Focused Practice

I. Answer the following questions:

1. What is a central plant designed to do?

2. What must there be to throttle the steam from high to low pressure?

3. How is cogeneration defined?

4. How can the idea of cogeneration be extended?

5. What is lost work?

6. How can lost work be recovered?

7. When do the reducing stations operate at their peak?

II. Analyse the grammar structures underlined in the above text.

III. Speak on: Cogeneration techniques.

SECTION V

Management, economics and labour protection

Unit 44

Grammar: The Adverbial Modifier

Word List:

1. currency	валюта
2. a spot exchange rate	курс обмена валюты в данный момент
3. a forward exchange rate	будущий курс обмена
4. gold bullion	золото в слитках
5. transaction	сделка
6. balance of payments	платежный баланс
7. gold stock of a country	золотой запас страны
8. surplus	активное сальдо, профицит
9. IMS	международная валютная система
10. floating exchange rate	плавающий курс обмена валют
11. supply and demand	Предложение - спрос
12. forward discount- premium	форвардная премия
13. dificit	дефицит
14. interest rate	процентная ставка
15. parity	паритет

Foreign Exchange

Each country uses a different currency. This means that an exchange rate (i.e., a spot exchange rate) must be set in order for trade in goods and assets to occur between countries. The traditional method has been to use a common standard for assessing the value of each currency. During the era of the gold standard, gold was the international means of payment, and each currency was assessed according to its gold value. The domestic purchasing power of a currency, i.e., its gold content, was set by the domestic monetary authorities, who thereby controlled the exchange rate.

Adjustments in exchange rates occurred only rarely, when a government was forced to reduce the gold content of its currency. To maintain equilibrium in the system, gold bullion was used to settle international transactions. The balance of all monetary flows in and out of a country was usually referred to as the balance of payments and accounted for all monetary flows over a given time period. These flows were linked to either trade (payments of imports and exports) or capital flows (borrowing and lending abroad). A deficit in the balance of payments resulted in a gold outflow and a reduction in the domestic reserves; this was equivalent to a reduction in the domestic money supply, since the gold stock of a country was its real money supply. Gold made up all the international reserves of a country.

In order to soften the impact of balance of payments deficits or surpluses on the domestic economy, hard currencies were introduced to increase international reserves. These currencies - the U.S. dollar, followed by the British pound and Deutsche mark - were freely convertible into gold. The gold exchange rates lasted for about 20 years after World War II.

But in the early 1970s international trade and financial transactions grew to the point where this direct link of currencies to a gold standard with fixed parities exploded. The international monetary system (IMS) progressively evolved toward a system of floating exchange rates. Under the current system, the price of each currency is freely determined by market forces. Exchange rate parities are not fixed by governments but fluctuate according to supply and demand.

The current IMS may be characterized as a system of floating exchange rates with constraints. The forces of supply and demand continually move the prices of major currencies, but the exchange rates are also constrained by certain institutional agreements, such as the IMS, which are adjusted only infrequently.

Spot exchange rates, forward exchange rates, and interest rates are technically linked for all currencies that are part of the free international market. The relation known as interest rate parity states that the forward discount, or premium, is equal to the interest rate differential between two currencies. In other words, the forward exchange rate is equal to the spot exchange rate adjusted by the interest rate differential. The interest rate parity relation derives from the fact that arbitrage exists. If it did not, riskless arbitrage would occur.