Industry, services and commerce is conducted on credit, and firms may provide small discounts on

accounts settled within, say, one month — and (c) bank credit: credit consisting of loans and overdrafts

to a bank’s customers.

Credit enables a producer to bridge the gap between the production and sale of goods, and

A consumer to purchase goods out of future income. Bank and other kinds of credit form part of the

Money supply and have considerable economic importance.

12.7.1.3. Read the text “Credit Guarantee Practice” and translate it in written form.

Credit Guarantee Practice

Credit as an Economic Concept

12.7.1.5. Read the text “Central Banks: Their Powers and Functions.” Enumerate the functions

Performed by different central banks.

All developed and most developing countries have a central bank that is responsible for exercising

Control of the credit system, sometimes under instruction from government and, increasingly often,

Under its own authority. Central banks typically execute policy through their lead role in setting shortterm

Interest rates which they control by establishing the rate at which loans of last resort will be

Made. Some central banks also use other devices to control money supply, such as special deposits.

With an increasing consensus that monetary policy plays an important part in determining aggregate