Read the text and do the tasks Currency School Versus Banking School 1. The Currency School originat...: ответ на тест 1029288 - Английский язык

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Currency School Versus Banking School
1. The Currency School originated from the writings of David Ricardo (1772–1823). It argued that excessive issuing of banknotes was a major cause of inflation. Currency School economists supported the British Bank Act of 1844 (or Peel’s Bank Act, named after Robert Peel (1788–1850)), which prohibited the issuance of banknotes against anything except 100% gold reserves.
2. However, the Act did permit the expansion of demand deposits subject to transfer or withdrawal by check against short term commercial paper of the type approved by the Banking Principle. This paved the way towards fractional reserve banking (that is allowing banks to expand their money supply beyond their gold reserves) and elastic currency (that is expanding money supply as trade increases and vice versa).
3. The Currency School was opposed by the Banking School. Drawing on the writings of Adam Smith (1723–1790), it espoused the Banking Principle or Fullarton Principle (named after John Fullarton (1780–1849)). The Banking School holds that as long as a bank maintains the convertibility of its banknotes into specie (gold), for which it should keep adequate reserves (that is less than 100%). it is impossible for the bank to over-issue its banknotes (when extending credit).
4. The Banking School reasoned that the issuance of gold-backed banknotes would stimulate business activity, would not raise prices, and that the quantity of notes issued would be limited by the needs of trade rather than the desire of the issuing bank. It claimed that noteholders would promptly present for redemption all banknotes issued in excess of the needs of trade (business) under the so-called law of reflux. As a result, a trade-related rise in the money stock would not be inflationary.
(Bennett T. McCallum : Monetary Economics (Theory and Policy) / T. Bennett. – Macmillan Publishing Company, New York, 1989. – 356 p)
Answer the question:
«What school espoused the idea that banknotes issued by the banks should be held in gold as a 100 % reserve?»

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Currency School Versus Banking School
1. The Currency School originated from the writings of David Ricardo (1772–1823). It argued that excessive issuing of banknotes was a major cause of inflation. Currency School economists supported the British Bank Act of 1844 (or Peel’s Bank Act, named after Robert Peel (1788–1850)), which prohibited the issuance of banknotes against anything except 100% gold reserves.
2. However, the Act did permit the expansion of demand deposits subject to transfer or withdrawal by check against short term commercial paper of the type approved by the Banking Principle. This paved the way towards fractional reserve banking (that is allowing banks to expand their money supply beyond their gold reserves) and elastic currency (that is expanding money supply as trade increases and vice versa).
3. The Currency School was opposed by the Banking School. Drawing on the writings of Adam Smith (1723–1790), it espoused the Banking Principle or Fullarton Principle (named after John Fullarton (1780–1849)). The Banking School holds that as long as a bank maintains the convertibility of its banknotes into specie (gold), for which it should keep adequate reserves (that is less than 100%). it is impossible for the bank to over-issue its banknotes (when extending credit).
4. The Banking School reasoned that the issuance of gold-backed banknotes would stimulate business activity, would not raise prices, and that the quantity of notes issued would be limited by the needs of trade rather than the desire of the issuing bank. It claimed that noteholders would promptly present for redemption all banknotes issued in excess of the needs of trade (business) under the so-called law of reflux. As a result, a trade-related rise in the money stock would not be inflationary.
(Bennett T. McCallum : Monetary Economics (Theory and Policy) / T. Bennett. – Macmillan Publishing Company, New York, 1989. – 356 p)
Define the statement which corresponds to the contents of the text.

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Origin of Money
1. Where does money come from? According to the Austrian School of Economics, historical experience shows that money, the universally accepted means of exchange, emerged from free market forces. People learned that moving from direct (barter) trade to indirect trade that is exchanging vendible goods against a good that might not necessarily be demanded for consumption or production in the first place would lead to a higher standard of living.
2. Driven by peoples’ self-interest and the insight that directly traded goods possess different degrees of marketability, some market agents started demanding specific goods not for their own sake (consumption or production) but for the sake of using them as a medium of exchange. Doing so entails a number of advantages. If money is used as a means of exchange, there does not have to be a «double coincidence of wants» to make trade possible. In a barter economy, it would take Mr. A to demand the good Mr. B has to offer, and Mr. B to demand the good that Mr. A wants to surrender.
3. By accepting not only directly useful consumption and production goods, but also goods with a higher marketability than those surrendered, individuals can benefit more fully from the economic advantages of the division of labor and free trade. Everyone recognizes the benefits of a universally accepted medium of exchange, but how does money come into existence? The Austrian School of Economics has offered a comprehensive explanation of the historical origin of money, actually based on the influential work of Carl Menger (1840–1921):
4. In a barter economy, self-interested individuals would be reluctant to surrender real goods and services in exchange for intrinsically worthless pieces of paper or even relatively useless metal. It’s true, however, that once everyone else accepts money in exchange, any individual is also willing to do so. But how could human beings reach such a position in the first place? According to Menger, money emerged spontaneously through the self-interested actions of individuals. No single person sat back and conceived of a universal medium of exchange, and no government action was necessary to effect the transition from a condition of barter to a money economy.
(Bennett T. McCallum : Monetary Economics (Theory and Policy) / T. Bennett. – Macmillan Publishing Company, New York, 1989. – 356 p)
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The History of Macroeconomics
1. Modern macroeconomics was born as a separate field in economics during the Great Depression. The founding father was John Maynard Keynes. In many textbooks his influence has been reduced to a «box» describing his dazzling achievements as a currency, commodity, and stock speculator; mathematician; adviser to the British Treasury Department; chairman of a life insurance company; a director of the Bank of England; overseer of the endowment of Kings College; editor of England’s most influential economic journal; author of many classic works in economic theory; professor at Cambridge University; and chief architect of the major economic institutions of the post-World War II global economy.
2. Most neoclassical textbooks begin their overview of macroeconomics with the preface that microeconomics deals with individual firms, households, and markets, while macroeconomics deals with the overall economy. What is distinctive about the shift to aggregate outcomes is not explained. Given the textbooks’ lack of guidance, it is easy for students to imagine that one can generalize from supply and demand in one market to supply and demand in all markets, that is, from partial equilibrium to general equilibrium models. From this perspective, macroeconomics is merely the summation of a lot of supply and demand curves.
3. Unfortunately, the world is more complicated. The comfortable optimism of general equilibrium theory suffers from the fallacy of composition. It suggests that what is true for the part is automatically true for the whole. This does not always follow. If I am at a concert and I stand up, I will probably see better. If everyone stands up everyone will probably not see better; so too for the macro economy. If I lower my prices, I may sell more. If everyone lowers their prices, things are more ambiguous. Everyone may not sell more. We may, for example, simply get deflation (a fall in the price level).
4. At the center of many macro controversies is the «coordination question». Oddly, this puzzle is ignored in many neoclassical textbooks. The problem resembles the simultaneity problem posed in the age old question «Which came first, the chicken or the egg?». In order to buy, people must have purchasing power. In order to have purchasing power, others have to buy. As long as everyone is buying, everyone is able to buy, but what ensures everyone is buying?
(Steven Mark Cohn: Reintroducing macroeconomics (a critical approach). – M.E. Sharp. Inc., 2007. – 368 p)
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The Cost of Lost Income to Working Families
1. The average duration of unemployment from 1975 to 2000 varied between eleven and twenty weeks and averaged about three and one-half months (Economic Report of the President 2000, 356). Because of the tendency of official statistics to exclude discouraged workers, the real duration was probably higher.
2. Despite the high level of consumption in the U.S. economy most working people have very little financial savings. The bottom half of the income ladder would be unable to maintain a standard of living 25 percent above the poverty line by relying on their financial savings for even two months. Although many families have more than one wage earner and other survival options (such as loans from relatives, home equity loans, high-interest credit card debt, and expanded household production), the financial burden of unemployment can obviously be quite high.
3. The social support system for the unemployed has two major components, unemployment insurance and the social safety net. Over the last twenty-five years there has been a reduction in unemployment insurance. From 1980 to 1999, coverage fell from 43.9 percent to 37.2 percent of the unemployed. State unemployment insurance payments fell from 36.6 percent to 31.6 percent of lost wages. Because there have been many different changes in the social safety net, it is difficult to say how the overall level of social insurance has changed. If we use «government expenditures for income-tested benefits» as a proxy for safety net spending, it appears the net strengthened a bit.
4. Unemployment often has serious psychological impacts in addition to its economic burdens. A recent review of empirical research on happiness in the Journal of Economic Literature reported that «Happiness research suggests that unemployment strongly reduces subjectively self-reported well-being, both personally and for society as a whole. This is… in line with the view that unemployment is involuntary for the bulk of people affected» (Frey and Stutzer 2002, 428).
(Steven Mark Cohn: Reintroducing macroeconomics (a critical approach). – M.E. Sharp. Inc., 2007. – 368 p)
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1. Adolescents generally relate to the music of their peer culture and therefore find music a familiar medium for them. Self-expression is often facilitated because of the non-verbal aspect of music. Thus, listening to and discussing songs are safe and non-threatening to the teenager and offer a pleasurable situation where projection of personal thoughts and feelings is facilitated in the situation because it is one step removed from their own experiences (Keen 2001). The therapeutic process is enhanced and may face little resistance because the adolescent client is «tuned in» to the music and not the therapist, who may subsequently become perceived as a safe and trusted adult.
2. Using music with adolescents can facilitate self-concept by affording them structured, successful experiences linked to specific reinforcements. It can enhance communication and self-expression by allowing the client the metaphoric use of song lyrics to promote expression. A great deal of information can also be gained by providing adolescents with the opportunity to write their own songs.
Because of its powerful socializing effect, using music in adolescent groups can provide a common ground and thus improve constructive interaction in individuals who have negative or non-existent peer relationships.
(Tuula Heinonen : Social work in health and mental health / Tuula Heinonen, Anna Metteri. – Toronto : Canadian Scholars’ Press Inc., 2005. – P. 89).
Define the statements which correspond to the contents of the text.