Demand tight money velocity of money

At odds near-monies deplete

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1. People might respond to a... policy by quickly converting... in their

mutual fund accounts or other liquid financial investments to money

in their checking accounts.

2. Bank reserves would then not fall as intended by the Fed, the interest

rate would not rise, and... might not change.

3. Total expenditures may be regarded as the money supply multiplied

by the... — the number of times per year the average dollar is spent on

goods and services.

4. Statements by the Fed that it intends to increase the... suggest

a "tighter" monetary policy is coming.

5. Such added spending is obviously... with the Fed's effort to restrict....

6. If pursued vigorously,... can... commercial banking reserves to the

point where banks are forced to reduce the volume of loans.

7. The Open Market Committee of the Federal Reserve System can buy

or sell securities on a daily basis and thus affect the... and interest

rates almost immediately.

Unit 6

Text. Translate the text consulting your dictionary.

SWAP

In finance, a swap is a derivative in which counterparties exchange cash flows of one party's financial instrument for those of the other party's financial instrument. The benefits in question depend on the type of financial instruments involved. For example, in the case of a swap involving two bonds, the benefits in question can be the periodic interest (or coupon) payments associated with the bonds. Specifically, the two counterparties agree to exchange one stream of cash flows against another stream. These streams are called the legs of the swap. The swap agreement defines the dates when the cash flows are to be paid and the way they are calculated. Usually at the time when the contract is initiated at least one of these series of cash flows is determined by a random or uncertain variable such as an interest rate, foreign exchange rate, equity price or commodity price.

The cash flows are calculated over a notional principal amount. Contrary to a future, a forward or an option, the notional amount is usually not exchanged between counterparties. Consequently, swaps can be in cash or collateral. Swaps can be used to hedge certain risks such as interest rate risk, or to speculate on changes in the expected direction of underlying prices.

Swaps were first introduced to the public in 1981 when IBM and the World Bank entered into a swap agreement.Today, swaps are among the most heavily traded financial contracts in the world: the total amount of interest rates and currency swaps outstanding is more thаn $347 trillion in 2010, according to Bank for International Settlements (BIS).

Swap market. Most swaps are traded over-the-counter (OTC), "tailor-made" for the counterparties. Some types of swaps are also exchanged on futures markets such as the Chicago Mercantile Exchange Holdings Inc., the largest U.S. futures market, the Chicago Board Options Exchange, IntercontinentalExchange and Frankfurt-based Eurex AG, etc.

Ex.1. Take one word from the left-hand clumn and one from the right to complete each of the following sentences.