, 1

 1. Economic Goods and Services.
 People begin to learn about economics when they are still very  young.  At
first they find that they want a lot of but they  couldnt  bye  everything.
There is a big gap between what they want and what they can have.
 Than they discover that there  are  thousands  of  things  they  or  their
parents could buy. Gradually, they settle into  two  major  economic  roles:
consumer and producer.
 Consumer buy goods and services for personal use, not for resale. Consumer
goods are products, such as food, clothing, and cars, that satisfy  people's
economic needs or wants. Some consumer goods, such as food, do  not  last  a
long time. Its perishable goods. Other goods, such as cars  or  VCRs,  last
longer. Services are actions , such as haircutting,  cleaning  or  teaching.
Services are used up at the time they are provided.
 A producer makes the goods or provides the services that consumers use.
 In order to produce something, a person must first have  right  resources.
Resources are the materials from which goods and services  are  made.  There
are three kinds of resources: human (people), natural (raw  materials),  and
capital resources (capital, or the money or property).  No  economy  has  an
unlimited supply of resources. In other words  ,  there  is  a  scarcity  of
 The basic economic questions individuals and nations face are: What  goods
and services will be produced? How will they be  produced  ?  Who  will  get
them ? How much will be produced for now and how much for  the  future?  The
answers to the questions depend on a country's human, natural,  and  capital
resources. Each country will answer 4 questions in a different way.
 2. Opportunity costs. Tradeoffs.
 All production involves a cost. This cost is not counted simply  in  terms
of money but also in terms of resources used.  In  building  a  bridge,  for
example, the real costs of the bridge are the human,  capital,  and  natural
resources it consumes. To  build  a  bridge  requires  the  labour  of  many
people, including engineers and construction workers. The capital  resources
these people use include a variety of tools and machines. Building a  bridge
also requires natural resources.
 Since resources are limited and human  wants  are  unlimited,  people  and
societies must make choices about what they want most. Each choice  involves
costs. The value of time, money, goods and services given  up  in  making  a
choice is called opportunity cost.
 When people make a choice between two possible uses  of  their  resources,
they are making a tradeoff between them.
 Then, society will understand the true costs of making one decision rather
than another, and can make the  decision  that  best  fits  its  values  and
 How can the concepts of opportunity costs and tradeoffs be  used  to  help
explain how the economy works? One way is to construct a simple plan of  the
economy called an economic  model.  The  simple  plan  helps  economists  to
analyse economic problems, seek solutions, and make comparisons between  the
economic model and the real world.
 One of the most important choices a society  makes  is  between  producing
capital goods and producing  consumer  goods.  If  a  nation  increases  its
production of consumer goods, its  people  will  live  better  lives  today.
However, if a nation increases its production of capital goods,  its  people
may live better in the future.
 Since every economic decision requires a choice, economics is a  study  of
tradeoffs. When you analyse each side of a tradeoff,  you  can  make  better
 11. Pricing policies.
 There are two types of pricing policies: to concern price emphasis and  to
emphasize low prices. The  price  emphasis  charge  appropriate  prices,  it
encourages sales, but the low prices dont give extra services (some  people
are interested in low prices and forget about  extra  services).  The  price
determines the number of sales. A good example of  price  emphasis  is  loss
leader pricing. It means that you chose one item and sell it at a  very  low
price. The consumer buys it and decides to buy something  else,  because  he
gets some extra  cash.  There  is  also  off-even  pricing:  it  produces  a
favorable psychological effect (79,99$).
 And now something about de-emphasis: it concerns  high  quality  expensive
items. Consumers dont call attention to the price at all.

 3. Utility and prices.
 Commodities of different kinds satisfy our wants in  different  ways.  For
example: food, car, medicine,  books  satisfy  very  different  wants.  This
characteristic of satisfying a want is  known  in  economics  as  utility.
Utility and usefulness are different things. For example:  a  submarine  may
or may not be useful in time of peace, but it satisfy a want.  Many  nations
want submarine. Economists say that utility is the relationship  between  a
consumer and a commodity.
 Utility  varies  between  different  people  and  different  nations.  For
example: somebody can be a vegetarian and he will be  rate  the  utility  of
vegetable very highly,  while somebody who eats meat can  rate  the  utility
of meat very highly. And about nations: mountain-republic  like  Switzerland
has little interest in submarines while  maritime  nations  rate  then  very
 Utility varies is also in relation of time. For example:  in  wartime  the
utility of bombs and guns is high. Utility of the commodity is  also  depend
from quantity. If paper is freely available, people  will  not  be  so  much
interested in buying too much of it. If there is an  excess  of  paper,  the
relative demand for paper will go down.
 Lets speak about prices.
 Individual cannot change the prices  of  the  commodities  he  wants.  But
theoretical he can do it. For example, if he byes a lot of smth., lets  say
a lot of oil, or somebody discover a lot of  oil,  the  price  of  oil  will
change on the international market.
 Now lets speak about desire.
 The consumers desire for a commodity tends to diminish (/)  as  he
buys more units of it. Economists call this tendency the Low of  Diminishing
Marginal Utility.
 The interaction of buyers and sellers determines the prices for goods  and
services. If the price is too low, a shortage will develop and if the  price
is too high, a surplus will develop.
 In a market economy, prices are the result of the needs of both buyers and
sellers. The sellers will supply more goods  at  higher  prices.  The  buyer
will buy more goods at lower prices. Some prices  is  satisfactory  to  both
buyers and sellers. This price is called an equilibrium price.
 4 Supply and demand.
 In a market economy, the actions of buyers and sellers set the  prices  of
goods and services. The price, in turn, determine what is produced,  how  it
is produced and who will bay it. Supply, the  quantity  of  a  product  that
suppliers will provide, is  the  sellers  side  of  a  market  transaction.
Suppliers usually want the price that allows them to make  the  most  money.
Demand, the quantity of a product consumer want, is  a  buyers  side  of  a
market transaction. Buyers want the price that gives  them  the  most  value
for the least cost.
 The items are sold one at a time, buyers mast quickly decided  what  price
they are willing to pay. Imagine now that you want to buy  electric  popcorn
maker on the auction. In order to get it you will have  to  outbid  all  the
others who want it. New popcorn maker costs about $14 and  you  decided  you
are willing to go as high as $10 but not hire.  At first you look into  your
wallet. Only $5 is there. But you know that you have  $15  on  the  desk  at
home, and you know that your friend  can  lend  you  some  money.  And  what
factors so far have influence you?  You  decision  is  the  result  of  your
tastes, your available cash income, your wealth, your credit. You have  also
had to think of the price of substitutes and the price of related items.
 And on the auction you buy. The cost of popcorn maker is $9.
 The popcorn demand schedule illustrates the low of demand, which indicates
that as the price of an item increases, a smaller quantity will be bought.
 The degree to which changes in price cause changes in quantity demanded is
called elasticity of demand. There are two main kinds of the  elasticity  of
demand, it is highly  elastic  and  inelastic.  Highly  elastic  means  that
demand  changes when the price changes and inelastic means when  people  buy
nearly the same amount even though the price of smth. changes.
 There are two main reasons for elasticity of demand.  The  first  concerns
the relationship between income and the cost  of  the  product.  The  second
reason why demand is elastic concerns whether or not substitute  product  is

 5. Markets and monopolies.
 Whenever people who are willing to sell a commodity contact people willing
to buy it, a market for that commodity is created. Buyers and  sellers  meet
in person, or they may communicate by letter,  by  phone  or  through  their
agents. In a perfect market  there  can  be  only  one  price  for  a  given
commodity: the lowest price which sellers will accept and the highest  which
consumers will pay. Competition influences  the  prices  prevailing  in  the
market. Although  in  a  perfect  market  competition  is  unrestricted  and
sellers are numerous, free competition and large numbers of sellers are  not
always available in the real world. In some markets there may  only  be  one
seller or a very limited number of sellers. Such a  situation  is  called  a
"monopoly". It  is  possible  to  distinguish  in  practice  four  kinds  of
 State planning and central control of the economy often mean that a  state
government has the monopoly of important goods  and  services.  A  different
kind of monopoly arises when  a  country  has  control  over  major  natural
resources or important services.  Such  monopolies  can  be  called  natural
monopolies. Legal monopolies  occur  when  the  law  of  a  country  permits
certain producers, authors and inventors a full monopoly over  the  sale  of
their own products. These types of  monopoly  are  distinct  from  the  sole
trading opportunities. This action is often called  "cornering  the  market"
and is illegal in many countries.
 In the market systems, competition answers the basic  questions  of  what,
how, for whom, and how much. Competition among producers is for the  highest
profits. Competition among consumers is for the best goods and  services  at
the lowest prices.
 In a market economy three basic resources - land, labour and capital - are
bought and sold  for  the  best  price.  Market  for  labour  is  constantly
 6. Economic Growth.
 If you spent all the money you have now, you might be able to buy many  of
the things you want. But you realise that by saving some now, you will  save
more for the future. Societies also must save  some  of  what  they  produce
today in order to  have  more  for  tomorrow.  Every  society  must  produce
capital goods as well as consumer goods to meet future economic needs. Long-
range economic growth depends on the continued production of  capital  goods
(goods used to produce other items).
 Everyone who works contributes to the growth of capital resources. Suppose
you earn $72 a week. Your labour must be valuable enough to earn  more  than
just the money to cover your wages. Your labour may earn your  company  $100
a week. Since you are paid $72, you are helping the company to  collect  $28
a week. Some, or all, of this money  can  be  used  for  capital  resources.
Company can use this money to replace old tools and equipment  for  example.
The manager may decide to replace the old tools, hire more help,  or  expand
the shop.
  In recent years, many people have argued that economic growth is a  mixed
blessing. The advantages of growth are fairly clear. As people produce  more
goods and services, the average standard of living goes  up.  Bat  there  is
some disadvantages: (1) use of natural resources that  cannot  be  replaced,
(2) generation of waste products, (3) destruction of  natural  environments,
(4) uneven growth among different groups in society.
 In the past, growth has allowed poor  people  to  improve  their  economic
conditions. Nevertheless, continuing economic growth at the  pace  of  today
may permanently damage our world,  polluting  air,  land,  and  waters,  and
using up natural resources. Growth, however, sometimes provides solution  to
the problems.
 13 The cost of growth.
 Long-range economic growth depends on producing  capital  goods.  Everyone
who works contributes to the growth of capital resources.  Your  labor  must
be valuable enough to earn more than just the money  to  cover  your  wages.
In recent years many people have argued that  economic  growth  is  a  mixed
blessing. As people produce more goods and services the standard  of  living
goes up. Growth also keeps people employed and earning income.  It  provides
people with more leisure time, since they can decrease their  working  hours
without decreasing their income. But what  are  the  disadvantages:  use  of
natural resources that cant be  replaced,  generation  of  waste  products,
destruction of natural environments, uneven growth  among  different  groups
of society.
 In the past, growth has allowed poor  people  to  improve  their  economic
 So, if our natural, human, capital  resources are overused now to  promote
economic growth, future growth may be much slower.
 Growth, however, provides solutions to the problems.

 7. The nation's economy. GNP. Economic indicators.
 Economists study  different  sides  of  the  economy  in  different  ways.
Microeconomics  is  the  part  of  economics  that  analyses  specific  data
affecting an  economy.  Macroeconomics  is  the  branch  of  economics  that
analyses interrelationships among sectors of the economy.
 Macroeconomists measure gross national product, or GNP, which is the value
of all goods and services produced for sale during one year.  Three  factors
limit the types of products counted.
 First, only goods and services produced during a specific year are counted
Second, economists count a product or a service  only  in  its  final  form.
Third, GNP includes only goods sold for  the  first  time.  When  goods  are
resold or transferred, no wealth is created.
 One way in which economists measure GNP is the  flow-of-product  approach.
Using this method, they count all the money spent on goods and  services  to
determine total value. Each time a new product is sold, GNP increases.
 Spending for products falls into  four  categories.  The  first,  and  the
largest, consumer spending, includes all  expenditures  of  individuals  for
final goods and services. Called  personal  consumption  expenditures,  this
category accounts for  about  65  per  cent  of  GNP.  The  second  category
includes all spending of businesses for new capital goods. It  accounts  for
about 13 % of GNP. The third category includes spending  of  all  levels  of
government. Government purchases of goods and services account for about  21
per cent of GNP. The fourth category is net exports of goods  and  services,
about 1% of GNP.
 Another way of determining GNP is  the  earnings-and-cost  approach.  This
method accounts for alt the money received for the production of  goods  and
services,  it  mea-sures  receipts.  Figuring  gross  national  product   by
counting what people receive requires calculating what  the  entire  country
earns for the goods it makes and  the  services  it  performs.  Included  in
earnings are such things  as  business  profits,  wages  and  salaries,  and
taxes' the government receives for its services. Also counted  are  interest
on deposits, money received as rent, and any other forms of income.
 Business and government planners, investors, and consumers make  decisions
based on their expectations of future economic performance. To help  predict
expansion or contraction of the economy, government economists identified  a
number of indicators. They fall into three categories: leading,  coincident,
and lagging. Leading economic indicators rise or fall just  before  a  major
change in economic activity. Coincident economic indicators change at  about
the same time that  shifts  occur  in  general  economic  activity.  Lagging
economic indicators rise or fall after a change in economic activity.
 Following and interpreting all economic indicators is time-consuming.  The
US Commerce Department,  therefore,  lists  a  composite  index,  or  single
number, for each of the three sets of indicators.  These  composite  indexes
are an average of all the indicators in each category.
  12 The rights of a customer and the responsibilities of a supplier.
 When you buy something from a shop, you are making  a  contract.  But  you
want to make sure if this contract means that it's up to the  shop  to  deal
with your complaints if the goods are  not  satisfactory.  The  first  thing
that comes to your mind is that the goods must not be broken or damaged  and
must work properly. The second thing that you find  important  is  that  the
goods must be as described - whether on the pack  or  by  the  salesman.  It
makes you understand the third principle: The goods should be fit for  their
purpose. This means the purpose for which most people buy  those  particular
goods. If you wanted something for a special purpose,  you  must  have  said
exactly what for.
 Many people think that complaining about faulty goods or  bad  service  is
never easy. Most of them dislike  making  a  fuss.  However,  when  you  are
shopping, it is important to know your rights. You are quite  sure  that  if
the shop sells you faulty goods, it has broken its side of the bargain.  And
that is absolutely right. In this  situation  customer  have  the  right  to
return the goods and have a complete refund.
 At that time if the good is broken and  it  was  your  fault  than  seller
shouldnt return your money to you. Thatll be his right.

 8. Income and Spending.
 Income is the money a person receives in exchange for  work  or  property.
There are five basic types of income:
 1. Employee compensation is the income earned by working  for  others.  It
includes wages and fringe benefits such as health and accident insurance.
 2. Proprietor compensation is the income that self-employed people earn.
 3. Corporation profit is the income corporations have  left  after  paying
all the expenses.
 4.  Interest  is  the  money  received  by  people  and  corporations  for
depositing their money in savings account or lending it to others.
 5. Rent is income from allowing others to use one's property temporarily.
 The total income is the sum of 5 basic types.
 One other type of income is a transfer payment - money one person or group
gives to another, though the receiver has not provided a  specific  good  or
service. For example it can be gifts, inheritances, and aid to the poor  are
three examples of transfer payments.
 Now lets speak about work people. By the type of work  people  do  workers
fall into one of four broad categories.
 1. White collar workers are people who do jobs in offices, for example  as
secretaries, teachers, and insurance agents.
 2. Blue collar workers are people who do jobs in factories or outdoors.
 3. Service workers provide services to other individuals or businesses.
 4. Farmworkers are people who work on their own farms or those of others.
 In the market system a person's income is determined  by  how  the  market
values that person's resources and skills.
 People do a big mistake when they say that   income  is  same  as  wealth.
Wealth is any resource that can be used to produce income.  An  individual's
possessions, such as a house, a car, or a stereo, are part of that  person's
wealth. Each of these could be sold to produce income.
 Now if we want to understand it we have to consider two women who  receive
an income of $25,000 a year. One earns all of her income working at a  bank.
The other  receives  her  $25,000  income  from  dividends  on  stock  worth
$250,000. The second woman is much wealthier than the first women.
 At the end of my presentation I have to say that spending  becomes  income
for someone else.
 9. Making a personal budget.
 When you live in loneliness you understand that something should  be  done
with your unlimited wants and limited resources. You should use your  income
as effectively as possible. Choices must be  made  concerning  spending  and
saving. You never know whether you can afford another outing,  or  a  disco,
or a concert. Than you come to  the  conclusion  that  you  must  develop  a
useful personal budget. And if you want to do it you should  keep  track  of
your actual income and expenses for a month, and, of course,  at  first  you
have to  clear out what should be recorded.
 Money  resources  may  include  allowance,  part-time  jobs,  babysitting,
errands, interest on savings. You must list all sources of  income.  And  it
means that if somebody presented you with a sum of money on an account  with
a bank, so you can rely on interest on savings  and  allowance  have  to  be
 Than you should  record  how  much  you  spend  for  food,  entertainment,
clothing,   college   supplies,   personal   care,    transportation,    and
miscellaneous items. You wonder in which category you spend  the  most,  the
least. You think that you should decide what changes to make in  the  budget
if you want to reduce your expenses.
 You have to understand  that  there  is  some  difference  between  fixed,
optional and flexible expenses. Fixed expenses are set in advance  and  must
be  paid  regularly  (e.g.   rent   payments,   tuition,   higher   purchase
installments).   Flexible   expenses   are   necessary   but   change   with
circumstances (food, clothing, college  supplies).  Optional  expenses  vary
and are not always necessary (entertainment, personal care).
 Thus you  can  compare  your  income  and  expenses.  And  of  course  you
understand if you want to live expenses should not be higher than income.

 10. The value of college education.
 Every year millions of students graduate from high school.  The  decisions
they make will affect the rest of their lives. Some will  choose  to  go  to
college; some will want to get full-time jobs; others will decide to  obtain
technical  job  training.  In  every  case,  economic  reasoning  will  help
students make better choices.
 Everybody  decide to consider the costs and trade-offs  connected  with  a
decision to go to college. And the main questions in this  situation:  Is  a
college education worth  the  expense  in  terms  of  immediate  and  future
personal growth and economic well-being?
 The opportunity costs of going to college involve a loss of income  and  a
loss of practical job experience while attending college. Lets consider  two
mans: The  Education Level  of the first one is less than 12 years  and  his
Projected Lifetime Earnings  is  $850.000;  The   Education  Level   of  the
second one is 5 years  college   and  his  Projected  Lifetime  Earnings  is
$1.500.000. We see a big difference between them.
 The trade-offs involved in going to college include using time  and  money
now to gain greater advantages in the future. But  somebody  think  that  if
you could invest $ 30.000 now, for instance,  forego  a  college  education,
and with your investment returns still have the same lifetime earning  power
as a college. Its of course can be true bat where do  you  get  $30.000  if
you dont have education. Besides nobody give you a job if you  havent  got
education and knowledge. And I am sure that my further  education  is  worth
the time and money involved.
  14 Annual report of a company.
 Just as teachers send out report cards to the  Deans  office  each  term,
corporations issue annual reports summarizing the progress made  last  year.
Stockholders and potential investors use the annual report to  evaluate  the
performance of corporation.
 The annual report  is  a  message  to  the  stockholders-the  owners-of  a
corporation  from  the  corporate   management.   The   report   tells   the
stockholders the companys financial status at the end of  the  fiscal  year
and what the management  sees  for  the  future.  Also,  the  annual  report
fulfils a legal  requirement.  The  Securities  and  Exchange  Commission  a
federal agency  in  the  USA  requires  corporations  to  publish  financial
information about their firm. With  such  information,  investors  can  make
educated decisions.
 Annual reports of company generally are divided  into  two  sections.  The
first  section  contains  a  letter  to  the  stockholders  from  the  chief
executive officer of a company. Accompanying  this  letter  summarising  the
companys performance is a chart of financial  highlights.  Also  frequently
included in the first section is an overview of the companys  organization.
The second section includes statistics on the  companys  performance.  Most
of the information appears in charts and graphs.
 For example, the balance sheet is a chart that includes the assets  (items
of value the company owns) and its liabilities  (debts  or  claims  against
the assets of the company).  The  balance  sheet  represents  the  financial
picture of the firm at the instant in time. The income statement  shows  the
profit or loss of the company for the year. This chart  reports  the  income
the company received from sales, interest, and other sources. The  operating
costs  salaries, advertising, maintenance  deducted from income total  the
profit or  loss.  The  statement  of  stockholders  investment,  or  equity
includes information on  the  companys  stock  such  as  number  of  shares
outstanding and issued.
 Various parts of the annual report can be  used  to  determine  whether  a
company is profitable. In addition to reporting on this current  year,  most
companies include in their annual reports comparisons of  the  current  year
and the prior years financial information. Also important  to  stockholders
and investors is the companys return on sales. For example, if a firm  sold
$1 mln. worth of its products and its profit was $100,000; return  on  sales
would be 10%.
 So we can say that annual reports help us to understand  financial  status
of the firm in the end of the fiscal year and to  make  educated  decisions-
invest in company our capital or not.

 15. Money: history, functions and forms.
 Today we buy bread, clothes with money in a  shop.  These  are  goods:  we
exchange our money for goods which others sell to us. Today we travel  on  a
train or bus. or maintain a banking account, and we pay the charge  or  fee.
These are services: we exchange our money  for  the  services  which  others
provide for us.
 In a primitive community people obtain goods and services by barter. Trade
by barter is the  earliest  form  of  trade,  when  people  offer  goods  in
exchange for what they want, that is they swap goods for other goods.
 As primitive communities  develop  into  more  advanced  societies  people
realize they need some commodity they can  use  in  exchange  for  anything,
some commodity that does not decay  and  remains  valuable,  some  commodity
with the help of which people can measure the value  of  one  thing  against
the value of another thing.  Such  commodity  is  money.  Thus  money  is  a
necessary part  of  any  civilized  society,  ft  serves  as:(1)  medium  of
exchange; (2) a store of wealth; (3) a measure of value.
 Money means coins, banknotes and cash in the bank account. We  use  it  to
make payments. Nowadays we know that the units of money  must  have  certain
qualities to be successful. They must be:
 1. Standard. They must all be of the same kind.
 2. Durable. They must be strong and long-lasting, so that they are a store
of value and do not wear out easily.
 3. Scarce. They must be difficult to come by to keep their value.
 4. Acceptable. They must be accepted as a medium of exchange in a.
 5. Portable. They must be easy to carry.
 6. Divisible. It must be possible to divide the units of  money  of  large
value into smaller values.
 In the past many things were used as the medium of exchange  corn,  furs,
rice, tobacco, salt tea, rum  there is no  end  to  them.  In  time  people
realized that metals were superior to the commodities previously  mentioned.

 The Ancient Britons and Greek  used  iron,  the  Romans  used  copper  but
gradually silver and gold replaced them.
 The advent of coinage is a step forward because coins are free  from  most
of the disadvantages  of  earlier  forms  of  money.  The  first  coins  are
credited to China around about 1.000. B.C.
 After coins came notes. The hardest problem for anyone with money then was
to find somewhere safe to keep it. Gold and silversmiths had safes,  because
their trade was traffic in coin  and  bullion,  and  they  needed  somewhere
secure to keep their stocks.
 So it came about in the seventeenth century that  goldsmiths  took  theses
deposits for safe keeping. They issued a receipt. More and more people  come
to hold  these  receipts  and  they  began  to  circulate  for  value  among
merchants. They come to be trusted and become usual in payment,  as  easier,
lighter and quicker to handle than a lot of coin.
 In the beginning people had to pay a fee for having money kept safe.  Then
goldsmith understood that some of his receipts were always out,  circulating
in the hands of the merchants.  So the goldsmith always  had  some  cash  in
hand, and he started to lend this out. This was the beginning of banks.

 16. The Bank of England.
 c) keeps accounts for overseas central banks
 The first and most important function of a central bank is to  advise  the
government on the making of the country's financial policy and then help  to
carry it  out  which  means  carefully  monitoring  the  money  supply.  Its
business at first was to receive money on deposit, discount  approved  bills
of exchange and lend against satisfactory security. At  first  this  lending
was nearly all to the government, and gradually the  Bank  came  to  perform
other services on behalf of the government, and so  to  become  regarded  as
'banker to the government'.
 Then The Bank of England was empowered to open country branches.
 From the time of its  foundation  the  Bank  had  strong  links  with  the
government and these strengthened over the centuries until in  1946  it  was
nationalised and became publicly owned.
 The Bank of England is controlled by a Court of Directors  similar  to  a
board of directors  running  a  large  public  company    made  up  of  the
Governor, the Deputy Governor and sixteen directors. They are all  appointed
by the Crown.
 As the central bank of the United Kingdom, the Bank of England:
  Implements the monetary  policy  of  the  government.  It  decides  what
percentage of bank deposits is held as cash,  and  what  percentage  may  be
  Acts as banker to the government. It administers  exchange  control  and
keeps the nation's gold and foreign currency reserves. The  Bank  keeps  the
government's banking accounts, manages the accounts  and  funds  of  various
governmental departments.
  Acts as banker to the deposit banks. It  keeps  the  accounts  of  other
  Acts as lender of last resort to the discount houses.
 Has about 90 accounts for overseas central banks.
 19. Types of bank services.
 Banks are among the most important financial institutions in  the  economy
that produce and sell financial services. Banking covers  so  many  services
that it is difficult to define it. Both  types  of  banking,  however,  have
three essential functions. They are:
 Deposit  functionreceiving  customers  deposits  and  offering  interest-
bearing deposits.
 Payments function  making payments  on  behalf  of  customers  for  their
purchases of goods and services.
 Credit functiontending and investing money. There  are  some  traditional
services that banks offer.
 Carrying out currency exchange. In today's financial  marketplace  trading
in foreign currency is usually carried out  by  the  largest  banks  due  to
currency risk and the expertise needed to carry out cash transactions.
 Safekeeping of valuables. During the Middle Ages, banks began the practice
of holding gold, securities, and other valuables owned  by  their  customers
in secure vaults. Customers still leave articles  of  value,  locked  boxes,
wills, and many other things in bank strong rooms for safety.  The  customer
should lock boxes and seal parcels before he hands them in to the bank.  The
banker will issue a receipt if so required. The banker hands them back  only
against a signature by his customer or a properly-appointed agent  whom  the
bank knows.
 Trust services. This  property  management  function  is  known  as  trust
services. Most banks offer both personal trust services to  individuals  and
families  and  commercial  trust  services   to   corporations   and   other
 Among the newest services offered by banks are:
 Financial  Advisingcustomers  have  long  asked  for  financial   advice,
particularly, when it comes  to  the  use  of  credit  and  the  saving  and
investing of funds.
 Cash Managementover the years banks have found that some of the  services
they provide for themselves are also valuable for their customers.
 Setting Insurance Policiesmost  banks  either  offer  selected  insurance
policies to their customers or have plans to  offer  insurance  services  in
die near future.
 Offering Security Brokerage Servicesin today's financial marketplace many
banks are doing their best to become  true  "financial  department  stores.
This is one of the main reasons banks began  to  market  security  brokerage
services in the 1980s, offering  their  customers  the  opportunity  to  buy
stocks, bonds, and other securities without security dealers or brokers.
 It should be clear from the list of services described  that  the  changes
affecting the banking business today are so  important  that  many  industry
analysts refer to current trends as "a banking revolution".

 17. Banking in the US.
 Banking services were associated with the Gold Rush. The first gold strike
occurred in California in 1848. In the wake came the  problems  of  carrying
mail and gold dust over hundreds  of  miles.  A  concern  called  Adams  and
Company opened its office in San Francisco  in  1849.  The  express  company
received the miner's gold for the pose of shipment.  It  weighed  the  gold,
gave a receipt for it and assumed responsibility for its  safety.  Thus  the
express companys iron safe became  the  local  bank.  About  this  time  in
Sacramento a group also opened a bank. There were three  clerks,  all  armed
with Colt revolvers and knives, and the banking hours were from six  in  the
evening until ten at night. It was in 1852 that  Wells  Fargo   and  Company
was born. In the July of  that  year  two  of  its  senior  men  arrived  in
California, one to be responsible for the express service the other for  the
banking. The  company  forwarded  packages,  parcels  and  freights  of  ail
descriptions between New York and San Francisco,  purchased  and  sold  gold
dust, bullion and bills of exchange. It also attended  to  the  payment  and
collection of notes, bills and accounts.
 It was very different from the goldsmiths and their  notes.  And  yet  the
basic functions  of  providing  security,  accepting  deposits,  paying  and
collecting bills, were exactly the same. All that  has  happened  since  has
been only a development of these basic functions.
      At present the Federal Reserve System is the core  of  the  country's
financial institutions, payment  processes,  markets  and  instruments.  The
system has four basic functions:
  (I) influencing the supply of money and credit,
  (2) regulating and supervising financial institutions,
  (3) serving as a banker and fiscal agent for the government
  (4) supplying payments and services  to  the  public  through  depositary
 The system is an  unusual  system  of  public  and  private  elements  and
centralized  and  decentralized  components.  At  the  head  of  its  formal
organization is the Board of Governors,  located  in  Washington,  D.C.  The
seven members of the board appointed for  14-year  terms  by  the  President
with the advice and concent of  the  Senate.  At  the  next  level  are  the
regional Federal Reserve Banks. The Reserve Banks are not profit  motivated.
Instead their policy is based on the System's estimates of the needs of  the
economy. The organization of the  System  also  includes  The  Federal  Open
Market Committee. It is the most important money policymaking  body  because
it exercises broad control over the growth Of the nation's money supply.  It
also has charge of the  System's  Operations  both  in  domestic  securities
market and in foreign Exchange markets. Two-fifths of the 12.600  commercial
banks in the US belong to the System. National banks must be members; state-
charted banks may join if they meet certain requirements. Each  member  bank
holds 3 percent of its capital as stock in its Reserve  Bank.  About  25.000
other  depositary  institutions  provide  American   people   with   banking

 18. Types of banks.
 Now there are only a few banks, each with many branches in  Great  Britain
(the Big Six  Barclays, Coutts, Lloyds, Midland, National  Westminster  and
Williams and Glyns). They are clearing banks, i.e. they have a seat  in  the
Clearing House. This is an arrangement for a quick  settlement  of  payments
between different banks. Those banks without a seat in  the  Clearing  House
get their cheques cleared by a bank which has, acting as an agent.  Clearing
is the process whereby the amount  of  a  cheque  is  transferred  from  the
drawer's bank to the payee's bank. The clearing banks have many  competitors
in different sections of their business. These rival bodies want to  collect
and use the public's savings for different purposes.
 Merchant banks carry on a great variety of business,  and  each  tends  lo
specialize  in  certain  activities  or  in  transactions  with   particular
countries. Some activities, however, are basic to all  of  them.  These  are
deposit banking, underwriting, and the management of client funds.
 The National Giro is a nationally owned scheme for the  fast  transfer  of
payments through post offices.
 One big drawback to the service provided by  the  clearing  hanks  is  the
restricted hours during which they are open to the public. This led  to  the
establishment of money shops.
 The accent is on the lending and  not  all  money  shops  provide  current
account facilities,  although  some  do;  but  attention  is  given  to  the
provision of  personal,  home  improvement  and  mortgage  loans,  life  and
general insurance facilities, investment advice, and savings accounts.
 Similar lo them are money shops in chain stores, open where the  store  is
open  the in-store banks. Of these the most numerous  are  those  of  the
Cooperative Bank, which set up nine 'handybanks' in the Birmingham area  and
hopes that within two years there will be 500 of  these  banking  points  in
Cooperative stores around the country. Such  a  handyhank  gives  facilities
for cashing cheques, depositing money, ordering travel  cheques,  etc.,  and
it is open all day Saturday.
 20. The company's structure and development on the basis of  "Harper  and
Grant Ltd."
 The company of Harper & Grant Ltd. was  started  forty-two  years  ago  by
Ambrose Harper and Wingate Grant. Wingate Grant died  many  years  ago,  and
his son Hector  is the present Managing  Director.  Ambrose  Harper  is  the
Chairman. He is very old man and he  comes to attend the board meetings  and
keep an eye on the business.
 The company started by making steel wastepaper  bins  for  offices.  These
wastepaper bins are more safer than the old type of basket made of  cane  or
straw. Wingate Grant captured a big contract with government offices.
 From wastepaper bins, Harper & Grant began to manufacture other  items  of
office equipment: desks, chairs,  cupboards,  filing  cabinets  and  smaller
objects, such as filing trays, stapling machines and so on, until  now  when
there are fifty-six different items listed in  their  catalogue.  All  items
are made of pressed steel.
 The factory consists of. These are  divided  into  the  Tool  Room,  Works
Stores, Press Shop, Machine Shops, Assembly Shop,  Paint  Shop,  Inspection,
Packing and Despatch Departments. There is also the Warehouse.
 The firm has  a  history  of  slow,  steady  growth.  But  Peter  Wiles  -
Production Manager, and John Martin - Sales Manager think that  they  should
be more adventurous. They  want  modernising  a  business  by  using  modern
things to run a business such  as  electronic  data  processing,  Discounted
Cash  Flow,  budgetary  control,  corporate  planning,   P.E.R.T.   (Project
Evaluation and Review Technique), automation, etc.   Harper  &  Grant  Ltd.,
like their rivals, must get right up-to-date and enlarge their business,  or
they will be outpaced by a firm whose business organisation is  better  than
their own.

 11. Pricing policies.
 Everybody, who wants to start his own business, must know, that its  very
important to attract the customers. There  are  many  ways  to  do  it.  For
example, to introduce new items of goods.
 Economists say that the most important thing for sellers is to charge  the
appropriate price for goods. There are two types of  pricing  policy:  price
emphasis(               )   and   price    de-
emphasis(   - - ).
 Price emphasis policy emphasizes low prices. And this encourages sales. We
must know that it has a weak point,  because  this  policy  doesnt  provide
extra services. But it let  sellers  get  more  money,  because  this  price
determines a big number of sales.
 A good example of price emphasis is loss leader pricing. It means that a
seller chooses one item and sells it at very low price. There is  also  off-
even pricing or odd-pricing.
 Businessman must start with specially low prices in order to compete  with
well-known goods. He can raise the price when his customers  get  accustomed
to a new brand, and they will continue to buy it.
 Next type of pricing policy  (price  de-emphasis)  concerns  high  quality
expensive items.  Seller  doesnt  call  attention  to  the  price  at  all.
Sometimes when the price rises, it convince some customers that the  product
must be of high quality, or will soon become very hard to get. And this  may
increase sales.
  12 The rights of a customer and the responsibilities of a supplier.
 Many people think that complaining about faulty goods or  bad  service  is
never easy. Most of them dislike  making  a  fuss.  However,  when  you  are
shopping, it is important to know your rights.
 When you buy something from a shop, you are making  a  contract.  But  you
want to make sure if this contract means that it's up to the  shop  to  deal
with your complaints if the goods are  not  satisfactory.  The  first  thing
that comes to your mind is that the goods must not be broken or damaged  and
must work properly. The second thing that you find  important  is  that  the
goods must be as described - whether on the pack  or  by  the  salesman.  It
makes you understand the third principle: The goods should be fit for  their
purpose. This means the purpose for which most people buy  those  particular
goods. If you wanted something for a special purpose,  you  must  have  said
exactly what for.
 You are quite sure that if the shop sells you faulty goods, it has  broken
its side of the bargain. And that is absolutely  right.  In  this  situation
customer have the right to return the goods and have a complete refund.
 At that time if the good is broken and  it  was  your  fault  than  seller
shouldnt return your money to you. Thatll be his right.
 There are four golden rules:
 Examine the goods your buy at once. If there are faulty, tell  the  seller
 Keep any receipts you are given. If you  have  to  return  something,  the
receipt will help to prove where and when you bought it.
 Dont be afraid to complain. You are not asking a favour  to  have  faulty
goods put right. The law is on your side.
 Be  persistent.  If  your  complaint  is  justified,  it   is   somebodys
responsibility to put things right.
 13 The cost of growth.
 Long-range economic growth depends on producing  capital  goods.  Everyone
who works contributes to the growth of capital resources.  Your  labor  must
be valuable enough to earn more than just the money  to  cover  your  wages.
In recent years many people have argued that  economic  growth  is  a  mixed
 One of the advantages of economic growth is the creation of new jobs. Some
people have jobs that did not exist 20 years ago. Part of them  makes  their
living  operating  the  computers.  Millions  of  workers  have  jobs   that
computers have made easier.
 However, the introduction  of  computers  spelled  unemployment  for  many
workers, for example for typesetters. It also cut the managers stuff,  make
the management easier. Unemployment is the most undesirable  consequence  of
economic growth.
 Unemployment causes social and economic problems.  Those  who  lost  their
jobs can hardly ever find new full-time job with a good wage.  Many  of  the
workers take jobs delivering flowers, polishing  glass,  stock-clerking,  or
driving taxes. Others do such odd jobs as painting and home repairs to  earn
income. Some of them try retraining programs, but find  that  employers  are
reluctant to hire older, experienced persons as beginners.
 Retraining in new skills is only one solution to the problem,  and  not  a
simple one. Retraining is more useful to the young than to the old.

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