Exercises

Ex.3. Find where in the text it is said about the points given below. Put down the number of the paragraph.

1. functions of national income accounting;

2. problems in calculating GNP;

3. how to distinguish increases in the quantity of goods and services from increases in their prices;

4. what are production possibilities;

5. international trade.

Ex.4. Find the terms in the text which designate the following:

1. total collection of plants and equipment.

2. goods and services purchased from foreign countries.

3. the total market value of all final goods and services produced in a given time period.

4. goods or services purchased for use as input in the production of final goods or services.

5. goods and services sold to foreign buyers.

Ex.5. Say if the following statements are true or false:

1. National-income accounts only help us to measure the economy.

2. Gross national product is the total market value of country’s output of goods and services in a given year.

3. We encounter problems in calculating GNP even when we focus on domestic market activity.

4. Net investment is positive as long as some new plants and equipment are being produced.

5. The distinction between GNP and NNP is thus mirrored in a distinction between gross investment and net investment.

6. The flow of new capital must exceed depreciation, or our stock of capital will decline.

7. Whenever gross investment exceeds depreciation, net investment is negative.

Ex. 6. Find the answers to the questions in the text. Put down the number of the paragraph:

1. What are the two basic functions of national – income accounting?

2. What is GNP per capita used for?

3. What is called nominal GNP?

4. What is inflation?

5. What do our production possibilities depend on?

6. Where is the distinction between GNP and NNP mirrored?

7. What represents net exports?

Ex.7. Make up a plan covering the main ideas.

Text 2. Economic Business Cycles

Ex.8 Read and memorize the following words, words combinations and word-groups:

business cycle - цикл ділової активності

permanent - постійний

recession - рецесія, економічний спад

capacity - потужність

interest rates - відсоткові ставки

depression - економічний занепад, депресія

downturn (downswing) - пониження, спад

upturn (upswing) - піднесення

trough - найнижча точка циклу

to run up debts - збільшувати борги

mortgage - іпотека

output - продукція, виробіток

balance of payments - платіжний баланс

borrow - брати кредит

to put up prices - підвищувати ціни

to lay off - звільняти

creative destruction - творче знищення (коли малі компанії завдяки творчим та іноваційним підходам стають більш конкурентноспроможними, ніж великі потужні компанії)

periods of office - термін перебування при владі (на посаді)

austerity Programmes - програма суворої економії

tax cut - зниження податків

monetary expansion - збільшення грошової маси в обігу

Exercise 9. Read and translate the whole text with a dictionary orally. Translate paragraphs 1,2,3 in writing. Do exercises after the text.

1. The business cycle or trade cycle (alternating period of expansion and contraction in economic activity) is a permanent feature of market economies: gross domestic product (GDP) fluctuates as booms and recessions succeed each other. During a boom, an economy (or at least parts of it) expands to the point where it is working at full capacity, so that production, employment, prices, profits, investment and interest rates all tend to rise. During a recession, the demand for goods and services declines and the economy begins to work at below its potential. Investment, output, employment, profits, commodity and share prices, and interest rates generally fall. A serious, long-lasting recession is called a depression or a slump.

2. The highest point on the business cycle is called a peak, which is followed by a downturn or downswing or a period of contraction. The lowest point on the business cycle is called a trough, which is followed by a recovery or an upturn or upswing or a period of expansion. Economists sometimes describe contraction as 'negative growth'.

3. There are various theories as to the cause of the business cycle. Internal theories consider it to be self-generating, regular, and indefinitely repeating. A peak is reached when (or just before) people begin to consume less, for whatever reason. As far back as the mid-nineteenth century, it was suggested that the business cycle results from people infecting one another with optimistic or pessimistic expectations. When economic times are good or when people feel good about the future, they spend, and run up debts. If interest rates rise too high, a lot of people find themselves paying more than they anticipated on their mortgage or rent, and so have to consume less. If people are worried about the possibility of losing their jobs in the near future they tend to save more. A country's output, investment, unemployment, balance of payments, and so on, all depend on millions of decisions by consumers and industrialists on whether to spend, borrow or save.

4. Investment is closely linked to consumption, and only takes place when demand and output are growing. Consequently, as soon as demand stops growing at the same rate, even at a very high level, investment will drop, probably leading to a downturn. Another theory is that sooner or later during every period of economic growth – when demand is strong, and prices can easily be put up, and profits are increasing employees will begin to demand higher wages or salaries. As a result, employers will either reduce investment, or start to lay off workers, and a downswing will begin.

5. External theories, on the contrary, look for causes outside economic activity: scientific advances, natural disasters, elections or political shocks, demographic changes, and so on. Joseph Schumpeter believed that the business cycle is caused by major technological inventions (the steam engine, railways, automobiles, electricity, microchips, and so on), which lead to periods of 'creative destruction'. A simpler theory is that, where there is no independent central bank, the business cycle is caused by governments beginning their periods of office with a couple of years of austerity Programmes followed by tax cuts and monetary expansion in the two years before the next election.