The Monetary System

The monetary side of the economy reflects the fact that the resources and goods are measured in terms of their prices, or monetary values.

Money is defined as anything that is accepted in exchange for goods and services. It includes notes and coins, but the most important means of making payments is through banks. Bank deposits, the sums standing to the credit of customers, are the prime constituent of what is regarded as money in the UK.

The business of banking is mainly in the hands of four domestic banks - Barclays, Lloyds, Midland, National Westminster - though there are several foreign banks operating in London. Against their liabilities to depositors, banks hold a variety of financial assets. These are of differing degrees of liquidity, reflecting the ease and speed with which they may be used to make payments. The most liquid assets are notes and coins, the least liquid are the loans and advances made to customers, often by granting overdraft facilities. It is the last of these which are of major importance in determining the quantity of money in existence.

The monetary sector of the economy includes a great many financial institutions as well as banks, for example discount houses, building societies, insurance companies and merchant banks.

The monetary policy for the government in the UK is carried out by the Bank of England. It may exert influence on the supply of money by pressuring banks to alter their lending policies. It has methods of controlling the size of the banks’ cash reserves, and otherwise affecting their liquidity. It can also set the level of interest rates.

Inflation. Changes in the general level of prices affect real output. The strength and duration of this effect are controversial, but governments throughout the world have been worried by persistent inflation, which hardly needs describing to anyone alive today.

Remember. Old money conversions to money used today: Six pence - 2½p; one shilling (or 'bob') - 5p; half a crown (2 shillings and sixpence) - 12½p; one guinea - £1.05.

Notes*

monetary value - грошова величина to make payments - робити оплату the sum standing to the credit of customers - сума на користь клієнтів prime constituent - основна складова частина financial asset - фінансовий актив аssets and liability - актив і пасив liquidity, n. - ліквідність loans, n., pl. - позики

bank’s cash reserve - резерв готівки банку real output - реальний прибуток insurance company - страхова компанія building society - будівельна організація merchant bank - торговельний банк discount house - вексельний заклад money in existence - наявні гроші в обігу advance, n. - аванс, позика, позичка

Talking points*

What’s money?

Which hands is the business of banking mainly in?

What does the monetary sector of the economy include?

Which bank is the monetary policy carried out in the UK?

What types of banks do you happen to know?

How can you interpret assets and liability in a broader sense of a word?

What’s inflation and how it is curbed in Britain?

Compare the inflation in your country with that one in UK.

Unit 9

Дата добавления: 2015-08-18