Theme 12

MONEY-AND-CREDIT
SYSTEM.
1. Amount of money and its structure. Money
asms.
2. Demand and supply on a money fund.
3. Structure of the modern credit and monetary
system.
4. Essence and credit forms.
5. Operations open-market.
6. Registration rate of percent.
7. Change of norm of obligatory backlogs.
Amount of money and its
structure. Money asms
 An amount of money is an aggregate of available
and cashless purchasing and pay facilities,
providing the appeal of commodities and
services in an economy, which private
individuals, institutional owners ( enterprises,
associations, organizations ) and state, dispose.
 Disposing components of amount of money on the degree of
decrease of liquidity, it is possible to select a few money
asms – indexes of amount of money. The most liquid money
asm is an asm of M0, which includes cashs in circulation.
Analogical on liquidity is an asm of M1, which unites cashs
and money on current accounts ( accounts «general
delivery») which can be served by checks. A check is
security, containing the order of proprietor of account in
credit establishment about payment to the holder of check at
his sight of the sum indicated in him. The asm of M1 is
named «money in narrow sense of word» or «money for
transactions». Deposits on current accounts execute all
functions of money and can be easily converted into cash.
Demand and supply on a money
fund.
 The basic postulate of quantitative theory of money consists in the
following: the absolute standard of prices (Р) is determined by suggestion of
nominal monetary reserves (М). By other words, than anymore suggestion
of money, the higher standard of prices. This dependence can be presented
as equalization of exchange of quantitative theory of money.
 MV = PY
 Where V velocity of circulation of money in relation to a profit;
 M is nominal suggestion of money;
 Р is a general standard of prices;
 Y is the real income.
 Dividing both parts of the above-mentioned equalization on V, and,
expressing the size of 1/V through to, we will come to the formula, known
as Cambridge equalization:

 M = кPY
Structure of the modern credit
and monetary system
 Dominant position in the credit and monetary system occupies a
central bank which is named the «bank of banks». Central banks
execute the row of important functions among which it is
necessary to select:
 emission of bank-papers;
 storage of state is gold - currency backlogs;
 storage of the system of accruals of other credit establishments;
 monetary accommodation of economy;
 maintenance of course of exchange of national currency;
 crediting of commercial banks and realization of cash
maintenance of public institutions;
 leadthrough of calculations and translated operations;
 control after activity of credit establishments.
 The special place in a modern market economy
is occupied by specialized credit are financial
institutes, such, as pension fund, insurance to
the company, mutual funds, investment banks,
loan are сберегательные associations etc.
Accumulating enormous money resources,
these institutes actively participate in the
processes of accumulation and effective
allocation of capital.
Essence and credit forms
 A credit is a loan in a money or commodity
form, given by a creditor to the borrower
subject to conditions collectibility with
payment of percent for using a loan.
 In a political economy a credit is examined as a
form of loan capital flow. It is a capital which is
given in a loan and brings a profit to his
proprietor as a percent.
 An interest rate depends on the followings
factors:
 Urgency of deposit.
 Risk factor.
 Size of loan.
 System of taxation.
 Monopoly of banks.
 A bank credit supposes:
 Mobilization temporally of free money facilities and
capitals;
 Instrumental in the redistribution of capitals on industries
and regions, to realization of structural changes in an
economy;
 Instrumental in smoothing of norm arrived on industries;
 Creates terms for the acceleration of turnover of money
facilities, replacements of available turn cashless and т.п.;
 Accelerates centralization and concentration of capital
and production.
Operations open-market
 Operations open-market (operations with state
securities). In modern practice of market management
of adjusting of amount of money a basic instrument
there are operations open-market. It is the constantly
applied method of control of money suggestion.
Operations open-market – it a purchase and sale of
state securities the Central bank. As economic partners
commercial banks and population come forward here.
By a purchase or sale at the opened market of state
securities (state bonds). A central bank can carry out
either infusing into backlogs in the credit system of
the state or their withdrawal.
 Thus, selling state securities (GKO), the Central bank diminishes
suggestion of money.
 We will suppose that at the money market there is a lack of
money facilities in circulation. In this case the Central bank
pursues a policy, directed on expansion of money suggestion,
and begins to buy up securities at commercial banks and
population. Investigation of it is an increase of demand on state
securities. Their market price increases thus, and interest rate on
falls by him. It does state securities unattractive for their
proprietors, and commercial banks and population begin actively
to sell state securities.
 A central bank pays the purchase of securities at commercial
banks by the increase of their backlogs to the amount of
purchases. It is possible to draw conclusion that the purchase of
state securities the Central bank at commercial banks in final
analysis results in growth of their backlogs and, consequently,
possibilities at commercial banks for delivery of credits increase.
The purchase of state securities the Central bank at a population
results in those end-point.
 Thus, buying state securities, the Central bank increases
suggestion of money.
Registration rate of percent.
Registration rate of percent.

 A registration rate is the second because of
importance instrument credit – money policy, which
is used for realization of control after suggestion of
money. Registration rate – it a percent under which
Central bank allots credit to the commercial banks.
Such credit gets to all commercial not banks, but only
those which have a financial standfast and presently
need additional money funds. The level of
registration rate sets the Central bank. A commercial
bank, getting a loan, gives out the debt obligation,
guaranteed by the additional financial providing as
state short-term bonds and commercial instruments.
Change of norm of obligatory
backlogs.
 The change of norm of obligatory backlogs also
comes forward the important instrument of
monetary policy, actively in-use Central bank for
control after suggestion of money. In a general view
the mechanism of action of this instrument
following: at the increase of norm of obligatory
backlogs the Central bank surplus backlogs of
commercial banks grow short, that conduces to the
multiplicative diminishing of money suggestion;
there is multiplicative expansion of money at
diminishing of norm of obligatory backlogs.

Theme 12

Uploaded by

Copyright:

Available Formats

Theme 12

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Theme 12

Uploaded by

Copyright:

Available Formats

MONEY-AND-CREDIT

Registration rate of percent.

You might also like