W. H. Philips and the Philips Curve

A.W.H. Phillips was an economist whose reputation was based largely on a single paper on the right topic published at the right time. In the late 1950-s, the connection between inflation and unemployment ranked as a major unsolved problem of macroeconomic theory. The curves that Phillips drew in his famous article in “Economica” suggested a simple, stable relationship between inflation and unemployment.

The central proposition of the Phillips curve theory is: other things remaining constant, the higher the unemployment rate, the lower is the inflation rate.

Phillips’s original idea was that the unemployment rate indicates the state of demand pressure in the economy. When unemployment is low, real GNP is above capacity, bottlenecks arise, and inflation accelerates. When unemployment is high, real GNP is below capacity, and inflation diminishes.

In the early 1960s, the Phillips curve became a central element of macroeconomics.

B. Translate from Russian into English.

b) Безработица – это одна из серьезных проблем, с которыми сталкивается любое общество. Как и любое явление, она не может быть оценена однозначно. С одной стороны, она дает людям время и возможность найти подходящую работу. С другой стороны, состояние безработных приводит людей к поиску незаконных заработков. Последствия безработицы весьма внушительны. Во-первых, это отсутствие заработка. Во-вторых, это потеря приобретенных профессиональных знаний и человеческого достоинства. Очевидно, что человек, разочаровавшийся найти высокооплачиваемую работу, соглашается на сомнительные предложения. Кроме того, безработица толкает людей к совершению преступлений. Если безработица длительная, она вызывает серьезные социальные и психологические проблемы не только для безработного, но и для его семьи.

WRITING

A. Using the notes and answers that follow write a 350 word essay on the topic ‘Problems of Unemployment and Possible Solutions’.

a) Think and answer the questions:

– What are the basic causes of unemployment?

– What are its consequences?

b) Match each of the suggestions (1-3) below with the corresponding results (a-c).

1. Governments to create incentives/subsidize industries.	a. Reduce crime,/social problems connected with illness/boredom.
2. Better education/training so workers can operate computers, sophisticated machinery, etc.	b. Create more positions, limit number of workers made redundant.
3. Free sports/recreational centers for unemployed to help people spend their time constructively.	c. People will have more qualifications for types of jobs available.

c) Can you suggest any other solutions to this problem? What would the expected result of each be?

d) Make up a plan of your essay and choose useful expressions for defining problems and solutions from the list below.

Problems and solutions

Steps Measures should must could be taken so as to/ in order to solve/overcome/combat…. deal with/eradicate = истреблять... One (possible) Another An alternative way to solve/overcome combat/deal with/ eradicate this problem the problem (of) would be/is By (+ ing) ..., we/governments/etc, can ensure that /prevent … The... situation could be improved if …/It would be a good idea if…

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