Text 4. What is Money Supply?

Every economy in the world is controlled by its supply of money, even one as small as the Monopoly game where players are provided with Monopoly money for buying and selling houses, hotels, and property around the board. The money supply of the Monopoly game, for example, primarily consists of the players’ cash on hand and the money they get for passing Go.

A modern economy is based on the use of money. Each country's money supply, therefore, determines how quickly the economy can grow. If the central bank increases the money supply, consumers and businesses have more money to spend on goods and services.

Just as the game of Monopoly can be stimulated by increasing the amount money available to its players, a country can encourage economic growth by increasing its money supply, which includes currency in circulation and readily available funds such as bank deposits on which cheques can be drawn. This “narrow” measure of the money supply is usually called “M1”. This easy-to-access money, often called “high-powered” money, tends to fuel most consumer and business consumption and therefore stimulates most economic growth.

Other measures of a country's money supply include funds that are not so readily available, such as time deposits and other long-term investments. These “wider” measures are often referred to as “M3” and “M4” or “L”.

Basically, when businesses and individuals have less money at their disposal, economic activity slows down. Central banks usually limit money supply growth in order to slow down the economy and control inflation. In a Monopoly game with less money floating around the board, for example, players will pay less money when buying properties from other players.

On the larger scale of a national economy, less money usually leads to an economic slowdown. When less money is available, interest rates tend to increase - the cost of money increases - and it becomes more expensive to borrow. If it costs businesses and consumers more to borrow money, they will be less inclined to increase spending. In this way, control of the money supply allows a central bank to reduce inflation.

The money supply can also be increased to stimulate economic activity. If the players in a Monopoly game are given more than two hundred dollars for passing Go - five hundred dollars, say - the results are predictable: the “economy” speeds up and players start buying and selling at higher and higher prices. Increasing the money supply usually results in rapid growth and inflated prices.

Exercise 28. Translate into English.

Грошова маса, нерухомість, визначати, споживачі, сприяти економічному зростанню, довгострокові інвестиції, в чиємусь розпорядженні, економічне сповільнення, зменшувати інфляцію, стимулювати економічну діяльність, підвищені ціни.

Exercise 29. Match the two parts of the sentences. Translate the sentences into Ukrainian in writing.

1. Every economy in the world is	a) interest rates tend to increase.
2. Each country’s money supply determines	b) increasing its money supply.
3. If the central bank increases money supply,	c) stimulate economic activity.
4. A country can encourage economic growth by	d) controlled by its supply of money.
5. Central banks usually limit money supply growth in order to	e) how quickly the economy can grow.
6. When less money is available,	f) slow down the economy and control inflation.
7. The money supply can also be increased to	g) consumers and businesses have more money to spend on goods and services.

Exercise 30. Agree or disagree to the following statements. Begin your sentences with the following phrases: I think so. Yes, it’s really so. I’m afraid, it’s wrong. I can’t agree.

1. Every economy in the world is controlled by its supply of money. 2. A modern economy is not based on the use of money. 3. Each country’s money supply determines how quickly the economy can grow. 4. If the central bank increases the money supply consumers and businesses have less money to spend on goods and services. 5. Control of the money supply doesn’t allow a central bank to reduce inflation.

Exercise 31. Insert articles where necessary.

1. Every economy in … world is controlled by its supply of … money. 2. In … Monopoly game … players are provided with Monopoly money for buying and selling houses, hotels and property. 3. Each country’s money supply determines how quickly … economy can grow. 4. … central banks usually limit money supply growth in order to slow down … economy and control … inflation. 5. Less money usually leads to … economic slowdown.

Exercise 32. Insert prepositions (of, for, in, at) where necessary.

1. Businesses and individuals have money … their disposal. 2. Control … the money supply allows a central bank to reduce inflation. 3. People buy and sell goods … higher and higher prices. 4. Increasing the money supply usually results … rapid growth and inflated prices. 5. Currencies are used … buying goods and services.

Exercise 33. Put 10 questions to text 4 and answer them in pairs.

Exercise 34. Discuss the quotation. Do you agree with it? Why? Why not?

“A bank is a place that will lend you money if you can prove that you don’t need it.”(Bob Hope, American comedian)

Exercise 35. Learn the following words and word combinations.

two-tier structure	дворівнева, двох’ярусна структура
state-owned	державний
issuing centre	емісійний центр
pursue policy	проводити політику
money circulation	грошовий обіг
monetary unit	грошова одиниця
exchange rate	обмінний курс ( валюти)
denomination	номінал
custody	схов, зберігання
discount rate	облікова ставка
interest rate	відсоткова ставка
mortgage	застава нерухомого майна, іпотечний кредит
limited liability partnership	товариство з обмеженою відповідальністю
joint-stock company	акціонерне товариство
securities	цінні папери

Exercise 36. Read, translate and give the gist of text 5.