1st PART THE CENTRAL BANK exercises
https://www.youtube.com/watch?v=LgYKBJqPYwI
I Watch the video and fill in the key verbs. Then set the subtitles and check if
you filled in the gaps correctly. (Your work here is a proof that you've
watched it)
The primary function of a central bank is to _manage_the nation's money supply through
activities such as _managing_ interest rates, _setting_ the reserve requirements and
_acting_ as a lender of last resort to the banking sector during the bank insolvency or
financial crisis.
The central bank has been described as a lender of last resort, which means it is responsible
for _providing_ its economy with funds when commercial banks cannot _cover_ a supply
shortage. In other words the central banks _prevents_ their countries' banking system from
_failing_.
However, the primary goal of the central bank is to _provide_ their countries' currencies
with price stability by _controlling_ inflation. As central bank also _acts_ as the regulatory
authority of a country's monetary policy and is the sole provider and printer of notes and
coins in circulation.
Time has proved that the central bank can best function in these capacities by _remaining_
independent from government fiscal policy and therefore uninfluenced by the political
concerns of any regime. The central bank should also be completely divested of any
commercial banking interests.
II CONNECT THE FOLLOWING VERB WITH THE CORREPONDING SENTENCES:
 Control
Establish
Ensure
Intervene
Lend
Sell
•
government bonds to commercial banks or buying them back in order to alter the
amount of credit the banks can offer-sell
•
on foreign exchange markets (buy and sell national currency) to prevent bigger
fluctuations-intervene
•
amounts of banknotes in circulation-control
•
min and max lending rates→ control the credit system-establish
•
to a commercial bank in danger of going bankrupt-lend
•
that banks have a sufficient liquidity ratio to allow customers to withdraw their
deposits when they want-ensure
III COMPLETE THE SENTENCES:
Central banks are responsible for:
•
overseeing the monetary supply
•
implementing monetary policy
•
supervising exchange rates
•
regulating the credit supply
•
supervising commercial banks
•
acting as a lender of last resort
•
maintaining currency status
IV THE EUROPEAN CENTRAL BANK - Watch the video on the provided link
and answer the following questions:
•
https://www.youtube.com/watch?v=TAlcFwGIQBg
1 Where are the headquarters of the ECB? In Frankfurt
2 Who is the Euro system formed of? It's formed of countries that use
Euro as their value
3 What are the main tasks of the Euro system? Main tasks are to define
and implement monetary policy for the Euro area
4 How is the price stability in the Euro zone maintained? By keeping
inflation rates at levels below but close to 2 percent
5
What might happen in case of the high inflation? People wouldn't be
avaible to get the same amount of goods and services for the same
amount of money.
6 Who are the members the ECB Governing council? Members are all
governors of the national central banks of the euro area countries and
the members of the European Central Bank's Executive Board
7 Name the five tasks of the ECB – 1)Ensuring the smooth operation of
payment systems,making it faster,safer and easier to make cashless
euro payments throughtout Europe, 2)Holding and managing official
reserves in foreign currencies and other assets, 3)collecting and
compiling a wide range of statistics, 4)Authorizing issuance of euro
banknotes, 5) To identify risks
FISCAL POLICY
Ist paragraph
Fiscal policy is the means by which a government adjusts its spending levels
and tax rates to monitor and influence a nation's economy. It is the sister
strategy to monetary policy through which a central bank influences a nation's
money supply. These two policies are used in various combinations to direct a
country's economic goals. Here's a look at how fiscal policy works, how it must
be monitored, and how its implementation may affect different people in an
economy.
1 What are the tools of fiscal policy? Taxes and spending
2. When applied by the government what is the goal of the fiscal policy?
Adjusting its spending levels and tax rates to monitor and influence a nations
economy
3. When is the fiscal policy most effective? In a deep recession where
monetary policy is insufficient to boost demand.
2nd paragraph
Before the Great Depression, which lasted from October 29, 1929, to the onset
of America's entry into World War II, the government's approach to the
economy was laissez-faire. Following World War II, it was determined that the
government had to take a proactive role in the economy to regulate
unemployment, business cycles, inflation, and the cost of money. By using a
mix of monetary and fiscal policies (depending on the political orientations and
the philosophies of those in power at a particular time, one policy may
dominate over another), governments can control economic phenomena.
*LAISSEZ-FAIRE ECONOMY
Laissez-faire is an economic theory from the 18th century that opposed any
government intervention in business affairs. The driving principle behind laissez-faire,
a French term that translates as "leave alone" (literally, "let you do"), is that the less
the government is involved in the economy, the better off business will be—and by
extension, society as a whole. Laissez-faire economics are a key part of free market
capitalism.
1 How did American economic policy get changed after the World War
II? By taking a proactive role in the economy and using a mix of
monetary and fiscal policies
2 In such a proactive attitude what should be regulated by the
government? Unemployment,business cycle, inflation and the cost of
money
KEY TAKEAWAYS

Fiscal policy is the means by which a government adjusts its spending
levels and tax rates to monitor and influence a nation's economy.

It is the sister strategy to monetary policy through which a central bank
influences a nation's money supply.

Using a mix of monetary and fiscal policies, governments can control
economic phenomena.
How Fiscal Policy Works
Fiscal policy is based on the theories of British economist John Maynard
Keynes. Also known as Keynesian economics, this theory basically states that
governments can influence macroeconomic productivity levels by increasing or
decreasing tax levels and public spending. This influence, in turn, curbs
inflation (generally considered to be healthy when between 2% and 3%),
increases employment, and maintains a healthy value of money. Fiscal policy
plays a very important role in managing a country's economy. For example, in
2012 many worried that the fiscal cliff, a simultaneous increase in tax rates
and cuts in government spending set to occur in January 2013, would send the
U.S. economy back into recession. The U.S. Congress avoided this problem
by passing the American Taxpayer Relief Act of 2012 on Jan. 1, 2013
1 What does the Keynesian economics, based on the theories of John Maynard
Keynes, state? It state that governments can influence macroeconomic
productivity levels by increasing or decreasing tax levels and public spending.
2 What does this type of economics have inflence on? On inflation, increasing
employment and maintains a healthy value of money