Economic growth is a plus, but, like all good things, it's best not to have too much at once. If the economy grows too rapidly, the result can be inflation. Steady growth is best, and governments use fiscal and monetary policy tools to achieve this. For example, they set interest rates in order to control borrowing and investment. However, the government can't just state, 'today's interest rate is four per cent' and expect all the other banks to follow. As usual, things are a bit more complicated!

The interest rate is not really set by the government at all, but by the levels of demand and supply of money in the money market. Imagine that money is like any other commodity, and the price of money is the interest rate. Banks can charge any interest rate that customers are willing to pay. If there is a limited amount of money available, the suppliers (the banks) will charge a higher price (the interest rate) as demand for money increases. Demand comes from the public who want to spend money to buy things and from businesses who want to invest money in order to grow. Just like other commodities, demand for money will fall as the price (interest rate) rises. The interest rate will be set by the market. It will be where the demand and supply curves meet - the equilibrium point. You can see this relationship shown in figure 1 on page 78.

Also, just like other markets, there can be shifts in the demand and supply curves. When shifts happen, the equilibrium point (the interest rate that is set) changes. This new interest rate may be above or below the government's target. What can they do about it? One thing they can do is to influence the supply of money in the market.

What exactly is the money supply and how can the government influence it? Obviously, the money supply includes all the notes and coins in purses, pockets and cash tills. Some of this money will be money that has been borrowed from banks, so loans form part of the money supply too. The supply also includes money that people and companies have in bank accounts, and the money that banks have in their reserve accounts in the central government bank.

Remember that banks lend most of the money that customers deposit. When customers want to make withdrawals, the bank takes cash from its reserve account with the central government bank. If the commercial bank has a shortage of cash in its reserve account, it is obliged to borrow from the central bank. When a commercial bank borrows from the central bank, it must borrow at the government's rate of interest. This is how the government can influence the interest rate equilibrium point of the market.

However, the government needs to ensure that at the end of each day the commercial banks have a shortage of cash. And, of course, they have ways of doing this!

Переведите на английский язык:

1.    Слишком быстрые темпы экономического роста могут вызвать инфляцию. Более предпочтителен устойчивый рост, на который нацелена как кредитно-денежная, так и налогово-бюджетная политика.

2.    Процентная ставка определяется уровнями спроса и предложения на денежном рынке.

3.    Денежная масса — это деньги в обращении, включающие наличность, деньги на счетах, резервы и т. д.

4.    Не контролируемые правительствами события, такие как войны, природные бедствия и пр., могут повлиять на экономику неожиданным образом.

5.    Нарушения экономического равновесия, вызванные со стороны спроса, могут происходить в странах, сильно зависящих от экспорта.

6.    Нарушения экономического равновесия могут происходить как со стороны спроса, так и со стороны предложения. Они могут иметь «эффект домино» для национальной экономики или экономики других стран.

7.    При нарушении равновесия со стороны предложения происходит нарушение поставок сырья или комплектующих, а при ограниченных запасах товара растёт его цена, а также растут переменные издержки производителей и их цены.