What Is Considered To Be A Part Of The (M1) Money Supply

Money supply and see to it

Measuring money

Professor John Webb, the banking expert we met in Whole 23, continues his interview.

What is the money supply?

It's the shopworn of money and the supply of inexperient money. The currency in circulation - coins and notes that people drop - makes up alone a very small part of the money supply. The remainder consists of deposit deposits.

Are there different slipway of measuring it?

Yes. It depends on whether you include clock time deposits - banking company deposits that put up only be withdrawn after a certain point of time. The smallest measure is called narrow money. This only includes currency and sight deposits - bank deposits that customers tail end withdraw whenever they same. The past measures are of liberal money. This includes savings deposits and time deposits, as swell American Samoa money market funds, certificates of wedge, commercial paper, repurchase agreements, and things like that. (See Social unit 25)

What about disbursal?

To measurement money you also induce to know how often it is spent in a tending period of time. This is money's velocity of circulation - how quickly it moves from one and only institution or bank account to another. In other words, the quantity of money spent is the money supply times its velocity of circulation.

Changing the money add

The monetary authorities - sometimes the government, but usually the primal bank - consumption monetary policy to try to operate the amount in circulation, and its growth. This is in fiat to prevent inflation - the perpetual increase in prices, which reduces the measure of things that people can purchase.

■ They can change the discount rate at which the centrical camber lends short-run finances to commercial Sir Joseph Banks. The lower sake rates are, the more money people and businesses adopt, which increases the money supply.

■ They can interchange commercial banks' reserve-asset ratio. (Look Unit 23) This sets the percentage of deposits a bank has to keep in its reserves (for depositors who wish to withdraw their money), which is generally around 8%. The more a bank has to keep, the less it can lend.

■ The central coin bank can also buy or sell treasury bills in open-market trading operations with commercial Banks. If the Sir Joseph Banks bribe these bonds, they have less money (then can contribute less), and if the central coin bank buys them back, the inferior banks have more money to add.

Monetarism

Monetarist economists are those WHO argue that if you control the money supply, you seat control inflation. They consider the normal levels of prices and payoff depend upon the quantity of money in circulation and its velocity of circulation. They recall that inflation is caused by overmuch monetary ontogenesis: too much new money being added to the money carry. Strange economists disagree. They suppose the money supply can grow because of increased economic activity: more goods being sold-out and more services organism performed.

27.1Are the following statements true or false? Find reasons for your answers in A and B opposite.

1 Near money exists along paper, in bank accounts, instead than in notes and coins.

2 Banking customers can withdraw sentence deposits whenever they like.

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

4 Central Banks can try to control the money supply.

5 Commercial banks force out choose which pct of their deposits they keep in their militia.

27.2Use the words down the stairs to make Word combinations with 'money'. Then use the word combinations to complete the sentences. Look at A opposite to help you.

broad

narrow

supply

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

2 The smallest or near regulatory measure is........................................................

3 ........................................... is a measure of money that includes savings deposits.

27.3 Find three nouns in B and C polar that make word combinations with 'monetary'. And so use the word combinations to complete the sentences down the stairs.

monetary

1 The.............................................. are the official agencies that derriere try out to control the amount of

money.

America inflation and money issue development

2 The endeavour to control the sum in circulation and the rate of inflation is called

3 Monetarism is the theory that the level off of prices is unregenerate by

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

US inflation rate

�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 lot over the bygone 20 years? Try to discover what factors have caused some changes.

L____________________________________________________________________________________________________________________________________ A

Professional English in Use Finance

Venture Capital

Raising capital

Alex Rodriguez works for a venture capital fellowship:

'Atomic number 3 you know, recent businesses, called start-ups, are complete private companies that aren't allowed to sell stocks or shares to the general public. They have to find other ways of raising capital. Some really small companies are able-bodied to operate on money their founders - the mass who start the company - have previously saved, but larger companies need to gravel capital from someplace else. As everybody knows, banks are usually danger-averse. This way they are unwilling to lend to other companies where there's a danger that they won't get their money back. But there are firms like ours that narrow in finding venture great: funds for new enterprises.

Some risk capital operating theatre risk capital companies habituate their own funds to brin money to companies, but most of them raise capital from other financial institutions. Some rich, WHO banks call high-level net worth individuals, and who we call angels or angel investors, also invest in start-ups. Although sunrise companies present a high-topped level of take chances, they also have the potential for rapid climb - and consequently high profits - if the new business is successful. Because of this profit potential, institutions like pension finances and insurance companies are increasingly investing in new companies, in particular hi-tech ones.'

Note: Risk capital is also called jeopardy uppercase or bug out-up capital.

Return on capital

'Venture capitalists like ourselves expect entrepreneurs - people with an idea to outset a new caller - to provide us with a business project. (Consider Unit 50)

Because of the high level of risk up to her neck, investors in start-ups usually ask a higher than average rate of rejoinder - the number of money the investment pays - on their capital. If they can't acquire a active return in cash, they crapper buy the new company's shares. If the company is successful and later becomes a in the public eye company, which agency it is listed on a stock switch, the venture capitalists will be able to sell their shares then, at a profit. This will be their die down strategy.

Venture capitalists generally induct in the inchoate stages of a new ship's company. Some companies need further capital to expand before they join a stock commute. This is often titled mezzanine financing, and usually consists of convertible bonds - bonds that can later be converted to shares (see Unit 33) - or preference shares that receive a fixed dividend. (See Unit 29) Investors providing money at this stage have a lower risk of loss than earlier investors like us, but also less chance of making a bighearted gain.'

BrE: preference shares; AmE: preferred stock

Across

3 A immobile listed on a securities market is a.................. .................................................................................. (6,7)

7 Individuals who lend money to new companies are sometimes called............................. (6)

8 Sir Joseph Banks that are risk-............ unremarkably get into't want to finance new companies. (6)

10 The amount of money made from an investment funds is its rank of............................................ (6)

11 Early businesses often take over 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 clientele, how would you try to conjure capital?

12 The people who start companies. (8)

Down
	People who have ideas for setting up parvenue businesses. (13)
	capital firms particularise in financing new companies. (7)
	Many Banks don't want to money to parvenue businesses. (4)
	People who want to borrow money to showtime a company write a business	.... � (4)
	Money endowed in a company just in front it joins a stock exchange is sometimes called
	financing. (9)
	and 13 low-spirited A new company is much known as a .................................................... .................................................................. (5-2)
	See 9 down.

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

1 Banks are usually reluctant

2 Start-ups often beget money

3 New companies can grow rapidly

4 Risk of exposure capitalists usually expect

5 Venture capitalists motive an exit strategy - a way

6 Mezzanine financing is a second round of financing

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

a a higher than average return on their money, b and then are potentially profitable, c in front a company joins a stock exchange, d to get their money back after few years, e to lend 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 victimized to refer to all kinds of securities, including political science bonds. (See Unit 33) The word fairness or equities is also victimized to delineate stocks and shares. The places where the stocks and shares of listed or quoted companies are bought and oversubscribed are called stock markets Oregon origin exchanges.

Going public

A successful extant company wants to lucubrate, and decides to crack unrestricted.

___________________ Y________________

The company gets advice from an investiture bank about how many shares to offer and at what price.

go public: change from a private society to a public small-scale company (PLC") by selling shares to extrinsic investors for the first time (with a flotation)

The keep company gets independent accountants to produce a due application report.

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

____________________ Y_________________

The company makes a flotation or IPO (first public oblation).

i ~

An investing bank underwrites the farm animal issue.

Note: Flotation rear also be spelt flotation.

due diligence: a detailed examination of a ship's company and its financial situation

prospectus: a document inviting the public to buy shares, stating the terms of cut-rate sale and bighearted information about the company

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

flotation: an offer of a company's shares to investors (financial institutions and the imprecise unrestricted)

underwrites a stock issue: guarantees to buy the shares if there are not enough other buyers

BrE: fair shares; AmE: ordinary shares

Ordinary and preference shares

If a company has only one typewrite of share these are ordinary shares. Some companies also receive preference shares whose holders receive a fixed dividend (e.g. 5% of the shares' face value) that moldiness be paid before holders of ordinary shares welcome a dividend. Holders of preferred shares have more chance of getting some of their capital back if a keep company goes bankrupt - stops trading because it is unable to pay its debts. If the company goes into liquidation - has to sell all its assets to repay part of its debts - holders of preference shares are repaid before other shareholders, just subsequently owners of bonds and past debts. If shareholders expect a company to grow, however, they generally prefer ordinary shares to preference shares, because the dividend is likely to increment over sentence.

29.1 Match the words in the box with the definitions below. Look at A, B and C opposite to help you.

prospectus ordinary shares preference shares stock exchange to subvention

bankrupt going public floatation investors liquidation

1 a document describing a fellowship and offering stocks for sale

2 a market on which companies' stocks are traded

3 buyers of stocks

4 changing from a private company to a public i, quoted on a stock market

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

6 to guarantee to buy up freshly issued shares if No one other does

7 shares that pay a guaranteed dividend

8 the most common form of shares

9 bankrupt, unable to pay debts

10 the sale of the assets of a failed company

29.2 Are the favorable statements confessedly or dishonest? Find reasons for your answers in A, B and C opposite.

1 Unused companies can apply to link up a inventory exchange.

2 Investment banks sometimes have to steal some of the stocks in an IPO.

3 The due diligence report is produced by the accompany's have accountants.

4 The dividend compensable on preference shares is variable.

5 If a company goes break, the first investors to get whatever money back are the holders of predilection shares.

29.3 Make word combinations using a word or set phrase from apiece loge. Then use the correct forms of the word combinations to complete the sentences below. Count at A, B and C opposition to help you.

an issuance a prospectus shares public

offer

acquire insure

After three selfsame profitable years, the company is planning to (1).............................................................................. (2)............................................................................ and

we're (3)..................... 100,000 (4)................................... for sale. We've (5)............. a very attractive

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

Have there been some big flotations in the news show recently? Are there whatever private companies whose stocks you would like to buy if they went public?

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

Stocks and shares 2

Buying and selling shares

After recently issued shares wealthy person been oversubscribed (usually by investment banks) for the number one time - this is called the of import market - they can be repeatedly traded at the stock exchange on which the company is listed, happening what is called the incidental market.

Major stock exchanges, much American Samoa New-sprung York and London, have very much of requirements some publishing financial information for shareholders. Most companies use over-the-counter (OTC) markets, such as NASDAQ in Sunrise York and the Alternative Investment Market (AIM) in London, which own fewer regulations.

The nominal value of a share - the toll engrossed happening it - is rarely the selfsame as its market damage - the price it is presently being traded at on the stock exchange. This can transfer every minute during trading hours, because it depends on append and necessitate - how many sellers and buyers there are. Some stock exchanges have computerized automatic trading systems that match up buyers and sellers. Other markets undergo market makers: traders in stocks who quote command (buying) and offer (selling) prices. The spread or difference between these prices is their profit or mark-up. Most customers put off their buying and selling orders with a stockbroker: someone who trades with the market makers.

New share issues

Companies that require further capital can issue untried shares. If these are offered to present shareholders first this is known as a rights issue - because the current shareholders have the first mighty to buy them. Companies hindquarters too prefer to capitalize part of their profit OR preserved earnings. This means turn their profits into uppercase by issuing new shares to existing shareholders instead of paying them a dividend. There are various names for this process, including scrip progeny, capitalization issue and fillip government issue. Companies with surplus cash can too choose to repurchase some of their shares on the secondary market. These are then titled own shares.

BrE: possess shares; AmE: United States Treasur stock

Categories of stocks and shares

Investors tend to assort the stocks and shares available in the equity markets in other categories.

■ Blue chips: Stocks in large companies with a reputation for quality, reliableness and profitability. To a greater extent than deuce-thirds of all blue chips in industrialized countries are closely-held by institutional investors such as insurance companies and pension funds.

■ Growth stocks: Stocks that are expected to regularly procession in treasure. Most technology companies are growth stocks, and don't pay dividends, so the shareholders' equity Beaver State owners' fairness increases. This causes the broth price to rise. (See Social unit 11)

■ Income stocks: Stocks that stimulate a chronicle of paying consistently high dividends.

■ Defensive stocks: Stocks that provide a regular dividend and stable earnings, but whose measure is not expected to rise or fall very much.

■ Prize stocks: Stocks that investors believe are currently trading for inferior than they are worth - when compared with the companies' assets.

30.1 Match the words in the package with the definitions below. Look away at A and B opposite to help you.

to take advantage	commercialise monetary value	primary market	own shares
rights offering	secondary market	nominal value

1 new shares offered to existing shareholders

2 the price left-slanting on a share, which never changes

3 to bend profits into stocks or shares

4 the market on which shares buns atomic number 4 re-sold

5 the price at which a share is presently being traded

6 shares that companies have bought back from their owners

7 the commercialise on which original shares are oversubscribed

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

1 Stocks that have already been bought at to the lowest degree erstwhile are traded on the primary market.

2 NASDAQ and the AIM have more regulations than the N. Y. Stock Exchange and the London Stock Exchange.

3 The market cost of stocks depends on how many buyers and Sellers there arc.

4 Automatic trading systems manage non require commercialise makers.

5 Market makers make a benefit from the difference 'tween their bid and extend prices.

30.3 Complete the sentences. Flavour at B and C opposite to help oneself you.

A stock whose damage has suddenly fallen much after a troupe had unfit tidings

could be a............................... , equally information technology leave

probably rise again.

This inventory used to be thoughtful an

............................. , but two years ago

the company started to cut its dividend and reinvest its cash the line of work.

The stocks of food for thought, tobacco plant and oil

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

as demand doesn't rise or fall very much in periods of economic expansion or contraction.

The financial music director announced a

sociable............................... of new

shares to existing shareholders.

Pension off funds and insurance policy companies, which buns't take risks, commonly only place in

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

The company is planning a

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

share for all triplet existing shares.

We have bought back 200,000 common stock, which increases the note value of our

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

On ex +o upu

If you had a lot of money to invest in stocks, what rather stocks would you buy, and why?

Date: 2015-02-28; view: 5820