Английский язык для экономистов - Малюга Е.Н.
ISBN 5-469-00341-8
Скачать (прямая ссылка):
4. Using the same principles, what will probably happen to the supply of apartments if the government sets a legal "ceiling" on the amount of rent a landlord can charge if it is below the equilibrium price for rental property?
5. If it is the role of government to assure economic security and equity, are there situations where price supports or ceilings are necessary? Unit 10
Monetary and Fiscal Policy
A. Preliminary discussion
1. How does the federal government manage the US economy?
2. What are its objectives?
3. What role does the Federal Reserve play in managing the economy?
B, Pre-reading exercises
B.i. Skim the text and give its key idea.
B.2. Scan the text for the following information.
1. What are strengths of monetary policy?
2. If the money supply is $ 150 billion, what will total spending be if velocity of money is 4?
3. What is federal funds rate?
C Reading
C.i. Read the text and answer the questions.
1. Why is monetary policy a more subtle and more politically conservative measure than fiscal policy?
2. How can changes in banking practices reduce the Fed's control of the money supply?
3. What are the effects of tight and easy money policies?
4. When does the velocity of money decline?
5. How can the Fed obtain the market interest rates it desires? Unit 10. Monetary and Fiscal Policy
171
Effectiveness of Monetary Policy
C. R. McConnelI, S. L. Bme
Strengths of Monetary Policy
Most economists regard monetary policy as an essential component of U.S. national stabilization policy, especially in view of the following features and evidence.
Speed and Flexibility. Compared with fiscal policy, monetary policy can be quickly altered. Recall that the application of fiscal policy may be delayed by congressional deliberations. In contrast, the Open Market Committee of the Federal Reserve System can buy or sell securities on a daily basis and thus affect the money supply and interest rates almost immediately.
Isolation from Political Pressure. Since members of the Fed's Board of Governors are appointed for 14-year terms, they are not often subject to lobbying and need not concern themselves with their popularity with voters. Thus the Board, more easily than Congress, can engage in politically unpopular policies which might be necessary for the long-term health of the economy. And, monetary policy itself is a more subtle and more politically conservative measure than fiscal policy. Changes in government spending directly affect the allocation of resources, and changes in taxes can have extensive political ramifications. Bv contrast, monetary policy works more subtly and therefore is more politically palatable.
Shortcomings and Problems
Despite its recent successes, monetary policy has certain limitations and it encounters real-world complications.
Less Control? Some commentators suggest that changes in banking practices may reduce, or make less predictable, the Fed's control of the money supply. People can now move near-monies quickly from mutual funds and other financial investments to checking accounts, and vice versa. A particular monetary policy aimed at changing bank reserves might then be rendered less effective by movements of funds within the financial system. For example, people might respond to a tight money policy by quickly converting near-monies in their mutual fund accounts or other liquid financial ==== investments to money in their chec- 172
Английский ЯЗЫК ДЛЯ экономистов
king accounts. Bank reserves would then not fall as intended by the Fed, the interest rate would not rise, and aggregate demand might not change. Also, banking and finance are increasingly global. Flows of funds to or from the United States might undermine or render inappropriate a particular domestic monetary policy. Finally, the prospects of E-cash and smart cards might complicate the measurement of money and make its issuance more difficult to control.
How legitimate are these concerns? These financial developments could make the Fed's task of monetary policy more difficult. But recent studies and Fed experience confirm that the traditional central bank tools of monetary policy remain effective in changing the money supply and interest rates.
Cyclical Asymmetry. If pursued vigorously, tight money can deplete commercial banking reserves to the point where banks are forced to reduce the volume of loans. This means a contraction of the money supply. But an easy money policy suffers from a uYou can lead a horse to water, but you can't make it drink" problem. An easy money policy can ensure only that commercial banks have the excess reserves needed to make loans. It cannot guarantee that the banks will actually make the loans and thus that the supply of money will increase. Ifcommercial banks, seeking liquidity, are unwilling to lend, the efforts of the Board of Governors will be to little avail. Similarly, the public can frustrate the intentions of the Fed by deciding not to borrow excess reserves. Additionally, the money the Fed injects into the system by buying bonds from the public could be used by the public to pay off existing loans.
