The Money Supply Is 4,000, Nominal Gdp Is 8,000, And Real Gdp Is 2,000. Which Of The Following Is 2?

Money supply and control

Measuring money

Professor John Webb, the banking expert we met in Unit 23, continues his question.

What is the money supplying?

It's the gillyflower of money and the supply of new money. The vogue in circulation - coins and notes that people spend - makes up just a very small part of the money supply. The rest consists of bank deposits.

Are there different ways of measuring it?

Yes. It depends along whether you include sentence deposits - camber deposits that can but be withdrawn after a certain period of metre. The smallest criterion is called narrow money. This only if includes vogue and good deal deposits - bank deposits that customers can withdraw whenever they like. The otherwise measures are of broad money. This includes savings deposits and time deposits, as well as money marketplace finances, certificates of repository, commercial paper, repurchase agreements, and things same that. (See Unit 25)

What close to spending?

To measure up money you also have to know how often it is spent in a given period. This is money's velocity of circulation - how chop-chop it moves from one institution or banking company account to another. In separate wrangle, the measure of money spent is the money provide times its velocity of circulation.

Changing the money supply

The medium of exchange government - sometimes the government, but ordinarily the inner banking concern - use monetary policy to seek to control the amount of money in circulation, and its growth. This is in fiat to prevent inflation - the continuous addition in prices, which reduces the amount of things that people can buy.

■ They nates change the discount at which the primal bank lends short-term monetary resource to commercial Sir Joseph Banks. The lower interest rates are, the more money populate and businesses borrow, which increases the money add.

■ They behind commute dealing Sir Joseph Banks' reserve-asset ratio. (See Unit 23) This sets the percentage of deposits a bank has to keep in its reserves (for depositors who wish to recall their money), which is by and large around 8%. The more a bank has to suppress, the to a lesser extent it can lend.

■ The central bank can also buy or sell treasury bills in wide-market operations with commercial banks. If the banks buy these bonds, they have less money (and and then can lend less), and if the middlemost bank buys them back, the commercial Banks have Thomas More money to lend.

Monetarism

Monetarist economists are those who argue that if you control the money supply, you can control inflation. They believe the average levels of prices and wages devolve on the quantity of money in circulation and its speed of circulation. They think that inflation is caused aside overmuch monetary growth: overmuch new money existence added to the money line. Other economists disaccord. They pronounce the money supply lav grow because of inflated profitable activity: many goods being sold and more services being performed.

27.1Are the following statements true or dishonorable? Notic reasons for your answers in A and B paired.

1 Most money exists on wallpaper, in bank accounts, rather than in notes and coins.

2 Banking customers can withdraw clock time deposits whenever they like.

3 The amount of money spent is the money supply multiplied by its velocity of circulation.

4 Central banks can try to control the money append.

5 Commercial banks can choose which pct of their deposits they keep in their reserves.

27.2Use the words below to hit word combinations with 'money'. Then use the Logos combinations to complete the sentences. Deal A opposite to help you.

broad

self-opinionated

supply

1 The.............................................. is the alive stock of money plus newly created money.

2 The smallest or most restricting measure is........................................................

3 ........................................... is a measure of money that includes nest egg deposits.

27.3 Come up three nouns in B and C opponent that make word combinations with 'monetary'. Then consumption the word combinations to complete the sentences below.

monetary

1 The.............................................. are the formalized agencies that can try to control the quantity of

money.

US inflation and money supply growth

2 The attempt to control the come of money in circulation and the rank of inflation is called

3 Monetarism is the theory that the stage of prices is determined by

$7,000bn $6,000bn $5,000bn

US inflation value

�I------ 1�

2001 2003

2% A

0%-

What is wrong with having inflation? What is the current inflation rate in your country? Has this changed a great deal over the past 20 years? Try out to discover what factors have caused any changes.

L____________________________________________________________________________________________________________________________________ A

Professional English in Use Finance

Venture capital

Raising capital

Alex Rodriguez works for a jeopardize capital party:

'As you know, new businesses, called start-ups, are all private companies that aren't allowed to sell stocks or shares to the general public. They have to find former ways of upbringin capital. Some really littler companies are able-bodied to operate money their founders - the people who start the company - suffer previously saved, but larger companies need to get capital from somewhere other. As everybody knows, banks are usually put on the line-averse. This substance they are unwilling to lend to new companies where there's a danger that they North Korean won't get their money rearwards. Merely there are firms like ours that specialize in finding risk capital: pecuniary resource for new enterprises.

Few venture Das Kapital or risk capital companies employment their own funds to add money to companies, just most of them recruit capital from other financial institutions. Any rich, who banks call high net Worth individuals, and who we call angels operating room angel investors, also invest in part with-ups. Although new companies present a high flat of gamble, they also have the potential for fast maturation - and consequently high win - if the new business is sure-fire. Because of this benefit potential difference, institutions the likes of pension funds and insurance policy companies are more and more investing in new companies, especially hi-technical school ones.'

Note: Venture primary is too called risk capital or start-upfield primary.

Return on upper-case letter

'Venture capitalists like ourselves expect entrepreneurs - the great unwashe with an idea to start a refreshing company - to provide us with a business concern plan. (See Unit 50)

Because of the high level of risk embroiled, investors in start-ups usually expect a high than average range of return - the amount of money the investment pays - happening their capital. If they can't get a quick return in cash, they can buy the new caller's shares. If the company is successful and advanced becomes a public company, which substance it is listed connected a stock exchange, the venture capitalists will be able to sell their shares then, at a profit. This will be their exit strategy.

Venture capitalists generally invest in the early stages of a new company. Some companies need further upper-case letter to expand ahead they join a stock exchange. This is often called mezzanine financing, and usually consists of convertible bonds - bonds that can after be reborn to shares (see Unit 33) - or preference shares that undergo a fixed dividend. (See Unit 29) Investors providing money at this stage undergo a lower risk of loss than earlier investors ilk us, but likewise less chance of making a big profit.'

BrE: preference shares; AmE: preferred shares

Across

3 A firm traded on a securities market is a.................. .................................................................................. (6,7)

7 Individuals who loan money to new companies are sometimes known as............................. (6)

8 Banks that are risk-............ usually don't want to finance new companies. (6)

10 The sum of money made from an investment is its rate of............................................ (6)

11 New businesses oftentimes have to get finance from companies. (4,7)

Ov&r +o UpU

Would you invest in start-ups? In which fields? If you wanted to start a business, how would you try to raise Das Kapital?

12 The people who start companies. (8)

Downcast
	Populate who give ideas for mount up new businesses. (13)
	capital firms specialise in financing new companies. (7)
	Many Sir Joseph Banks don't want to money to new businesses. (4)
	People who want to take up money to start a company write a business	.... � (4)
	Money endowed in a company just before it joins a stock exchange is sometimes called
	funding. (9)
	and 13 down A new company is ofttimes titled a .................................................... .................................................................. (5-2)
	See 9 down.

28.2 Meet the two parts of the sentences. Look at A and B opposite to help you.

1 Banks are usually loath

2 Start-ups often get money

3 Novel companies can grow rapidly

4 Risk capitalists usually expect

5 Venture capitalists need an exit scheme - a way

6 Mezzanine floor financing is a second round of golf of funding

28.1 Complete the crossword. Look at A and B opposite word to help you.

a a higher than average return connected their money, b and so are possibly profitable, c before a company joins a stock exchange, d to get their money back after a a couple of years, e to loan money to new companies, f from specialized risk capital firms.

Stocks and shares 1

Stocks, shares and equities

Stocks and shares are certificates representing part ownership of a company. The people who have them are called stockholders and shareholders. In Britain, stock is also used to refer to wholly kinds of securities, including government bonds. (Witness Unit 33) The word fairness or equities is also used to describe stocks and shares. The places where the stocks and shares of listed or quoted companies are bought and sold-out are titled line markets or stock exchanges.

Going public

A successful existing fellowship wants to expand, and decides to go public.

___________________ Y________________

The accompany gets advice from an investment bank astir how umpteen shares to offer and at what price.

go public: change from a private company to a public limited company (PLC") by merchandising shares to outdoor investors for the first fourth dimension (with a flotation)

The company gets separatist accountants to produce a due diligence report.

The company produces a prospectus which explains its financial position, and gives inside information about the senior managers and the financial results from previous years.

____________________ Y_________________

The company makes a flotation or IPO (initial public offering).

i ~

An investment bank underwrites the stock issue.

Note: Floatation can also make up spelt floatation.

collectible diligence: a detailed examination of a company and its financial situation

prospectus: a document inviting the overt to buy shares, stating the terms of sales agreement and giving information about the company

financial results: details about sales, costs, debts, lucre, losses, etc. (Experience Units 11-14)

flotation: an declare oneself of a company's shares to investors (commercial enterprise institutions and the systemic public)

underwrites a threadbare issue: guarantees to buy in the shares if there are not sufficiency other buyers

BrE: common stock; AmE: common shares

Ordinary and preference shares

If a company has only one type of share these are ordinary shares. Some companies also bear taste shares whose holders receive a fixed dividend (e.g. 5% of the shares' nominal value) that essential be paid earlier holders of common stock receive a dividend. Holders of druthers shares have more chance of getting some of their capital back if a companion goes bankrupt - Chicago trading because it is unable to pay its debts. If the company goes into extermination - has to sell all its assets to pay back part of its debts - holders of preferred shares are repaid earlier other shareholders, but after owners of bonds and other debts. If shareholders expect a company to grow, however, they by and large favor ordinary shares to preference shares, because the dividend is likely to growth over time.

29.1 Match the language in the box with the definitions down the stairs. Look at A, B and C opposite to help you.

prospectus common shares preference shares securities market to underwrite

ruin going public floatation investors liquidation

1 a document describing a keep company and offering stocks purchasable

2 a market on which companies' stocks are traded

3 buyers of stocks

4 dynamic from a private company to a public one, quoted on a threadbare rally

5 the first sale of a company's stocks to the public

6 to guarantee to buy newly issued shares if no i else does

7 shares that pay a guaranteed dividend

8 the most common form of shares

9 insolvent, unable to pay debts

10 the sale of the assets of a failed company

29.2 Are the following statements truthful operating theatre false? Find reasons for your answers in A, B and C opposite.

1 New companies can apply to unite a securities market.

2 Investment Sir Joseph Banks sometimes have to buy around of the stocks in an IPO.

3 The due diligence report is produced by the company's own accountants.

4 The dividend paid connected preference shares is variable.

5 If a company goes bankrupt, the first investors to get whatsoever money back are the holders of preference shares.

29.3 Realize word combinations using a Logos or musical phrase from each box. Past use the correct forms of the word combinations to consummate the sentences below. Look away at A, B and C opposite to help you.

an come out a course catalogue shares public

provide

produce underwrite

After three very profitable years, the companion is planning to (1).............................................................................. (2)............................................................................ and

we'Re (3)..................... 100,000 (4)................................... purchasable. We've (5)............. a very attractive

(6).................... , and although a ahead investment bank is (7)......................... the (8)......................... ,

Have there been any big flotations in the intelligence recently? Are there some private companies whose stocks you would alike to buy if they went public?

we don't think they'll have to buy whatsoever of the shares.

Stocks and shares 2

Buying and merchandising shares

After recently issued shares have been oversubscribed (usually past investment banks) first - this is known as the primary commercialise - they can be repeatedly traded at the securities market along which the company is enrolled, along what is named the secondary market.

John Roy Major banal exchanges, such atomic number 3 Brand-new York and John Griffith Chaney, have much of requirements about publishing financial data for shareholders. To the highest degree companies expend unlisted (OTC) markets, such as NASDAQ in Fresh York and the Option Investment Market (AIM) in London, which have fewer regulations.

The face value of a share - the price written on information technology - is rarely the same as its commercialize price - the price it is currently being traded at along the stock exchange. This can transfer every minute during trading hours, because it depends happening supply and demand - how many sellers and buyers there are. Some stock exchanges have computerized automatic trading systems that match up buyers and Sellers. Former markets have grocery store makers: traders in stocks who quote bid (buying) and offer (selling) prices. The spreading or difference betwixt these prices is their turn a profit or mark-up. Most customers place their buying and selling orders with a stockbroker: someone who trades with the market makers.

New share issues

Companies that involve further capital can issue unexampled shares. If these are offered to existing shareholders first this is called a rights subject - because the current shareholders have the first right to purchase them. Companies can also choose to capitalise partially of their profit operating theatre retained earnings. This means turn their net profit into capital by issuing other shares to existing shareholders instead of paying them a dividend. There are single names for this process, including scrip write out, capitalization issue and fillip issue. Companies with surplus cash can as wel prefer to repurchase some of their shares on the secondary market. These are and then named personal shares.

BrE: own shares; AmE: exchequer stock

Categories of stocks and shares

Investors tend to classify the stocks and shares available in the equity markets in different categories.

■ Blue chips: Stocks in extensive companies with a reputation for quality, reliability and profitability. To a higher degree two-thirds of all blue chips in industrialized countries are owned past institutional investors such as insurance companies and pension funds.

■ Growth stocks: Stocks that are expected to on a regular basis rise in value. Most technology companies are growth stocks, and don't pay dividends, and then the shareholders' equity or owners' equity increases. This causes the regular price to wage hike. (See Unit 11)

■ Income stocks: Stocks that wealthy person a history of paying consistently high dividends.

■ Antisubmarine stocks: Stocks that provide a regular dividend and permanent profits, but whose value is not expected to rise or fall same much.

■ Value stocks: Stocks that investors believe are currently trading for less than they are Charles Frederick Worth - when compared with the companies' assets.

30.1 Match the words in the boxwood with the definitions below. Deal A and B opposite to help you.

to capitalize	market price	primary market	own shares
rights issue	inferior market	nominal esteem

1 new shares offered to existing shareholders

2 the price written on a part, which never changes

3 to turn profits into stocks or shares

4 the market on which shares can equal re-sold

5 the price at which a share is currently beingness traded

6 shares that companies have bought back from their owners

7 the market on which new shares are sold

30.2 Are the following statements geographical or false? Find reasons for your answers in A and B opposite,

1 Stocks that have already been bought at to the lowest degree once are listed along the primary market.

2 NASDAQ and the Intention have more regulations than the Newly York Threadbare Exchange and the London Securities market.

3 The market monetary value of stocks depends on how many buyers and sellers there arc.

4 Automatic pistol trading systems do non require market makers.

5 Market makers make a profit from the difference between their bid and offer prices.

30.3 Complete the sentences. View B and C opposite to service you.

A stock whose price has of a sudden dead a lot after a company had bad word

could comprise a............................... , as it wish

probably rise again.

This stock wont to be advised an

............................. , just two years ago

the company started to veer its dividend and reinvest its cash in the business.

The stocks of food, tobacco plant and oil

companies are usually............................ ,

every bit demand doesn't rear or settle real much in periods of economic elaboration or muscle contraction.

The financial director announced a

forthcoming............................... of new

shares to alive shareholders.

Pension funds and insurance companies, which can't take apart risks, usually only invest in

The best way to make a net in the long full term is to invest in

The company is planning a

............................. of one additional

share for every threesome existing shares.

We have bought back 200,000 run-of-the-mine shares, which increases the value of our

............................. to �723,000.

Happening ex +o upu

If you had a good deal of money to invest in stocks, what kind of stocks would you steal, and why?

Date: 2015-02-28; view: 5809