English Reader. Мишустина В.Д. - 22 стр.

have even more money to lend, which generates further deposits providing more
money for further loans.
      Another way of controlling the money supply is to raise or lower interest rates.
When a central bank decides that the economy is growing too slowly - or not growing
at all - it can reduce the interest rate it charges on the loans to the country's banks.
When banks are allowed to get cheaper money at the central bank, they can make
cheaper loans to businesses and consumers, providing an important stimulus to
economic growth. Alternatively, if the economy shows signs of growing too quickly,
a central bank can increase the interest rate on its loans to banks, putting the brakes
on economic growth.
      Perhaps the most dramatic way of increasing or decreasing the money supply is
through open market operations, where a central bank buys or sells large amounts of
securities, such as government treasury bonds, in the open market. By buying a large
block of bonds, from a bank or a securities house for example, the central bank
pumps money into the economy because it uses funds that previously were not part of
the money supply. The money used to buy the bonds then becomes available for
banks to lend out to consumers and businesses.
      In a sense, the central bank creates money every time it dips into its vaults to
buy bonds in the open market. Whether it uses a check, pays cash, or simply credits
the bank's account at the central bank, the funds for an open market purchase enter
the money supply for the first time.

                                             B

      A central bank, unlike other players in the economy, does not have to secure
funding from any other source. It can simply print more money or use its virtually
unlimited credit with banks in the system. Once a central bank's payment enters the
economy, it becomes part of the money supply, providing fuel for businesses and
consumers to increase their economic activities. Likewise, when a central bank sells
bonds in the open market, the payments from banks and securities houses disappear
into the black hole of the central bank's vault, completely removed from the economy
at large.
      An error in judgment at the central bank has grave consequences for everyone in
the economy. If a central bank allows the economy to expand too rapidly by keeping
too much money in circulation, it may cause inflation. If it slows down the economy
by removing too much money from circulation, an economic recession could result,
bringing unemployment and reduced production.
      A central bank is much than a national piggy bank, providing funds for each
country's economy. In addition to coordinating the country's monetary policy, it
serves as a watchdog to supervise the banking system, in most cases acting
independently of its government to provide a stabilizing influence on the country's
economy.
      The activities and responsibilities of central banks vary widely from country to
country. For example, Britain's Bank of England is responsible for printing the
money as well as supervising the banking system and coordinating monetary policy.
22