Read the text and do the tasks 1. Heterodox economists also criticize the textbooks’ treatment of in...: ответ на тест 1029306 - Английский язык

Read the text and do the tasks
1. Heterodox economists also criticize the textbooks’ treatment of international trade for de-emphasizing the geopolitical context of free trade rhetoric. Trade patterns and other international economic relations have always been deeply influenced by geopolitical factors, exemplified by colonialism, persistent threats of military or covert interventions over economic issues, and the use of foreign aid as a lever for structuring trade relations. This continues today.
2. The deposit of Saudi oil revenues in U.S. banks and the Saudis’ moderation of OPEC price increases, for example, reflect geopolitical forces (such as our military help in maintaining the Saudi regime) as much as market forces. One of the hidden pressures for NAFTA similarly involved U.S. government efforts to gain privileged access for U.S. firms and financial interests to Mexican oil. The latter has been insulated from foreign ownership by Mexican law.
3. The recent push for a neoliberal version of «free trade» (which, for example, often strives to protect intellectual property rights much more vigorously than labor rights) is as laden with nationalist geopolitical agendas as past global trading orders. It is also just as laden with the objectives of private corporations and economic interests in the host nations pushing different policies.
(Steven Mark Cohn : Reintroducing macroeconomics (a critical approach). – M.E. Sharp. Inc., 2007. – P. 208).
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Trade and payments across national borders require that one of the parties to the transaction contract to pay or receive funds in a foreign currency. At some stage, one party must convert domestic money into foreign money. Moreover, knowledgeable investors based in each country are aware of the opportunities of buying assets or selling debts denominated in foreign currencies when the anticipated returns are higher abroad or when the interest costs are lower. These investors also must use the foreign exchange market whenever they invest or borrow abroad. The foreign exchange market is the largest market in the world in terms of the volume of transactions. That the volume of foreign exchange trading is many times larger than the volume of international trade and investment reflects that a distinction should be made between transactions that involve only banks and those that involve banks, individuals, and firms involved in international trade and investment.

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1. Clearly, the specific form of independence may matter for inflation. Debelle and Fischer maintain it is goal dependence and instrument independence that would produce low inflation. In fact, such an arrangement may prevent policy makers from changing the objective of policy on a frequent basis, thereby provoking the time inconsistency problem.
2. What is more, even if central bank independence leads to low inflation, the case for independence might be greatly weakened if it is accompanied by a growing real economic instability. However, little relationship was found between measures of real economic activity and central bank independence.
3. In other words, countries with more independence central banks enjoyed lower inflation yet suffered no cost in terms of more volatile real economic activity. Viewed from this point, one may be inclined to see central bank independence as a kind of free lunch.
4. While standard indices of central bank independence were negatively associated  with inflation among developed economies, this was not the case among developing economies. Here, turnover rates of central bank governors were positively correlated with inflation. This is a case, however, in which causality is difficult to evaluate: Was inflation high because of political interference that leads to rapid turnover of central bank officials? Or did central bank officials get fired because they couldn’t keep inflation low?
(Ansgar Belke : Monetary economics in globalised financial markets / A. Belke, T. Polleit. – Springer, 2009. – P.11).
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1. Originally, economists used to think in terms of commodity price rules for issuers of currency to follow. For them the most natural way was to implement a system of property-rights-respecting rules, which imposed on the issuers of currency the obligation to maintain a particular exchange rate between their currencies and one or more commodities.
2. If a bank issues, say, US$1 bills, a commodity standard requires it to ensure that the US$1 bills always exchange for a given amount of a commodity. Because the issuer would maintain a fixed exchange rate between the US$1 bills and a particular quantity (or quantities) of one or more real goods, the nominal price of that good (or goods) would be fixed. Currency issued under these conditions is said to be fully convertible.
3. Commodity standards were the historical norm. The perhaps best remembered commodity standard is the international gold standard. Britain adopted a de facto gold standard in 1717 after the master of the mint, Sir Isaac Newton (1643–1727), re-valued the silver guinea and formally adopted the gold standard in 1819, when the British Parliament abandoned long-standing restrictions on the export of gold coins and bullion from Britain. The US, though formally on a bimetallic gold and silver standard, switched to gold de facto in 1834 and de jure in 1900. In 1834, the US fixed the price of gold at US$20.67 per ounce. It remained at that level until 1933.
(Ansgar Belke : Monetary economics in globalised financial markets / A. Belke, T. Polleit. – Springer, 2009. – P.49).
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1. The central bank is the monopoly supplier of base money. At the same time, the central bank can, via imposing minimum reserve requirements, exert a (pre-dominant) influence on the demand for central bank money. That said, the central bank is in a (comfortable) position to manage the conditions in the market for central bank money (usually referred to as money market), that is determining the quantity of base money or the interest rate on base money balances.
2. Figure 1.25 shows a simple model of the inter-bank money market (for, say, 1-month money), where the interest rate is determined by the demand for and supply of base money. The demand is determined by minimum reserves, the cash drain and working balances. Supply is determined by the central bank’s regular operations and by autonomous factors (such as, for instance, deposits being shifted from central bank to commercial bank accounts and vice versa).
3. In their money market operations central banks aim to ensure an orderly functioning of the money market, helping credit institutions to meet their liquidity needs in a smooth manner. This is typically achieved by providing regular refinancing to banks and facilities that allow them to deal with end-of-day balances and to cushion transitory liquidity fluctuations. What is more, central banks tend to signal their monetary policy stance to the money market via changing the conditions under which the central bank is willing to enter into transactions with commercial banks.
(Ansgar Belke : Monetary economics in globalised financial markets / A. Belke, T. Polleit. – Springer, 2009. – P.325).
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1. In most countries, price stability has become the primary objective of monetary policy. Central bankers, economists, and other knowledgeable observers around the world agree that price stability both contributes importantly to the economy’s growth and employment prospects in the longer term and moderates the variability of output and employment in the short to medium term.
2. Price stability is considered as a situation in which the economy’s price level does neither increase nor decrease over time; that said, price stability is a situation in which inflation (that is an ongoing increase in the economy’s price level) and deflation (that is a ongoing decline in the economy’s price level) are actually absent, or, to put it differently: price stability is a situation in which the purchasing power of money remains unchanged over time.
3. The idea of preserving the value of money by stabilising the economy’s price level – which is actually typically represented by a consumer price index – is based on the work of Irving Fisher (1867–1947) between 1895 and 1922, in particular on Fisher’s The Making of Index Numbers from 1922. Fisher was one of the first experts on the calculation of price index numbers, and he began the first weekly newspaper publication of a wholesale price index in 1923. Before that, the value of the currency was fixed against a certain amount of gold. In fact, Fisher’s «index regime» has become the «state-of-the-art» concept in monetary policy.
(Ansgar Belke : Monetary economics in globalised financial markets / A. Belke, T. Polleit. – Springer, 2009. – P.531).
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