Economic Considerations

Lesson 2: The aim of the lesson is to make you feel more confident while talking about economic issues and matters of the kind. We are gradually moving towards learning to act as interpreters whose job it is to understand and interpret for various purposes.

1. Match the terms to their definitions:

1	Economic indicators	Purchases of goods and services by people and businesses.
2	Economic services	An ‘increase in the price of goods and services.
3	Scarcity	The price of a “market basket” of the necessary goods and services.
4	Inflation	An inadequate supply of goods that doesn’t meet the demand for them.
5	Standard of living	Activities of people that have a market value.
6	Consumption	Total market value of all goods and services produced in one year.
7	Consumer price index	The level of people’s well-being, showing what they can and cannot afford.
8	Gross national product	Price indexes, production and employment figures and other statistics showing the status of economy.

2. Read the text and explain the difference between two notions – “income” and “the cost of living”.

We often speak of our earnings as an indicator of the standard of living. We compare our wages and salaries with others, or the wages we earn today and those we earned ten years ago. But our income does not indicate very accurately how our standard of living is progressing. The cost of living is much more important than income. You may receive a rise in salary, but you may be poorer than before because of inflation. This means that the cost of living rises at a greater rate than income. On the other hand, a small rise in one’s income may be very important if prices go down or, at least, remain the same.

3. It is often said that the value of the dollar has decreased, or that it is worth only 75 or 50 cents compared to a dollar of 10 or twenty years ago. It means that the dollar can only buy what 50 cents could buy years ago. The cost of living has risen. Besides, the cost of living depends on geographic factors. For example, central heating or vegetables cost much more in the northern regions. The cost of living depends on the weather, too. Floods, droughts, or frosts cause food shortages, and prices go up. Good weather produces a lot of fruit and vegetables, and prices go down. Do you feel that the value of our national currency is increasing or decreasing? How does the climate tell on the cost of living in our region?

4. The consumer price index (CPI) is calculated periodically. The products and services that consumers buy determine the general cost of living. These things are divided into categories: housing, transportation, and others. For example, the CPI on a “market basket” of typical food purchases is published regularly. What kinds of food must a hypothetical market basket include? What other categories of consumer goods must go into the market basket, besides food?