The bank of england
As the governments bank, the Brink of England carries out many functions. It runs the accounts of government departments and handles the government's vast number* financial payments, receipts and transfers. It also raises money for the government by the sale of government securities and treasury bills. Government securities are long- term fixed interest loans, repayable by the government at a fixed date up to twenty years in the future. Treasury bills are short-term loans sold at a discount and repaid at their face value after ninety-one days. Another responsibility of the bank is the issue of bank notes. It is the only bank in England and Wales which is allowed to issue bank notes. Finally, the Bank Of England nvmages the gold and currency reserves and by buying and selling these can influence the Sterling exchange rate.
The Bank of England is also the bankers' bank, since all banks doing sterling business in the United Kingdom are required to have accounts with it. The Bank of England can influence the l>chaviour of commercial banks by controlling the amount of money it requires them to deposit in their accounts. If it increases the amount required, then the banks will have less money to lend to their customers, and this will have an effect on the economy as a whole.
The Bank of Kngland exercises general authority and supervision over the banking and financial s)s:cm in the United Kingdom, maintaining good order and confidence.
Text 11 long-term loans
Hire purchase of consumer durables is usually arranged over at least a full year, often two or three year*. The person lending to such borrowers not only has to wail longer than three months* but also has to accept repayment in small sums mcr the whole of the period. This requires the keeping of records of payments, and perhaps the sending of reminders to slow payers. It also involves considerable risks of nonpayment. especially where the asset is worn out before the repayment period over. Loans of this kind arc usually made by specialist firms called finance house*. They set up the necessary bookkeeping system* ind employ specialists in repossession and debt collection. The rate of interest charged is much higher than Hank Rate, ami may even be excessive in many cases.- It is one of the more speculative fields of loan activity, and is subjcct to stringent legal control over documentation procedures. Even so. the activities of finance houses are of great importance to poor people needing extended credit pcriodv Hire-purchase rates of interest are rarely less than 20 per cent, and often exceed 30 per cent, but because of technical procedures in the repayment system rarely appear to the unsophisticated purchaser to be as high as they in fact arc.
THE ECONOMIC SYSTEM
There arc many forms of economic order, ranging from the mixed private enterprise system to partially or completely controlled economics. Regardless of their form, however, economic System is the s>stem that a society usts for allocition and distribution of soiree resources.
Private enterprise means that decisions about what and how much to produce arc left to the discretion of Owners and managers. In controlled economics such decisions arc the responsibility of some governmental agency. There is. of course, no
economy today that is completely free of governmental influence, nor is this condition
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necessarily undesirable. There are many bcncficial services and protections available
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from government. Irrespective of the form of economic order, it pcrlorms certain valuable functions in the life of organizations of all types.
Among the functions of the economic order the most important one is to provide some means of resource allocation. In a private enterprise this function is havically performed by the priev mechanism. This simply means that demand for and supply ol goods and services interact to set their market price. In the сьс of regulated utilities there arc governmental agcncks such as public service commivsions that determine the rates that may be charged by utility companies.
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THE WORLD ECONOMY
Tlic study of economics would be incomplete without an understanding of the nation's role in the world economy. The study of the world economy is known as international economics'. International economics embraces two brood зпм$ of interest: international trade and international financc. World trade has been gaining increasing significance among nations. Why do nations trade? The answer is thai nations have different quantities and qualities of economic resources and different ways of combining them. As a result, each country can produce certain goods more efficiently, or at relatively tower costs, than others. This idea can be stated somewhat differently. Imagine a world consisting of only two countries, each producing the same goods. Under such circumstarvces, the alternative or opportunity cost to each country of producing more of one good is the amount of the second good that must 1ч- Sacrificed. In view of this, w hich of the two goods should the countries produce? The answer is that each should specialize. When two parties engage. Ihe sacrifice that each waVxs to obtain something from the other is called the 'terms of trade . For example, in order to buy a book, you might have tod to give up five visits to the movies. Your terms of trade, therefore, arc 5 movies = I book. The terms of trade tor и given transaction equal the number of units of goods that must be given up for one unit of goods received by each party to the transaction. Or in other words, terms of trade ate defined as the ratio of the prices of its export commodity to the price of ils import commodity.
SUPERMARKET ECONOMICS
Supermarkets offer valuable economic lessons. The modern supermarket illustrates in a small way how the market system operates in the economy as a whole. Each supermarket is reported to have tens of thousands of items of various sizes and brands. Store owners and managers compcte for the customers' dollars by trying to offer the best service and the greatest variety of goods possible at prices their customers are willing to pay. The modern supermarket is believed to provide everything from basic foods to gourmet items from any place in the world. Because they usually purchase in bulk supermarkets arc able to offer basic items at a lower price than small shops.
Information about consumer preferences in this huge mix of products is generated by a simple procedure. Having taken their selection consumers go to the checkout line. Checkout clerks enter information about the sale on the store's computer by passing the product's bar code across a scanner.
Products that fail to satisfy are replaced by more attractive products.
Winners arc selected and the losers ' gradually lose shelf space. Ultimately producers cither improve their products or pass from the scene. The market registers their preferences and reconciles supply with demand.
