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СодержаниеThe federal reserve system
FED’s most powerful but least used tool is its control of reserve requirements (rr). Raising rr
Vocabulary practice: switching
Stop-and-go fed policies
THE FEDERAL RESERVE SYSTEM
Read aloud the key term and its definition so that they make up a single sentence. (Remember about the agreement between the subject and the predicate!). Translate the sentences you have arrived at from English into Russian.
Translate the text from English into Russian in writing paying particular attention to the translation of the economic terms in bold as well as words and phrases relevant to the subject of the text. Read out your translation in class and introduce the necessary corrections.
After you have read and studied this chapter you should be able to describe the purposes of a central bank such as the Federal Reserve System (FED); discuss the FED’s primary and secondary tools and how these tools may be used; evaluate the effects of various regulations on the efficiency of the financial sector, and distinguish various types of financial intermediaries.
Chapter Review: Key Points
Get ready for an oral (written) translation exercise based on the economic terms in bold, as well as other relevant words and phrases from the text.
Денежные авуары населения; volume of money in circulation; взимать процентную ставку; charge member banks; следовательно; down payments; идти на убыль; demand deposit; норма дисконта; важнейший инструмент; purchases of stock; нормативные правовые акты; проводить различие; поделить на ; drains on the potential multiplier; продемонстрировать силу убеждения; vice versa; рынок федеральных фондов; relative to; предписываемая законом маржа; рыночный процент; value of the potential money multiplier; рекомендации банкам со стороны Федеральной резервной системы; Open-Market Operations (OMO); важнейший инструмент; Federal Open Market Committee; Федеральная резервная система ФРС; financial intermediary; частичные резервы; получать процентную ставку; a reciprocal; регламентировать (упорядочивать, контролировать); fractional reserve banking ; функции государственного банка; least used tool; оказывать влияние на денежную базу; after all adjustments; банк, обслуживающий другие кредитные институты (банк банков); обязательство государственного займа; induce changed behavior; частичные резервы; financial intermediary; держать мало избыточных резервов; interbank lending; норма ссудного процента; issue bank reserves; установленные законом нормы обязательных резервов банков; legal reserves; последняя кредиторская инстанция; purchases of stock; нормативные правовые акты; reserve-requirement ratio; разрешать денежно-кредитный кризис; secondary tool; совокупные банковские резервы; trade in U.S. bonds.
4 Translation from page.
Translate from page the passages expanding on the subject of the text.
For decades, the U.S. economy has been plagued by faltering growth, variations in the dollar's exchange rate, and swings in rates of unemployment and inflation. Monetary growth has also been erratic. Are these facts connected? One group of new classical economists, the monetarists, cite inconsistent growth of the money supply as the basic cause of all these problems.
Such external shocks as the Vietnam War, conflict in the Persian Gulf, and OPEC oil price hikes may also partially explain cyclical swings, but most monetarists view attempts at economic fine-tuning as doomed. Indeed, many observers lay full blame for recessions from 1981 to 1983 and from 1990 to 1992 at the Federal Reserve's doorstep.
Uneven but growing inflation marked the 1970s. In 1979, the Fed announced that it would target M1 and control its rate of growth. Since then, monetary growth and GDP growth continue to be on a roller coaster: up for a few quarters and then down for the next few. The Fed announces targets, but then adjusts them when economic conditions seem to warrant different targets.
The drop in the rate of monetary growth between 1979 and 1980 was so abrupt that, although inflation decelerated, the economy went into a deep slump. Between 1986 and 1994, however, the Fed held monetary growth under a tight reign.
Discerning a pattern in the Fed's policies during the early 1990s requires more detective work. Most economists view low interest rates as critical for balanced investment and economic growth. The Fed lowered its discount rate 25 times from 1989 to 1993. Federal deficits during the early 1990s were at record levels, so expanding the monetary base should have been easy: the Fed could simply absorb (monetize) substantial chunks of new federal debt by buying Treasury bonds. Then, readily available bank reserves would swell the money supply— after bankers made loans to investors. But this predicted chain of events failed to unfold.
The Fed regularly announces targets for monetary growth in the moderate range (2% to 6%), with precise targets depending on economic conditions. However, while unemployment rates hovered between 6% and 8% during the recession of 1990-1992, the money supply (M2) fell below the Fed's targeted growth rates.
This slow growth represented a sharp departure from most economic recoveries since World War II, when the real (inflation-adjusted) money supply grew at an average annual rate of 7%. Among possible explanations for sluggish monetary growth are the following:
1. The Fed bought too few Treasury bonds through its open markets operations, so the monetary base expanded too slowly.
2. Despite increased availability of bank reserves, banks, fearing widespread defaults, were reluctant to lend, and pessimistic investors were reluctant to borrow during this recession.
3. Foreign financial investors responded to lower U.S. interest rates by transferring their funds to countries where interest rates were higher, reducing the funds available for lending by U.S. financial intermediaries. 2558 digits
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