Методические указания по развитию навыков чтения и устной речи по специальности для студентов ОЗО 2 курса экономического факультета

МИНИСТЕРСТВО ОБРАЗОВАНИЯ РОССИЙСКОЙ ФЕДЕРАЦИИ РОСТОВСКИЙ ГОСУДАРСТВЕННЫЙ УНИВЕРСИТЕТ КАФЕДРА АНГЛИЙСКОГО ЯЗЫКА ГУМАНИТАРНЫХ ФАКУЛЬТЕТОВ

Методические указания по развитию навыков чтения и устной речи по специальности для студентов ОЗО 2 курса экономического факультета.

Ростов-на-Дону 2000 г.

2 Методические указания обсуждены и утверждены на заседании кафедры английского языка гуманитарных факультетов РГУ. Протокол № 2 от 15.09.2000 г. Составитель: ст. преп. Андреева Л.Л. Ответственный редактор: ст. преп. Тукодова М.М.

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Методическая Записка Данные методические указания предназначены для студентов II курса экономического факультета ОЗО. Целью методических указаний является развитие умений чтения и устной речи на материале текстов профессионального характера. Текстовой материал подобран из оригинальной литературы и учебных изданий. Методические указания состоят из 8 разделов и глоссария экономических терминов. Каждый раздел включает текст для чтения и ряд заданий к нему. Целью заданий является расширение запаса активной лексики по специальности, а также развитие навыков поиска информации и формирование речевых умений в сфере профессионального общения. Глоссарий представляет собой список экономических терминов, которые встречаются в текстах, с объяснениями на английском языке.

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UNIT 1. 1.1.

Practise the pronunciation of the following words: major (adj) – mercantilists (n) – physiocrats (n) – compete (v) – achieve (v) – favorable (adj) – exceed (v) – excess (n) – increase (v) – increase (n) – measure (n) – hoard (n) – acquire (v) – manufacture (v) – argument (n) –

1.2. 1. 2. 3. 4.

Read the text and answer the following questions: What two groups are discussed? How were they different from each other? What is a "favorable balance of trade"? What is "laissez faire" and with which group is the term associated? The First Modern Economists

The Mercantilists. Between the 16th and 18th centuries the major countries of Europe believed in the economic theory of mercantilism. Mercantilists argued that nations should behave as if they were merchants competing with one another for profit. Accordingly, governments should support industry by enacting laws designed to keep labor and other production costs low, and exports high. In this way the nation could achieve what was called a “favorable balance of trade”. “Favorable balance of trade” described a situation in which exports exceeded imports. The excess, which was like profits to a merchant, would result in an increase in the nation’s supply of gold or silver. And, as most people agreed in those days, the true measure of a nation’s wealth was its hoard of gold or silver.

5 To achieve favorable trade balances, the major European powers sought to acquire colonies. Colonies, it was thought, could provide the “mother country” with cheap labor, raw materials and a market for its manufactured goods. In an effort to attain these goals in their American colonies, the British, for example, enacted the Navigation Acts. The Navigation Acts protected British industry by prohibiting the colonies from producing certain goods like hats, woolen products and wrought iron. The laws also listed certain “enumerated articles" (mostly raw materials), which could not be sold by buyers in countries other than England. Resentment towards the Navigation Acts was so great that they are regarded as one of the principal causes of the Revolutionary War. Today there are people who still argue that their country should promote a “favorable balance of trade”, that their national government should do what it can to restrict imports and promote exports. For that reason, they are often described as neo-mercantilists or “new” mercantilists. The Physiocrats. For one group of the 18th – century French philosophers and economists, the suggestion that the nations should go out of their way to protect business and industry made no sense at all. These were the physiocrats. The physiocrats argued that the products of agriculture and other natural resources were the true source of wealth. Since these were God-given, it made little sense for government to go out of its way to help business and industry increase profits. For similar reasons, they opposed government efforts to promote a “favorable balance of trade”. In other words, since real wealth came from the land, it followed that the wisest thing government could do would be to keep its hands off business and let nature take its course. This idea was expressed in the slogan “laissez faire” (let people do as they choose). Interestingly, the 200-year-old argument between those favoring regulation of the economy and those supporting laissez faire is still with us. Whether the problem involves individuals (like those living in poverty and unemployment) and institutions (such as a rising tide of business or bank failures), there are those who find the solution in government intervention, and others who favor “laissez faire”, letting natural economic forces take their course. 1.3.

Find in the text the English equivalents of the following expressions:

Соревноваться друг с другом за прибыль, вводить законы, издержки производства, активный торговый баланс, экспорт превышает импорт, показатель богатства нации, промышленные товары, достичь цели, запрещать колониям производить определенные товары, одна из основных причин, ограничить импорт и стимулировать экспорт, постараться изо всех сил, истинный источник богатства, природные ресурсы, повышать прибыли, вмешательство правительства.

6 1.4. 1. 2. 3. 4. 5. 6. 7. 1.5.

Match the words from the text with their definitions: to enact wealth profit increase to exceed to restrict to promote

a. money, gained by business b. to keep within limits c. a large amount of money and possessions d. to be greater than e. a rise in amount, numbers, etc. f. to make or pass a law g. to help actively, to support

1.5. Complete the sentences bellow with the words from the text:

1. The British government …….a number of laws to support its economy. 2. Mercantilists believed that the true …… of a nation’s wealth was its … of gold or silver. 3. The colonies ……Britain with cheap labor and raw materials and were a market for its … . 4. Britain used … of its colonies to gain large … . 5. Last year export … import, and the country achieved … . 1.6. Are the following statements true or false? If they are false, correct them. 1. The economic theory of mercantilism appeared in the 19th century. 2. Mercantilists agreed that a “favorable balance of trade” was the source of a nation’s wealth. 3. Major European powers sought to acquire colonies to get markets for their manufactured goods. 4. British colonies could sell raw materials to all European countries. 5. The ideas of mercantilists were forgotten long ago. 6. Physiocrats supported the idea that nations should go out of their way to protect business and industry. 7. The ideas of physiocrats were expressed in the slogan “laissez faire”, which means government intervention into economy. 1.7. Translate the following sentences into English: 1. Меркантилисты считали, что богатство нации может быть достигнуто активным торговым балансом. 2. Колонии давали европейским державам дешевую рабочую силу, сырье, и служили рынками для промышленных товаров. 3. В 16-18 вв. показателем богатства нации был ее запас золота и серебра. 4. По мнению нео-меркантилистов национальное правительство должно ограничивать импорт и способствовать увеличению экспорта.

7 5. Физиократы доказывали, что истинным источником богатства нации является сельское хозяйство и природные ресурсы. 6. Некоторые экономисты поддерживают идею физиократов, что правительство не должно вмешиваться в экономику. 1.8. Divide the text into logical parts. Express the main idea of the whole text and of its parts. 1.9. Give the summary of the text. UNIT 2 2.1. Practise the pronunciation of the following words: associate (v) – influential (adj) – efficient (adj) – circumstances (n) – consumer (n) – competitor (n) – exert (v) – advantageous (adj) – interference (n) – guide (v) – machinery (n) – 2.2.

Read the text and answer the questions:

1. With which group are Adam Smith’s ideas most in agreement: the mercantilists or the physiocrats? 2. What is another term for Smith’s invisible hand? How does it operate in a nation’s economy? ADAM SMITH AND THE WEALTH OF NATIONS 1776, the year that Americans associate with the singing of the Declaration of Independence, also marked the publication in England of one of the most influential books of our time, The Wealth of Nations. Written by Adam Smith, it earned the author the title “The father of economics”. Smith objected to the principal economic beliefs of his day. He differed with the physiocrats who argued that land was the only source of wealth. He also disagreed with the mercantilists who measured the wealth of a nation by its money supply, and who called for government regulation of the economy in order to promote a “favorable balance of trade”.

8 In Smith’s view, a nation’s wealth was dependent upon production, not agriculture alone. How much it produced, he believed, depended upon how well it combined labor and the other factors of production. The more efficient the combination the greater the output, and the greater the nation’s wealth. The heart of Smith’s economic philosophy was his belief that the economy would work best if left to function on its own without government regulation. In those circumstances, self-interest would lead business firms to produce only those products that consumers wanted, and to produce them at the lowest possible cost. They would do this, not as a means of benefiting society, but in an effort to outperform their competitors and gain the greatest profit. But all this self-interest would benefit society as a whole by providing it with more and better goods and services, at the lowest prices. To explain, why all society benefits when the economy is free of regulation, Smith used the metaphor of the “invisible hand”. The “invisible hand’ was Smith’s name for the economic forces that we today would call supply and demand, or the marketplace. He sharply disagreed with the mercantilists who, in their quest for a “favorable balance of trade”, called for regulation of the economy. Instead, Smith agreed with the physiocrats and their policy of “laissez faire,” letting individuals and businesses function without interference from government regulation or private monopolies. In that way, the “invisible hand” would be free to guide the economy and maximize production. The Wealth of Nations goes on to describe the principal elements of the economic system. In a famous section, Smith turned to the pin industry to demonstrate how the division of labor and the use of machinery increased output. “One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifths grinds it at the top for receiving the head; to make the head requires two or three distinct operations… “. Although modern technology has improved the methods by which pins are produced, the principles pertaining to the division of labor remain unchanged. Similarly, other sections dealing with the factors of production, money and international trade are as meaningful today as when they were first written. Smith’s The wealth of Nations contains some of the best descriptions of the principles upon which the economic system of the United States is based. 2.3. Find in the text the English equivalents of the following expressions: Одна из самых влиятельных книг, основные экономические убеждения, единственный источник богатства, денежный запас, призывать к государственному регулированию, факторы производства, выпуск продукции, работать самостоятельно, производить товары по наиболее низким ценам, приносить пользу обществу; делать лучше, чем конкуренты; получать наибольшую прибыль, свободный от регулирования, предложение и спрос, увеличивать до предела производство, разделение труда.

9 2.4.

Match the words from the text with their definitions:

1. to exert 2. commodity 3. consumer 4. to benefit 5. to function 6. to maximize 7. to interfere 8. to improve 2.5.

a. to make an effort b. a person who buys and uses goods and services c. to get in the way d. an article of trade e. to operate f. to make better g. to increase to greatest amount h. to be useful, profitable or helpful

Complete the sentences below with the words from the text:

1. At the time of A. Smith people believed that the wealth of a nation was measured by its … … . 2. Smith thought that economy would … best without government regulation. 3. Business firms and individuals exert themselves to outperform their … and gain greater … . 4. Society … when the economy is free of regulation, because better goods and services are provided at lowest … . 5. Smith demonstrated how … of … and the use of machinery increased … . 2.6.

Are the following statements true or false? If they are false correct them.

1. Smith agreed with he physiocrates that land was the only source of wealth. 2. Smith was against government regulation of the economy in order to promote a favorable balance of trade. 3. In Smith’s view, a nation’s wealth was dependent upon the combination of labour and other factors of production. 4. Business firms produce only those products that consumers want as a means of benefiting society. 5. The “invisible hand” was the name for the economic forces of the market given by mercantilists. 6. The principle elements of the economic system have changed since the time of A. Smith. 2.7.

Translate the following sentences into English.

1. Богатство нации зависит от производства, от того, как сочетаются труд и другие факторы производства. 2. Чем больше выпуск производства, тем больше богатство нации.

10 3. Производители, пытаясь опередить конкурентов и получить большую прибыль, производят товары по наиболее низким ценам. 4. Экономические силы, которые называются “предложение” и “спрос” управляют экономикой. 5. Смит поддерживал физиократов в том, что предприятия должны работать без вмешательства правительственного регулирования. 6. Смит продемонстрировал, как разделение труда и использование станков повышает выпуск продукции. 2.8.

Divide the text into logical parts. Express the main idea of the whole text and its parts.

2.9.

Give the summary of the text.

UNIT 3 3.1. Practise the pronunciation of the following words: quantity (n) – negotiate (v) – previously (adv) – occur (v) – consequence (n) – available (adj) – determine (v) – 3.2. Read the text and answer the questions: 1. What is a free market system? 2.How do producers know what goods to make? 3.How does price influence production? 4.How are prices determined? HOW FREE MARKETS WORK A free market system is one in which decisions about what to produce and in what quantities are decided by the market, that is, by buyers and sellers negotiating prices for goods and services. You and I and other consumers send signals to tell producers what to make, how many, in what color, and so on. The way we do that is by going to the store and buying products and services. For example, if all of us decided we wanted

11 more fish (rather than red meat), we would signal fishermen to catch more fish. The message is sent by the price. As the demand for fish goes up, the price goes up as well, because people are willing to pay more. Fishermen notice this price increase and know they can make more money by catching more fish. Thus, they have the incentive to get up earlier and fish later. Furthermore, more people go fishing. These are people who previously couldn’t make a profit fishing but now can because of the higher price. The kind of fish they go for depends on the kind of fish we prefer (requests in the store). The same process occurs with all products. The price tells producers how much to produce. As a consequence, there is rarely a long-term shortage of goods in the United States. If anything were wanted but not available, the price would tend to go up until someone would begin making that product or sell the ones they already had, given free markets. How Prices are Determined The discussion about supply, demand, and pricing is an important part of microeconomics. It illustrates the fact that prices are not determined by sellers. Rather, they are determined by buyers and sellers negotiating in the marketplace. A seller may want to receive $10 a pound for fish, but the quantity demanded at that price may be quite low. The lower the price the fisherman can charge, the higher the quantity demanded is likely to be. Many more people can and will buy fish at $1 a pound than at $10 a pound. How is a price determined that is acceptable to both buyers and sellers? The answer is found in the economic concepts of supply and demand. 3.3. Find in the text the English equivalents of the following expressions: Договариваться о ценах на товары и услуги, покупатели сигнализируют, спрос на рыбу, повышение цены, зарабатывать больше денег, стимул, получать прибыль, зависеть от, подобный процесс происходит, в результате, долговременная нехватка, недоступный, иметь тенденцию к повышению, в условиях свободной торговли, ценообразование, цены определяются, требуемое количество. 3.4. Find in the text the words which correspond to the following definitions: 1. 2. 3. 4. 5.

an encouragement to greater activity an amount of money for which a thing is sold or bought a place where buyers and sellers come together a condition of having less than needed to try to come to an agreement

12 3.5. Complete the following sentences with the verbs and nouns, denoting upward and downward movements, from the list below: Verbs: Increase, rise, go up, raise Decrease, fall, drop, go down, decline, reduce Nouns: An increase, a rise A decrease, a fall, a drop, a decline, a reduction 1. 2. 3. 4. 5.

The price of rice has … as a result of bad weather conditions. Last year the sales of the company … greatly. Many new companies entered the market and there was a 10% … in prices. Some governments fear the … in Japanese investment in Europe. The … in profits is the result of bad management.

3.6. Are the following statements true or false? If they are false correct them. 1. Under a free market system all decisions are made by sellers. 2. Going to the store and buying products and services, we signal producers what to make. 3. As the demand for the product goes up, the price reduces. 4. The price increase is an incentive for the producers to make more products. 5. Long-term shortage of goods often occurs under a free market system. 3.7. Translate the following sentences into English. 1. Продавцы и покупатели ведут переговоры на рынке о ценах на товары и услуги. 2. Покупая товары и услуги, потребители дают знать производителям, что производить и в каком количестве. 3. Если спрос на товар увеличивается, то растет и его цена, так как люди готовы заплатить больше. 4. В США не бывает длительной нехватки товаров. 5. Чем ниже цена на товар, тем больше спрос на этот товар. 3.8. Divide the text into logical parts. Express the main idea of the whole text and its parts. 3.9. Give the summary of the text.

13 UNIT 4 4.1. Practise the pronunciation of the following words: access (n) – nonexistent (adj) – monopoly (n) – monopolistic (adj) – oligopoly (n) – oligopolistic (adj) – identical (adj) – invisible (adj) – perceive (v) – differentiation (n) – advertising (n) – competitor (n) – competitive (adj) – acceleration (n) – superior (adj) – tremendous (adj) – 4.2.

Read the text and answer the following questions:

1. What factors determine the price of a product under different forms of competition? 2. What is the difference between perfect and monopolistic competition? 3. What is the reason for the existence of oligopolies? 4. Why are prices in an oligopoly not competitive? 5. When does the monopoly occur? COMPETITION IN A FREE MARKET SYSTEM Competition is a cornerstone of a free market system. However, competition exists in different degrees ranging, from being perfect to nonexistent. Economists generally agree that four different degrees of competition exist. They are called (1) perfect competition, (2) monopolistic competition, (3) oligopoly, and (4) monopoly. Perfect competition exists when there are many buyers and sellers in a market and no seller is large enough to dictate the price of a product. Under perfect competition, sellers produce products that appear to be identical. Agricultural products are often considered to be the closest examples of perfect competition at work. For example, a buyer would be content to buy wheat from either farm A or farm B since there is little or no difference between the wheat and because the prices would be the same. Why are the prices the same? Remember, no seller is

14 large enough to dictate the price of a product. Price is determined according to the principles of supply and demand. Under perfect competition, the market is guided by Adam Smith’s invisible hand theory. Now that you know what perfect competition is, you should also know that there are no true examples of perfect competition. Today, government price supports and drastic reductions in the number of farms make it hard to argue that even farming is an example of perfect competition. Monopolistic competition exists when a large number of sellers produce products that are very similar but are perceived by buyers as different. Under monopolistic competition, product differentiation (the attempt to make buyers think similar products are different in some way) is a key to success. Think about what that means for just a moment. Through tactics such as advertising, branding, packaging, sellers try to convince buyers that their product is different from competitors'. Actually, the competitive products may be similar or interchangeable. Motor oil is a good example of this. One seller may inform consumers its product contains a super cleaning additive, a competitor promises more gas mileage, still another competitor offers faster acceleration. The buyer selects a particular brand as superior even though any of the three products would work in the car. Under monopolistic competition, limited barriers (such as a start-up capital) exist for new firms wanting to enter the market. Prices are set by individual sellers. An oligopoly is a form of competition in which a market is dominated by just a few sellers. Generally, oligopolies exist in industries such as steel, automobiles, aluminum and aircraft. One reason some industries remain in the hands of a few sellers is that the initial investment to enter an oligopolistic industry is tremendous. Think what it would cost to build a steel mill or an automobile assembly plant. In an oligopoly, prices are generally similar rather than competitive. The reason for this is simple. Intense price competition would lower profits for all the competitors, since a price cut on the part of one producer would most likely be matched by the others. Product differentiation rather than price differences is usually the major factor in market success. A monopoly occurs when there is only one seller for a product or service. Obviously, in a monopoly situation, both the price and supply of a product are controlled by the single seller. In the United States, laws prohibit the creation of monopolies. However, the legal system does permit approved monopolies such as public utilities that sell gas and electric power. These utilities’ prices and profits are usually monitored carefully by public service commissions that protect the interest of buyers. 4.3.

Find in the text the English equivalents of the following expressions:

Система свободной торговли, конкуренция среди продавцов, иметь открытый доступ к рынку, при совершенной конкуренции, в соответствии с принципами предложения и спроса, резкое сокращение количества ферм,

15 воспринимаются покупателями как разные, реклама, снабжение товара торговой маркой, конкурентоспособная продукция, начальные капиталовложения, понижать доходы, снижение цены. 4.4. 1. 2. 3. 4. 5. 6.

Find in the text the words that correspond to the following definitions:

a person or business organization competing with one another or others market in which there is only one seller market dominated by a few firms to have the most important place or position unlike, not of the same kind a person or company that produces goods

4.5.

Complete the sentences below with derivatives of the words used in the text. Verb To compete ? To divide ? To advertise

1. 2. 3. 4. 5.

Noun ? investment ? ? difference ?

Adjective ? monopolistic ?

The new product developed by the company is … in the domestic market. Under … competition prices are determined by individual sellers. … helps sellers to convince buyers that their product is … from others. The … of labor enables producers to increase the output of products. Foreign companies … large sums of money into new enterprises on the territory of Russia.

4.6.

Are the following statements true or false. If they are false correct them.

1. Competition exists in two degrees: perfect and monopolistic. 2. Agricultural products are true examples of perfect competition. 3. Under monopolistic competition sellers of similar products try to convince buyers that their product is different from competitors’. 4. In oligopoly prices are competitive and this is the main factor in market success. 5. A monopoly occurs when there is only one seller of a product or service.

16 4.7.

Translate the following sentences into English:

1. При совершенной конкуренции продавцы производят одинаковые товары, и ни один продавец не может устанавливать цену на товар. 2. Цена определяется в соответствии с принципами предложения и спроса, т.к. при совершенной конкуренции рынком управляет теория “невидимой руки” А. Смита. 3. Когда большое количество продавцов производят сходные товары, они пытаются заставить покупателей думать, что эти товары как-то отличаются друг от друга. 4. Продавцы используют рекламу, торговые марки, упаковку, чтобы сделать товары конкурентоспособными. 5. Такие отрасли промышленности, как сталелитейная, автомобилестроение, самолетостроение и другие остаются в руках нескольких продавцов, т.к. необходимы огромные капиталовложения, чтобы построить такие предприятия. 6. Когда есть только один продавец товара или услуги, как цена, так и предложение контролируются этим продавцом. 4.8.

Divide the text into logical parts. Express the main idea of the whole text and of each part.

4.9.

Give the summary of the text. UNIT 5

5.1. Practise the pronunciation of the following words: considerably (adv) – refer (v) – wholesale (n) – calculate (v) – consecutive (adj) – failure (n) – severe (adj) – consequence (n) – unbelievable (adj) – phenomenon (n) – campaign (n) – 5.2.

Read the text and answer the following questions:

1. What are the major causes of inflation? 2. When does cost-push inflation occur?

17 3. 4. 5. 6. 7.

What condition does demand-pull inflation refer to? How does the supply of money affect inflation? What are the measures of inflation? What does the CPI measure? What does the PPI measure? INFLATION AND THE CONSUMER PRICE INDEX

Inflation basically refers to a general rise in the price level of goods and services over time. Inflation had gone over 10 percent in the 1980s, and people were afraid it would go even higher. Inflation rates have come down considerably since then. There are many causes of inflation, according to economists. Two of the most important are cost-push inflation and demand pull inflation. Cost-push inflation refers to the fact that business people raise prices when the costs of various factors of production go up. For example, increases in the cost of labor, machinery, raw materials, fuels, and credit push up prices. The push for a higher minimum wage and the lower number of unemployed people may add greatly to cost-push inflation. Demand-pull inflation refers to a condition in which buyers want to buy more goods and services than are available at the time. The demand for goods and services is related to the amount of money in the economy. If the supply of money increases faster than production increases, the result is inflation. This is called “too much money chasing too few goods”. Measures of Inflation Two of the more popular measures of price changes over time (inflation indicators) are the consumer price index (CPI) and the producer price index (PPI), also known as the wholesale price index. The consumer price index measures changes in the prices of about 400 goods and services that consumers buy. It measures the price of an average market basket of goods for an average family over time. Such an index gives a vivid picture of the effects of inflation on consumer prices. If the cost of the “market basket” is $ 1,000 one month and goes up to $ 1,006 the next, it is said that the inflation rate for the month was 0.6 percent or roughly 7.2 percent annually. At that rate, the cost of consumer goods would double in about 10 years. The producer price index measures changes in the prices businesses pay for goods and services over time. Both the consumer price index and the producer price index are calculated monthly and are published in the business periodicals. The consumer price index is the most closely followed because many companies and the government programs base their salary and payment increases on it. Many people also follow the producer price index closely, because it usually indicates future consumer prices and is therefore a barometer of future inflation.

18 5.3.

Find in the text the English equivalents of the following expressions:

Рост уровня цен, темп развития инфляции; инфляция, обусловленная ростом издержек; инфляция спроса, минимальная зарплата, безработные, быть доступным, показатели инфляции, индекс цен на потребительские товары, индекс цен производителя, индекс оптовых цен, средняя потребительская корзина, потребительские цены, ежегодно, удвоиться, повышение оплаты труда. 5.4.

Find in the text the words which correspond to the following definitions:

1. 2. 3. 4. 5. 6.

a payment of money for labor or service lacking a job to make or become larger in amount or number the productive resources of land, labor, capital and economic activity the price of making or producing something able to be obtained, used, etc.

5.5

Complete the sentences below with the words from the text.

1. 2. 3. 4.

The prices for goods are high because production … have risen. During the economic recession the number of … people … greatly. The miners went on strike and demanded to raise their … . The wealth of a nation depends on how well it combines labor and other … of …. 5. The new product is not … in most of the shops yet. 5.6. 1. 2. 3. 4. 5.

Are the following statements true or false? If they are false correct them. In the 1980s inflation went over 10% and is still going higher. Cost-push inflation is caused by the increase in the cost of factors of production. Demand-pull inflation is caused by the rise in prices for goods and services. We can see the effect of inflation on consumer prices calculating the cost of an average market basket. The producer price index and the consumer price index are important both for businesses and people, as they are a barometer of future inflation.

5.7. Translate the following sentences into English. 1. Темпы роста инфляции значительно повысились за последние 10 лет. 2. Когда повышаются затраты на различные факторы производства, производители повышают цены.

19 3. Если количество денег в экономике увеличивается быстрее, чем производство товаров, результатом этого будет инфляция. 4. Индекс цен на потребительские товары измеряет изменения в ценах на 400 товаров. 5. Индекс цен на потребительские товары и индекс цен производителей рассчитываются ежемесячно и публикуются в периодической печати. 5.8.

Divide the text into logical parts. Express the main idea of the whole text and of each part.

5.9. Give the summary of the text. UNIT 6 6.1.

Practise the pronunciation of the following words:

consecutive (adj) – occur (v) – consequence (n) – failure (n) – revive (v) – unbelievable (adj) – expansion (n) – worsen (v) – encounter (v) – phenomenon (n) – 6.2. 1. 2. 3. 4. 5. 6.

Read the text an answer the following questions:

What are the consequences of recession for an economy? What was the highest inflation rate? When and in what country did it occur? What is the average expansion period in an economy? What happens at the end of an expansion period? When and where did stagflation occur? What was the result of the government measures to slow inflation?

THE ISSUE OF RECESSION VERSUS INFLATION A recession is defined as two consecutive quarters of decline in the GNP. When recession occurs, prices fall and businesses begin to fail. A recession has severe consequences for an economy: high unemployment, business failures, and an overall drop in living standards. For years (since 1930 when the Great

20 Depression occurred), the government has pumped money into the economy to revive it. The U.S. government becomes concerned when inflation is in the range of 5 percent to 10 percent. However, these figures must be put in some perspective. In 1988, inflation in Brazil was 1,000 percent; in Peru, it was over 10,000 percent; and in Nicaragua it was 20,000 percent. Inflation rates like these can destroy an economy and business. Such rates also set the stage for major revolutions. In Germany, inflation rates in 1923 were unbelievable. The price of coffee or bread often doubled in an hour! At the height of the problem, a loaf of bread cost 200 billion marks. People had to carry baskets filled with money to buy groceries. Is it any wonder that Germany today is very concerned about inflation? The longest period of growth in the U.S. economy occurred from 1961 to 1969. The average expansion period is only 33 months. From 1982 until 1989, the economy was expanding. That made it one of the longest periods of expansion in U.S. history. Toward the end of such a period, inflation tends to worsen as the economy encounters more and more constrains to growth. Productivity gains come harder or disappear and labor costs climb. STAGFLAION IN THE 1980s A rather new economic phenomenon occurred in the late 1970s and early 1980s. Inflation kept rising even though the economy was slipping into recession. This was an unexpected economic event that called for a new term. The word used was stagflation, or high unemployment and slow growth combined with inflation. Thus, two bad situations were occurring at once. To slow inflation, the government took out money of the economy. This slowed growth, plunging the economy into a deeper recession. Inflation finally came down, but there were still two bad situations: economic stagnation combined with high unemployment (above 10 percent). In the middle of the 1980s, economic attention turned toward lowering the unemployment rate and getting the economy moving again. The money supply was increased and taxes were cut. By 1989, unemployment had fallen to 5.0 percent while the economy picked up. 6.3. Find in the text the English equivalents of the following expressions: Две последовательные четверти, валовой национальный продукт, предприятия терпят неудачу, экономический спад, тяжелые последствия для экономики, общее снижение уровня жизни, предотвращение нового экономического спада, инфляция находится в пределах до 10%, темпы роста инфляции, быть озабоченным, средний период экономического подъема, сталкиваться с ограничениями роста, увеличение производительности, издержки на оплату рабочей силы, экономический застой, налоги были снижены.

21 6.4.

Give definitions to the following words from the text:

GNP (gross national product) recession depression inflation rate productivity stagnation stagflation 6.5. 1. 2. 3. 4. 5.

Complete the sentences below with the words from the text.

… is characterized by high unemployment and business … . In most European countries … are higher than in Asia and Africa. When recession occurs … is in the range of over 10 percent. The company increased its … and made a good profit last year. The longest period of … in the U.S. economy lasted from 1982 until 1989.

6.6.

Are the following statements true or false? If they are false correct them.

1. 2. 3. 4. 5.

Recession has no influence on the economy of a country. The Great Depression occurred in 1950. When depression occurs businesses fail and unemployment increases. The highest inflation rate reached 20.000 percent in Nicaragua. Toward the end of the period of expansion the economy encounters constraints to growth. 6. The early 1980s was the period of deep recession in the U.S. 6.7.

Translate the following sentences into English:

1. Экономический спад имеет тяжелые последствия для экономики: высокий уровень безработицы, крах предприятий, общее снижение уровня жизни. 2. Высокие темпы роста инфляции могут быть пагубными для экономики и подготовить почву для революций. 3. Самый долгий период экономического роста в США длился 8 лет. 4. Новый экономический феномен произошел в конце 70-х, начале 80-х гг., когда инфляция продолжала расти, хотя экономика переживала спад. 5. Чтобы замедлить темпы инфляции, правительство изъяло деньги из экономики, что привело к ещё более глубокому спаду.

22 6.8.

Divide the text into logical parts. Express the main idea of the whole text and its parts.

6.9.

Give the summary of the text. UNIT 7

7.1.

Practise the pronunciation of the following words:

budget (n) – equal (v) – unsuccessful (adj) – merely (adv) – debt (n) – commercial (adj) – campaign (n) – politician (n) – enough (adv) – taxation (n) – 7.2. 1. 2. 3. 4. 5.

Read the text and answer the following questions:

How does the government try to keep the economy stable? Why were the government’s attempts to balance the budget unsuccessful? What is the way to lower the federal debt? What was the major issue in the 1988 political campaign in the USA? Do rich people pay higher taxes than poor people?

THE ISSUE OF FISCAL POLICY The term fiscal policy refers to government efforts to keep the economy stable by increasing or decreasing taxes and/or government spending. For many years, the government has tended to raise taxes to fund more and more social and defense programs. The government tried to cut spending to balance the budget (that is, make income equal spending). But such attempts were rather unsuccessful in that they merely cut the growth in spending rather than spending itself. The result is an increasing federal debt. The debate is whether to lower the debt through more taxes or through less spending. The debate begins to sound like a beer commercial: “More taxes!” “Less spending!” The answer will likely be some combination of the two. Taxes and Spending A major issue in the 1988 political campaign concerned fiscal policy, especially taxes. Michael Dukakis seemed to favor increasing income taxes to pay

23 for government programs. George Bush resisted increased taxes and called for less spending instead. He said, “Read my lips: no new taxes”. Still others proposed taxes on gasoline or “sin taxes”, that is, higher taxes on alcohol and tobacco. George Bush’s victory certainly did not assure taxpayers that no new taxes would be proposed. That will always be an issue in an economy that involves politicians. Some people felt that taxes should be raised mostly on the rich. They felt that rich people were not paying their fair share. Of course, rich people feel that 28 percent federal tax plus state and local taxes are high enough already. In fact, they want to lower capital gains taxes – the taxes on income earned from investments such as stocks and bonds and home ownership. The point is that people are divided in the United States over economic issues such as taxation and fiscal policy in general. Such issues will dominate government/ business/ economic thinking in the future. 7.3. Find in the text the English equivalents of the following expressions: Сохранить экономику стабильной, повышение или снижение налогов, государственные расходы, сократить расходы, увеличивающийся федеральный долг, звучать как обычная реклама, главный вопрос, выступать за увеличение подоходного налога, убедить налогоплательщиков, не платили справедливую долю, государственные и местные налоги, налог на увеличение рыночной стоимости капитала; доход, полученный с инвестиций; акции и облигации, домовладение, налогообложение. 7.4. Give definitions to the following words from the text: fiscal policy taxation income tax “sin taxes” taxpayer capital gains tax 7.5. Complete the sentences below with the words from the text. 1. The government is planning to … taxes on alcohol and tobacco. 2. All people working in state enterprises and private firms have to pay … . 3. Some politicians propose to lower government … to make economy stable. 4. … feel that federal tax and local taxes are too high. 5. The federal … has increased greatly due to recession. 7.6.

Are the following statements true or false. If they are false correct them. 1. The government attempts to cut spendings were successful. 2. The federal debt can be lowered through more taxes.

24 3. Taxpayers believed G. Bush that no new taxes would be proposed. 4. Rich people pay more taxes than poor. 7.7.

Translate the following sentences into English:

1. В течение многих лет правительство повышало налоги, чтобы финансировать социальные программы. 2. Попытки правительства сократить расходы, чтобы сбалансировать бюджет, оказались безуспешными. 3. Казалось, что Дукакис выступает за повышение подоходного налога. 4. Богатые люди хотят снизить налог на увеличение стоимости капитала. 7.8.

Divide the text into logical parts. Express the main idea of the whole text and of each part.

7.9. Give the summary of the text.

UNIT 8 8.1. Practise the pronunciation of the following words: warrant (v) – available (adj) – discourage (v) – hire (v) – consequence (n) – acquisition (n) – diversify (v) – mortgage (n) – manufacturing (n) – 8.2. Read the text and answer the following questions: 1. 2. 3. 4. 5. 6. 7.

What is the role and responsibility of the Federal Reserve Bank? Does the Fed operate under the head of the president or Congress? What is the goal of monetary policy? How does the Fed manage money supply? What is loose monetary policy? What is tight monetary policy? What consequences does monetary policy have for businesses?

25 THE ISSUE OF MONETARY POLICY In leaning about monetary policy, the first thing one must understand is the role of the Federal Reserve Bank (the Fed). The Fed is one of the sources of money; it can add or subtract money from the economy as it sees fit. For example, the Fed can simply produce more dollars or cut the amount it lends to banks, if it thinks one of those actions is warranted. Managing the money supply is the responsibility of the Federal Reserve System. It operates independently of the president or congress and has the goal of keeping the economy growing without causing inflation. It does that by trying to manage the money supply and interest rates. This process is called monetary policy. A nation’s monetary policy is the management of the money placed into the economy and the management of interest rates. As you know, having too much money in the economy sometimes causes inflation. When that happens, the Fed cuts the money supply and increases interest rates. That makes less money available for spending and discourages businesses and consumers from borrowing money (because of high interest rates). When businesses find it hard to borrow money, they often cut back on production and lay off workers. This slows the economy and lowers inflation. Tight versus Loose Monetary Policy. When unemployment gets too high, the Federal Reserve Bank may put more money into the economy and lower credit rates. This stimulates spending and encourages business growth, which leads to the hiring of more people. When you read that the Fed is “loosening up on the money supply” or "lowering interest rates”, it means that the Fed is trying to stimulate the economy (that is, increase consumer spending and increase business investment). A tight monetary policy is one in which the Fed restricts the supply of money and increases credit costs to lower inflation. As you can imagine, such intervention into free markets has serious consequences for businesses. They watch the Fed very closely to see what the monetary policy is now and will be in the future. HOW INTEREST RATES AFFECT SMALL BUSINESS Articles from business journals tend to say things such as, “High interest rates are slowing the search by Acme-Cleveland Corporation, a machine-tool producer, for a major acquisition to help diversify the company”. Another article may say, “With fixed mortgage rates dropping toward 10 percent, home builders are expected to increase production”. Such quotes are meant to show the impact of interest rates on the economy. Interest rates affect every kind of industry, from banking to farming and manufacturing. When rates are rising, business confidence and consumer confidence tend to fall because things are going to be more expensive to buy. When they fall, people get more optimistic.

26 The prime rate is the most favorable interest rate that businesses can get from banks. Small businesses and consumers like you and me must pay higher rates than the prime. 8.3. Find in the text the English equivalents of the following expressions: Источник денег, добавлять или изымать деньги, давать взаймы деньги банкам, денежный запас, ставка процента, денежно-кредитная политика, регулирование ставок процента, брать деньги взаймы, сокращать производство, увольнять рабочих, снижать инфляцию, кредитные ставки, способствовать росту деловой активности, ограничивать денежный запас, вмешательство в свободный рынок, серьезные последствия, базисная ставка. 8.4. Give definitions to the following words from the text: monetary policy interest rate prime rate money supply 8.5. Complete the sentences below with the words from the text: 1. The Federal Reserve Bank manages … … as it sees fit. 2. The Fed is one of the … of money. 3. Monetary policy is the management of … . 4. To lower inflation the Fed … interest rates, and businesses find it hard… money. 5. Low credit rates … the economy and … business growth. 8.6. Are the following statements true or false? If they are false correct them. 1. The Federal Reserve Bank borrows money from other banks. 2. The responsibility of the Federal Reserve System is managing the money supply and interest rates. 3. The Fed operates under the guidance of the Congress. 4. The Fed tries to lower inflation restricting the supply of money and increasing credit costs. 5. Small businesses and consumers pay the prime rate when they borrow money from banks. 8.7. Translate the following sentences into English: 1. Федеральный Резервный Банк играет большую роль в денежнокредитной политике, т.к. является одним из источников денег и может добавлять или изымать деньги из экономики. 2. Целью Федеральной Резервной Системы является поддержание роста экономики и снижение инфляции.

27 3. ФРБ может регулировать развитие экономики, снижая или повышая ставки процента и сокращая или увеличивая денежный запас. 4. Ставки процента оказывают влияние на все сферы экономики, от банковского дела до сельского хозяйства и промышленности. 5. Наиболее благоприятная ставка процента при получении банковского кредита – базисная ставка. 8.8. Divide the text into logical parts. Express the main idea of the whole text and of its parts. 8.9. Give the summary of the text.

28

GLOSSARY balance of trade: the difference between the export and import of merchandise capital: something created to produce other goods and services; also money used to pay for the operations of a business commodity: any article exchanged in trade competition: the rivalry among buyers and among sellers in the purchase and sale of resources and products competitor: a person, business organization, firm, etc., competing with another or others competitive: a product or service that can be readily sold because buyers consider its price and quality acceptable consumers: individuals or groups that use economic goods consumer price index (CPI): monthly statistics that measure changes in the prices of about 400 goods and services that consumers buy demand: the quantity of products that people are willing to buy at different prices at a specific time depression: a severe from of recession economics: the social science that describes and analyses how society chooses from among scarce resources to satisfy its wants export: good or service sold to a buyer in another country federal deficit: the difference between government revenue from taxes and government spending fiscal policy: government efforts to keep the economy stable by increasing or decreasing taxes or government spending GNP (gross national product): a measure of a nation’s total output of goods and services per year real GNP: GNP adjusted for changes in the price level; the value of goods and services produced in the nation in a given year import: good or service purchased from a seller in another country incentive: an encouragement to a greater activity

29 inflation: a period of rising prices during which the purchasing power of the dollar is falling: a general rise in the prices of goods and services over time inflation rate: annual percentage increase in the general level of prices cost-push inflation: inflation caused by rising business costs demand-pull inflation: inflation caused by excessive demand for goods and services interest: payment for using someone else’s money; income derived from allowing someone to use one’s capital invest: to use money to make more money out of something that will increase in value laissez faire: French term meaning ‘let them do’; describes a policy of minimal involvement of government in business market: place where buyers and sellers come together marketplace: any place in which goods are bought and sold free market: a market that operates under conditions of perfect competition free market system: system in which decisions about what to produce and in what quantities are decided by the market; that is, by buyers and sellers negotiating prices for goods and services market price: price at which goods or services and money will actually be exchanged; the price at which supply exactly equals demand mercantilists: some of the first modern economists who believed that nations should behave like merchants competing with one another; they wanted government support to keep the nation’s business competitive money: can be anything that is generally accepted in payment for goods and services monetary policy: the management of the amount of money placed into the economy by the government and the management of interest rates monopoly: market in which there is only one seller oligopoly: market dominated by a few firms physiocrates: thinkers in the 18th century France who believed that because natural resources were the true source of wealth, it made little sense for government to promote business price: an amount of money for which a thing is offered, sold or bought

30 prime rate: the most favorable interest rate that businesses can get from banks production: the process of creating or changing the form of commodities factors of production: the productive resources of land, labor, capital and economic activity productivity: the total output of goods and services in a given period of time divided by work hours (output per work hour) recession: a period of low business activity and high unemployment revenue: the value of what is received for goods sold, services rendered and other sources shortage: a condition of having less than needed stagflation: stagnant (no growth) economic conditions combined with inflation supply: the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time surplus: an amount additional to what is needed