Apr 18, 2016
- Complete the sentences below. Use the key words if necessary.
- The functions of central banks
key words
A journalist is interviewing Professor John Webb, an expert in central banking.
‘What are the main functions of central banks?’
‘Well, most countries have a central bank that provides financial services to the government and to the banking system. If a group of countries have a common currency, for example the euro, they also share a central bank, such as the European Central Bank in Frankfurt.
Some central banks are responsible for — trying to control the rate of inflation to maintain . This involves changing interest rates. The aim is to protect the value of the currency — what it will purchase at home and in other currencies.
In many countries, the central bank and the banking system and the whole financial sector. It also collects financial data and publishes statistics, and provides financial information for consumers. In most countries, the central bank prints and — putting banknotes into circulation. It also participates in clearing cheques and settling debts among commercial banks.’
The central bank and the commercial banks
key words
‘How exactly does the central bank supervise the commercial banks?’
‘Well, commercial banks have to keep — a certain amount of their deposits — for customers who want to withdraw their money. These are held by the central bank, which can also change the — the minimum percentage of its deposits a bank has to keep in its reserves.
If one bank goes bankrupt, it can quickly affect the stability of the whole . And if depositors think a bank is unsafe they might all try to withdraw their money. If this happens it’s called a or a , and the bank will quickly use up its reserves. Central banks can act as , which means lending money to financial institutions in difficulty, to allow them to make payments. But central banks don’t always or rescue banks in difficulty, because this could lead banks to take risks that are too big.’
Central banks and exchange rates
key words
‘What about exchange rates with foreign currencies?’
‘Central banks manage a country’s reserves of and foreign currencies. They can try to have an influence on the — the price at which their currency can be converted into other currencies. They do this by on the , and moving the rate up or down by buying or selling their currency. This changes the balance of — how much is being sold — and — how much is being bought.’
- The functions of central banks
- Match the two parts of the sentences.
- The central bank will sometimes lend money . . .
- if there is a run on a commercial bank.
- if they could always be sure of rescue by the central bank.
- if monetary policy is successful.
- Banks would probably start taking too many risks . . .
- if there is a run on a commercial bank.
- if monetary policy is successful.
- if they could always be sure of rescue by the central bank.
- Central banks are usually responsible for . . .
- if they could always be sure of rescue by the central bank.
- the amount of money commercial banks are able to lend.
- printing and distributing banknotes.
- The central bank can alter . . .
- the amount of money commercial banks are able to lend.
- printing and distributing banknotes.
- if there is a run on a commercial bank.
- There will be low and stable inflation . . .
- if there is a run on a commercial bank.
- if they could always be sure of rescue by the central bank.
- if monetary policy is successful.
- The central bank will sometimes lend money . . .
- Complete the text with words below.
- monetary supervising stability financial
- Today the Federal Reserve’s duties fall into four general areas:
• conducting the nation’s policy; - • and regulating banking institutions and protecting the credit rights of consumers;
- • maintaining the of the financial system; and
- • providing certain services to the US government, the public, financial institutions, and foreign official institutions.
- monetary supervising stability financial
- Use the word combinations to complete the sentences below.
- . . . , including setting interest rates, is designed to maintain . . . .
- Monetary policy | financial stability
- Financial stability | monetary policy
- If there’s a . . . and the bank goes bankrupt, this can have a rapid effect on the whole . . . .
- bunk run | monetary policy
- bunk run | financial system
- On one day in 1992, the Bank of England lost over £1 billion (more than half of the country’s foreign reserves) in the . . . , trying to protect the . . . of the pound.
- exchange rate | currency markets
- currency markets | exchange rate
- . . . , including setting interest rates, is designed to maintain . . . .
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