GLOSSARY. · Discount rate– The interest rate a central bank charges on loans of reserves to banks

· Discount rate – The interest rate a central bank charges on loans of reserves to banks.

· Exchange rate – The number of units of one nation’s currency that equals one unit of another nation’s currency.

· Federal Reserve System –the twelve central banks in the USA that service banks and other financial institutions within each of the Federal Reserve districts, popularly called the Fed.

· Nominal interest rate – the annual percentage amount of money that is earned on a sum loaned or deposited in a bank.

· Open market operations – the buying and selling of government securities by a central bank.

· Required reserve ratio – the percentage of deposits that a central bank requires a bank to hold in vault cash or on deposit with it.

· Required reserves – the minimum balance that a central bank requires a bank to hold in vault cash or on deposit with it.

MONEY AND MONETARY POLICY

DISCOVERING CONNECTIONS

1. What do you know from the history of money?

2. Can you give any examples of things that were used as money in the previous societies?

3. Do you see any advantages of a barter system?

4. What functions does money serve in modern societies?

5. What body is responsible for monetary policy in the country?

READING

Text 1

As you read the text, focus on the types and functions of money.