.3. Put the given below questions in the right order according to the content of the text.

1. What does the economy need to enable economic growth over the long run?

2. In what way will the economic health of the state become relatively good according to the monetarists?

3. What would provoke the going back to the old, failed monetary policies of the past?

4. What is the monetarists' steady monetary growth prescription like?

4. Answer the questions given in the task 15.3.

4. Write the summary of text 17.

16.1 Read text 18 and translate it into Ukrainian in written form.

TEXT 18

The decline of monetarism

It's interesting that when the Fed really began to pay attention to what the monetarists were saying, this may have led to the ultimate decline of the monetarists. In October 1979 Federal Reserve chairman Paul Volcker announced a major policy shift. No longer would the Fed focus only on keeping interest rates on an even keel. From now on the Fed would set monetary growth targets and stick to them.

This new policy was followed for most of the next three years. The double-digit inflation that prevailed in 1979 and 1980 was finally brought under control by late 1982 - but not until we had gone through a period of sky-high interest rates, very high unemployment, and two recessions.

Even though the Fed had finally followed the advice of the monetarists - at least to a large degree - and even though the nagging inflation of the last 15 years had finally been wrung out of the economy, people began to look elsewhere for their economic gurus. They looked to the White House, which had become a stronghold of the latest school of economics, the supply-side school.

17.1 Read texts 19, 20 and 21. While reading define and put down the key words of each text.

TEXT 19