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Tools of macroeconomic policy & central banking RB

Tools of macroeconomic policy & central banking RB. Tools of macroeconomic policy: Monetary and fiscal policy. Fiscal policy = A government policy on taxes and public spending. Monetary policy = The central bank’s policy on controlling the money supply.

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Tools of macroeconomic policy & central banking RB

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  1. Toolsofmacroeconomicpolicy&central banking RB

  2. Tools of macroeconomic policy:Monetary and fiscal policy • Fiscal policy = A government policy on taxes and public spending. • Monetary policy = The central bank’s policy on controlling the money supply.

  3. Whatcanthesetwopoliciesbeused for? Macroeconomic policy can beexpansionary (1) or restrictive (2). Decide which definition is which policy: []increases the total supply of money in the economy, used to combat unemployment in a recession. []decreases the total money supplyin order to combat inflation.

  4. Whatcanthesetwopoliciesbeused for? Macroeconomic policy can beexpansionary (1) or restrictive (2). Decide which definition is which policy: [1]increases the total supply of money in the economy, used to combat unemployment in a recession. [2]decreases the total money supplyin order to combat inflation.

  5. Monetary policy RB, p. 62: Find opposites to these terms: • restrictive • upturn • to stimulate • to reduce • to discourage • to lend • plentiful • expansionary • recession • to cool • to drive up, increase, etc • to encourage • to borrow • scarce

  6. RB, p. 62/ I Find answers in text: • When should a loose/tight monetary policy be used? • What should be done? • How? • Do: RB, p. 63/ II

  7. RB, p. 63/ II Find answers in text:

  8. RB, p. 63/ III Present: e.g. If the economy IS INRECESSION/OVERHEATING, the central bank should STIMULATE/ COOL IT. This can be done by LOWERING/RAISING the reserve requirement, DROPPING/ INCREASING the discount rate, or by BUYING/SELLING bonds on the open market.

  9. RB, p. 63/ IV Fill in the gaps: • FISCAL • SPENDING • GREATER • REDUCE • UNEMPLOYMENT • DEMAND • HIRING • EXPANSIONARY • MONETARY • INFLATION •  WISHES 12. RESTRICTIVE 13. MONETARY 14. MAKE 15. MONETARY 16. RATE 17. BORROW 18. BANK 19. SPEND 20. LESS. 21. OPPOSITE 22. SPEND 23. LESS

  10. Central banking • What are central banks for? • Watch and take notes: ECB and Eurosystem explained: http://www.ecb.europa.eu/ecb/educational/html/index.en.html ECB tasks and roles: http://www.ecb.europa.eu/ecb/educational/movies/html/index.en.html?id=1

  11. Central banking: vocabularyMatch up the terms and definitions • Implement • Fluctuate • Liquidity • Last resort • National currency • The only remaining, unwanted, option or choice • The type of money (coins, banknotes) used in a country • Go up and down uncertainly • When cash is available • Apply, enforce

  12. The tasks of the Central bankListening 1 Fill in the gaps as you listen. 2 Answer these questions: What is a bank run? What is the political business cycle?

  13. RB, p.61 Central banking Listening I Fill in the gaps as you listen: 1a setting interest rate ceilings and floors 1b printing money, or destroying it 1c open-market operations 2 exchange rate supervision 3 commercial banking supervision 4 act as lender of last resort

  14. Match up the expressions in Task II with those in Task I Task II Task I 1b printing money, or destroying it 1a setting interest rate ceilings and floors 3 commercial banking supervision 2 exchange rate supervision 4 act as a lender of last resort 1c open-market operations A B C D E F

  15. RB, p.61 Central banking - ListeningCOMPARE STYLES: Formal? Colloquial? 1a setting interest rate ceilings and floors 1b printing money, or destroying it 1c open-market operations 2 exchange rate supervision 3 commercial banking supervision 4 act as lender of last resort Bestablishing maximum and minimum lending rates, A controlling the amount of banknotes in circulation F selling govt. bonds to commbnks or buying back, to alter amount of credit D intervening on foreign exchange markets C ensuring sufficient liquidity ratio E Lending money to banks to avoid going bankrupt

  16. HW Visit different central banks’ web sites and compare them: • Bank of England • Croatian National Bank • Deutsche Bundesbank • The FED & • The European Central Bank – game at: http://www.ecb.europa.eu/ecb/educational/topfloor/html/index.en.html

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