Credit Policy

Credit policy is ... component of economic policy. It is a combination of measures taken by ... Central Bank to affect the supply of credit. The aims of ... credit policy may include stimulation or restriction of investment or consumer spending, … avoidance of price inflation.

Credit policy and monetary policy tend to be closely related and in some countries credit policy is regarded as ... part of monetary policy.

Credit policy largely works indirectly. The Central Bank controls ... amount of credit advanced by commercial banks through the interest rate policy, by influencing ... liquidity, expanding or contracting the volume of Central Bank money. The principal instruments available for this purpose are ... discount policy, minimum reserve requirements and open market operations. Direct credit control involving ... establishment of credit ceilings is less frequently used now than in ... past, many governments regarding it as ... undesirable interference with the market mechanism.

Words you may need:

	Англійський варіант	Російський варіант	Український варіант
1	price inflation	ценовая инфляция	цінова інфляція
2	the amount of credit advanced ...	размеры кредита, предоставленного ...	розміри кредиту, наданого ...
3	discount policy	учетная политика	облікова політика
4	credit ceiling	потолок кредитования	потовк кредитування

Ex. 5.

1. Supply the prepositions where necessary.

2. Describe the impact of "easy" and "tight" monetary policy on an economy.

Monetary policy is the branch of financial policy that is concerned ... controlling the supply of money and credit. Monetary policy is important because of its impact... inflation and on interest rates.

If a government pursues an "easy" monetary policy it means that it allows the amount of money ... circulation to rise and it lets banks increase the volume of loans.

If government pursues a "tight" monetary policy, it restricts the amount ... money in circulation and reduces the funds available … banks... making loans.

When money is tight:

1. Interest rates rise, because commercial banks have to borrow … a higher rate... the interbank market.

2. Credit falls, because people and businesses borrow less ... higher rates.

3. Aggregate demand falls, because people and businesses buy less, as they have less money.

4. Output falls, too, because ... less consumption, firms produce less.

5. Unemployment rises, because companies are producing and selling less, and so need ... less labour.

1. Inflation falls, because there is less money in circulation.

6. The exchange rate will probably rise, if there is the same demand but less money, or if there is higher demand, as foreigners take advantage of the higher interest rates to invest ... the currency. Increasing the money supply, ... making more reserves available, has the opposite effects.

The amount of money ... circulation and its velocity of circulation determine the average level of prices and wages. Many central banks now set money supply targets. ... increasing or decreasing the money supply, the central bank indirectly influences ... interest rates, demand, output, growth, unemployment and prices. The central bank can reduce the reserves available ... commercial banks by changing the reserve requirements. This reduces the amount ... money that banks can create and makes the money tight or scarce.

Alternatively, the central bank can engage ... what are called open-market operations, which involve selling short-term government bonds (such as three-month Treasury bills) ... the commercial banks, or buying them back.

Words you may need:

	Англійський варіант	Російський варіант	Український варіант
1	money is tight	денег недостаточно	грошей недостатньо
2	interbank market	межбанковский рынок	міжбанківський ринок
3	velocity of circulation	скорость обращения	швидкість обертання
4	to set targets	устанавливать ориентиры, показатели	встановлювати орієнтири, показники
5	alternatively	и наоборот	і навпаки
6	engage	заниматься	займатися
7	short-term government bonds	государственные краткосрочные облигации	державні короткострокові облігації
8	treasury bill	казначейский вексель	казначейський вексель

Ex. 6.