Economics for a Beginning Student (110
..pdfbank would (предотвратить) spurts of money growth and inflation around election time. 6. The commercial banks have some (гибкость) in creating deposits and money. 7. A higher nominal money (запас) may not be entirely government’s fault. 8. Government control could be (увеличивать). 9. The government controls the supply of cash and (запас денег). 10. New institutions would arise (принимать на себя) the banks’ existing lending business. 11. These new institutions would provide (определенный) credit. 12. The credit would influence both (процентные ставки) and consumption and investment behaviour.
X.Summarize in 10 sentences the contents of Text 2.
XI. Translate into Russian the third paragraph of Text 1.
XII. Speak about three ways of dealing with inflation. The following words will help you:
1. there +to be, three ways, to deal with inflation; 2. first, we, to adopt, tough policies; 3. they, to be designed, to keep inflation under control; 4. second, we, to change, pertinent laws and institutions; 5. we, to make it hard, for inflation to emerge; 6. third, we, to learn, to live with inflation.
UNIT 6
Pre-reading task
I. Answer the following questions:
1.Why do people resort to indexation?
2.What else can be done about inflation?
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II.Read Text 1
Learning to Live with Inflation (Text 1)
We noted earlier that, as higher inflation persisted, most economies gradually learned to live with it. Banks have now begun to pay high nominal interest rates on some types of deposit; firms are beginning to move to inflation accounting; and the government is committed to raising nominal tax bands and nominal transfer payments (unemployment benefit, supplementary benefit, pensions) in line with inflation. What else needs to be done if we are to reduce the costs of inflation?
On the tax front, complicated adjustments would be required to remove the effects of inflation from the taxation of interest income and capital gains. On other fronts, indexation could be widely introduced.
Indexation automatically adjusts nominal contracts for the effects of inflation. Indexed wages would allow initial settlements to be subsequently corrected for any unanticipated inflation that occurred over the life of the contract. Indexed loans would mean that the amount to be repaid would rise with the price level. Lenders would no longer suffer from unexpected inflation and borrowers would no longer gain.
Indexation has already been introduced in countries that have had to live with inflation rates of 30 or 40 per cent for years. And the more that countries such as the UK adjust their institutions to cope with inflation, the more they are moving in this general direction.
Should we adapt to inflation? Without indexation and widespread institutional reforms, it is costly to live with high inflation rates. But indexation does not remove the costs of high inflation completely. First, indexation is almost always imperfect. Workers cannot be compensated today for yesterday’s inflation. The menu costs of perpetually changing things would be enormous. But compensation at discrete intervals means that real wages are changing during these intervals. Nor can indexation get rid of shoe-leather costs. Until we can invent a
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way to pay a nominal interest rate on all money, higher inflation will always lead to lower desired real cash balances and more time and effort spent in transacting.
By reducing many but not all of the costs of inflation, indexation means that high inflation is much more likely to continue and even increase. Since fewer people are losing out, there will be less political pressure on the government to do something about it. But at high inflation rates, the menu costs and shoe-leather costs could really become very substantial.
Thus there is no easy solution. Tight monetary and fiscal policies could impose a large loss of output and jobs during the transition to lower inflation. But it would be a once-and-for-all cost, against which should be set the present value of the permanent benefits. Monetarists, who believe prices and wages adjust fairly quickly, believe that even the initial cost might not be too large. More extreme Keynesians believe it could be enormous. Whether incomes policy would speed this transition remains an open question. In practice, it seems most likely that we shall continue with some inflation and with institutions that at least partially offset its worst effects.
III.Answer the questions:
1.What nominal transfer payments is the government committed to raise?
2.What do you know about indexation and inflation rates in the UK?
3.What leads to more time and effort spent in transacting?
IV. Check up the pronunciation of unfamiliar words in a dictionary and read Text 2 aloud.
Learning to Live with Inflation (Text 2)
1. We know that higher inflation may persist. 2. Most economies gradually learn to live with it. 3. Banks, firms, the government try to reduce the costs of inflation. 4. It is necessary to remove the effects of inflation from the taxation
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of interest income and capital gains. 5.Besides, indexation could be widely introduced. 6. Indexation automatically adjusts nominal contracts for the effects of inflation. 7. Indexed wages and indexed loans would be introduced. 8. Lenders would no longer suffer from unexpected inflation. 9. Borrowers would no longer gain. 10. Without indexation, it is costly to live with high inflation rates. 11. But indexation does not remove the costs of high inflation completely. 12.Indexation is almost always imperfect. 13. But compensation at discrete intervals is important. 14. It means that real wages are changing during these intervals. 15. Indexation reduces many but not all of the costs of inflation. 16. It means that high inflation is much more likely to continue and even increase. 17. However fewer people are losing out. 18. As a result there will be less political pressure on the government to do something about it. 19. Nevertheless there is no easy solution. 20. Tight monetary and fiscal policies could impose a large loss of output and jobs. 21. The present value of the permanent benefits should be set against this cost. 22. Monetarists believe that prices and wages adjust fairly quickly. 23. They think that even the initial cost might not be too large. 24. More extreme Keynesians believe it could be enormous. 25. Whether incomes policy would speed this transition to lower inflation remains an open question. 26. Certain institutions at least partially offset the worst effects of inflation.
V.Write out from Text 2 the English equivalents for the following words and
expressions:
1. высокий, продолжать существование; 2. постепенно, научиться; 3. уменьшить, издержки инфляции; 4. устранять, действие, налогообложение, ставка процента, доходы от прироста капитала; 5. кроме того, индексация, вводить; 6. автоматически, согласовывать, номинальные контракты, воздействие; 7. индексированная зарплата, индексированный заем; 8. заимодавец, не страдать больше, неожиданный; 9. заемщик, больше не извлекать пользу; 10. без индексации, дорогой, высокие темпы инфляции;
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11. устранять, издержки, полностью; 12. почти всегда, несовершенный; 13. компенсация, с промежутками; 14. означать, реальная зарплата, изменяться, в течение; 15. устранять, не все издержки; 16. гораздо более вероятно, продолжаться, даже, увеличиваться; 17. однако, меньше, нести потери; 18. в результате, меньше, давление, правительство, относительно этого; 19. тем не менее, легкое решение; 20. жесткая монетарная и фискальная политика, навязывать, сокращение производства и потеря рабочих мест рабочих мест; 21. стоимость, постоянные выплаты, противопоставлять; 22. монетарист, думать, приспосабливаться, довольно быстро; 23. первоначальная стоимость; 24. экстремистский, огромный; 25. ли, ускорить, переход, низкий, оставаться; 26. учреждение, по крайней мере, частично, возмещать, наихудший.
VI. Translate Text 2 into Russian (in writing).
VII. Translate the Russian version of Text 2 into English (orally).
VIII. Make up meaningful phrases with the following:
1. We, to know, that, higher inflation, to persist; 2. most economists, gradually, to learn; 3. banks, firms, to try, to reduce, the costs; 4. it, to be necessary, to remove, from taxation; 5. besides, indexation, to be introduced; 6. indexation, to adjust, nominal contracts, for; 7. indexed wages and loans, to be introduced; 8. lenders, no longer, to suffer, from; 9. borrowers, no longer, to gain; 10. without indexation, it, to be costly, to live with; 11. indexation, not to remove, the costs, completely; 12. indexation, to be, imperfect; 13. compensation, at intervals, to be important; 14. it, to mean, that, wages, to change, during; 15. indexation, to reduce, many, not all of the costs; 16. it, to mean, that, high inflation, to be likely, to continue; 17. fewer people, to lose out; 18. there + to be, less pressure, to do something; 19. there + to be, no easy solution; 20. tight policies, to
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impose a large loss, output; 21. the present value, benefits, to be set, against; 22. monetarists, to believe, that, prices, to adjust, fairly; 23. they, to think, that, the initial cost, not to be large; 24. Keynesians, to believe, that, it, to be enormous; 25. whether, incomes policy, to speed, the transaction, to remain; 26. certain institutions, offset, the effects.
IX. Replace the Russian words and expressions with their English equivalents.
1. We know that higher inflation may (продолжать существование). 2. Most economies (постепенно) learn to live with it. 3. Banks, firms and the government try (уменьшить) the costs of inflation. 4. It is necessary to remove the effects of inflation from (налогообложение) of interest income and capital gains. 5. Besides, indexation could be widely (вводить). 6. Indexation automatically (согласовывать) nominal contracts for the effects of inflation. 7. (индексиро-
ванная зарплата и индексированные займы) would be introduced. 8. (Заимо-
давцы) would no longer suffer from unexpected inflation. 9. (Заемщики) would no longer gain. 10. (Без индексации) it is costly to live with high inflation rates.
11.But indexation does not remove the costs of high inflation (полностью).
12.Indexation is almost always (несовершенный). 13. But compensation (с промежутками) is important. 14. It (означать) that real ways are changing during these intervals. 15. Indexation reduces many but not all (издержки) of inflation. 16. It means that high inflation (наиболее вероятно) to continue and even increase. 17. However fewer people (нести потери). 18. As a result there will
be less political (давление) on the government to do something about it. 19. Nevertheless there is easy (решение). 20. Tight monetary and fiscal policies could impose a large loss of output and (рабочие места). 21. The present (стоимость) of the permanent benefits should be set against this cost. 22. Monetarists (полагать) that prices and wages adjust fairly quickly. 23. They think that even (первоначальный) cost might not be too large. 24. More extreme Keynesians believe it could be (огромный). 25. Whether incomes policy would
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speed this transition to lower inflation (оставаться) open question. 26. Certain institutions (по крайней мере частично) offset the worst effects of inflation.
X.Summarize in 10 sentences the contents of Text 2.
XI. Translate into Russian the last paragraph of Text 1 (in writing).
XII. Speak about reducing the costs of inflation. The following words will help you.
1. It, to be necessary, to incur, the permanent benefits of lower inflation; 2. The economy, must first undergo, a period of low output and employment; 3. This transition, could be made, more quickly, less painfully; 4. The more credible the new policy, the faster to be the speed, adjustment, wages, prices.
UNIT 7
Pre-reading task
I. Answer the questions.
1.What is the difference between voluntary and involuntary unemployment in your opinion?
2.Unemployment means misery, social unrest and hopelessness for the unemployed. Do you agree? Give your explanation.
II. Read Text 1.
Types of Unemployment (Text 1)
Economists used to classify unemployment as frictional, structural, de- mand-deficient, or classical. We discuss each in turn.
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Frictional Unemployment. This is the irreducible minimum level of unemployment in a dynamic society. It includes people whose physical or mental handicaps make them almost unemployable, but it also includes the people spending short spells in unemployment as they hop between jobs in an economy where both the labour force and the jobs on offer are continually changing.
Structural Unemployment. In the longer run, the pattern of demand and production is always changing. We discussed the reasons why particular countries in the world economy come to specialize in the production of particular commodities at particular times. In recent decades industries such as textiles and heavy engineering have been declining in the UK. Structural unemployment refers to unemployment arising because there is a mismatch of skills and job opportunities when the pattern of demand and production changes. For example, a skilled welder may have worked for 25 years in shipbuilding but is made redundant at 50 when the industry contracts in the face of foreign competition. That worker may have to retrain in a new skill which is more in demand in today’s economy. But firms may be reluctant to take on and train older workers. Such workers become the victims of structural unemployment.
Demand-deficient Unemployment. This refers to Keynesian unemployment, when aggregate demand falls and wages and prices have not yet adjusted to restore full employment. Aggregate demand is deficient because it is lower than full-employment aggregate demand.
We saw that, until wages and prices have adjusted to their new long-run equilibrium level, a fall in aggregate demand will lead to lower output and employment. Some workers will want to work at the going real wage rate but will be unable to find jobs. Only in the longer run will wages and prices fall enough to boost the real money supply and lower interest rates to the extent required to restore aggregate demand to its full-employment level, and only then will de- mand-deficient unemployment be eliminated.
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Classical Unemployment. Since the classical model assumes that flexible wages and prices maintain the economy at full employment, classical economists had some difficulty explaining the high unemployment levels of the 1930s. Their diagnosis of the problem was partly that union power was maintaining the wage rate above its equilibrium level and preventing the required adjustment from occurring. Classical unemployment describes the unemployment created when the wage is deliberately maintained above the level at which the labour supply and labour demand schedules intersect. It can be caused either by the exercise of trade union power or by minimum wage legislation which enforces a wage in excess of the equilibrium wage rate.
The modern analysis of unemployment takes the same types on unemployment but classifies them rather differently in order to highlight their behavioural implications and consequences for government policy. Modern analysis stresses the difference between voluntary and involuntary unemployment.
III.Answer the following questions.
1.People of what age suffer from structural unemployment?
2.In what case will demand-deficient unemployment be overcome?
3.What is the modern analysis characteristic of as far as voluntary and involuntary unemployment is concerned? What does it want to stress?
IV.Check up the pronunciation of the unfamiliar words in a dictionary and read Text 2 aloud.
Types of Unemployment (Text 2)
1. Unemployment can be classified as frictional, structural, classical and demand-deficient. 2. Frictional unemployment is irreducible minimum level of unemployment. 3. It takes place in a dynamic society. 4. Physical or mental handicaps make some people almost unemployable. 5. Structural unemployment includes such people. 6.It also includes spending short spells in unemployment.
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7. There may be a mismatch of skills and job opportunities. 8. It is possible when the pattern of demand and production changes. 9. Firms may be reluctant to take on and train older workers. 10. Such workers become the victims of structural unemployment. 11. Demand-deficient unemployment refers to Keynesian unemployment. 12. Aggregate demand may fall. 13. Wages and prices have not yet adjusted to restore full employment. 14. Aggregate demand is deficient. 15.It is lower than full-employment aggregate demand. 16. Some workers will want to work at the going real wage rate. 17. But they will be unable to find jobs. 18. Only in the longer run will demand-deficient unemployment be eliminated. 19. Classical unemployment describes the following models. 20. Unemployment is created when the wage is deliberately maintained above a certain level. 21. At this level the labour supply and labour demand schedules intersect. 22. It can be caused by the exercise of trade union power or by minimum wage legislation. 23. This enforces a wage in excess of the equilibrium wage rate.
V. Write out from Text 2 equivalents for the following words and expressions.
1. безработица, классифицировать, фрикционный структурный, классический безработица вследствие недостаточного спроса; 2. несокращаемый; 3. динамический; 4. физические и умственные недостатки, не подлежащий приему на работу; 5. включать; 6. короткие промежутки; 7. несоответствие, умение, возможность получения работы; 8. возможный, модель, спрос и производство; 9. делающий что-то неохотно, принимать на работу, обучать; 10. жертва структурной безработицы; 11. безработица вследствие недостаточного спроса, относиться; 12. совокупный спрос, падать; 13. зарплаты и цены, приспосабливаться, восстанавливать; 14. дефицитный; 15. более низкий; 16. реальный уровень заработной платы; 17. не быть в состоянии; 18. с течением времени, устранять; 19. описывать, следующая модель; 20. создавать, умышленно поддерживать, определенный уровень;
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