Foundations of Economics. Учебное пособие

preconceptions, and ideological biases unavoidably interfere with the attempt to derive conclusions that are independent of the particular economist espousing them. Moreover, there is no realistic laboratory in which economists can test their hypotheses.

In response, economists are wont to distinguish between “positive economics” and “normative economics.” Positive economics seeks to establish facts: If butter producers are paid a subsidy, will the price of butter be lowered? Will a rise in wages in the automotive industry reduce the employment of automobile workers? Does monopoly foster technical progress? Normative economics, on the other hand, is concerned not with matters of fact but with questions of policy or of trade-offs between “good” and “bad” effects: Should the goal of price stability be sacrificed to that of full employment? Should income be taxed at a progressive rate? Should there be legislation in favor of competition?

Because positive economics in principle involves no judgments of value, its findings may appear impersonal. This is not to deny that most of the interesting economic propositions involve the addition of definite value judgments to a body of established facts, that ideological bias creeps into the very selection of the questions that economists investigate, or even that much practical economic advice is loaded with concealed value judgments (the better to persuade rather than merely to advise). This is only to say that economists are human. Their commitment to the ideal of value-free positive economics (or to the candid declaration of personal values in normative economics) serves as a defense against the attempts of special interests to bend the science to their own purposes. The best assurance against bias on the part of any particular economist comes from the criticism of other economists. The best protection against special pleading in the name of science is founded in the professional standards of scientists.

Text B. The professionalization of economics, reflected in the growth of graduate programs on the subject, has been described as "the main change in economics since around 1900".Most major universities and many colleges have a major, school, or department in which academic degrees are awarded in the subject, whether in the liberal arts, business, or for professional study.

The Nobel Memorial Prize in Economic Science(commonly known as the Nobel Prize in Economics) is a prize awarded to economists each year for outstanding intellectual contributions in the field. In the private sector, professional economists are employed as consultants and in industry, including banking and finance. Economists also work for various government departments and agencies, for example, the national Treasury,

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Central Bank or Bureau of Statistics.

TEXT ASSIGNMENTS

V. Answer the following questions:

Text A

1)Can human behavior be analyzed with the same objectivity as the behavior of atoms and molecules?

2)What is positive economics concerned?

3)What does normative economics examine?

4)What is the best assurance against bias on the part of any particular economist?

Text B

1)How has the professionalization of economics been described?

2)Where are professional economists employed?

3)What prize is awarded to economists each year for outstanding intellectual contributions in the field?

Text A

1)The same objectivity can analyze human behavior as the behavior of atoms and molecules.

2)There is no practical laboratory in which economists can test their hypotheses.

3)The best guarantee against preconception on the part of any particular economist comes from the criticism of his own work.

4)Positive economics in principle contains no judgments of value.

5)A great deal of practical economic advice is loaded with concealed value judgments.

6)The best protection against special pleading in the name of science is founded in the professional standards of scientists.

7)Most major universities and many colleges have a department in which academic degrees are awarded in the subject, whether in the liberal arts, business, or for professional study.

8)Economists are needed in various government departments and agencies, for example, the national security.

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UNIT 13

MONEY AND ITS FUNCTIONS

I. Topical vocabulary. Read the words.

Text A

-Crucial – - , ;

-Medium of exchange – , - ;

-Unit of account – , ;

-Store of value – ;

-Standard – ;

-Deferred payment – ( ), ;

-In exchange for – " .., ", ";

-To consume – , ;

-Subsequently – ;

-To benefit – , ;

-Barter economy – . ", ";

-To trade – ;

-To swap for – ", " - .;

-Swap – ";

-Simultaneously – ";

-To hand over – , ;

-Wants – , ;

-Satisfactory – " ";

-Wasteful – , . ";

-Scarce – -", , ;

-Commodity – , " ;

-Debt – ;

Text B

- To keep accounts – " ";

-To quote price – ;

-As well – , , " ";

-Shopkeeper – ";

-Purchase – ;

-Worthless – - ;

-To be worthless – ;

-Interest-bearing bank account – ;

-To pay interest – , ;

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-Purchasing power – ,

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-To erode – ";

-To borrow – ";

-To repay – - , ;

-Bank loans – ;

-Invariably – ", ;

II.Translate these words without a dictionary:

III.Skim the text. Try to understand the general sense.

MONEY AND ITS FUNCTIONS

Although the crucial feature of money is its acceptance as the means of payment or medium of exchange, money has three other functions. It serves as a unit of account, as a store of value, and as a standard of deferred payment. We discuss each of the four functions of money in turn.

TEXT A.THE MEDIUM OF EXCHANGE

Money, the medium of exchange, is used in one-half of almost all exchange. Workers exchange labour services for money. People buy or sell goods in exchange for money. We accept money not to consume it directly but because it can subsequently be used to buy things we do wish to consume. Money is the medium through which people exchange goods and services.

To see that society benefits from a medium of exchange, imagine a barter economy.

A barter economy has no medium of exchange. Goods are traded directly or swapped for other goods.

In a barter economy, the seller and the buyer each must want something the other has to offer. Each person is simultaneously a seller and

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a buyer. In order to see a film, you must hand over in exchange a good or service that the cinema manager wants. There has to be a double coincidence of wants. You have to find a cinema where the manager wants what you have to offer in exchange.

Trading is very expensive in a barter economy. People must spend a lot of time and effort finding others with whom they can make mutually satisfactory swaps. Since time and effort are scarce resources, a barter economy is wasteful. The use of money — any commodity generally accepted in payment for goods, services, and debts — makes the trading process simpler and more efficient.

TEXT B. OTHER FUNCTIONS OF MONEY

The unit of account is the unit in which prices are quoted and accounts are kept.

In Britain prices are quoted in pounds sterling. It is usually convenient to use the units of account as well. However there are exceptions. During the rapid German inflation of 1922-23 when prices in marks were changing very quickly, German shopkeepers found it more convenient to use dollars as the unit of account. Prices were quoted in dollars even though payment was made in marks, the German medium of exchange.

Money is a store of value because it can be used to make purchases in the future.

To be accepted in exchange, money has to be a store of value. Nobody would accept money as payment for goods supplied today if the money was going to be worthless when they tried to buy goods with it tomorrow. But money is neither the only nor necessarily the best store of value. Houses, stamp collection, and interest-bearing bank accounts all serve as stores of value. Since money pays no interest and its real purchasing power is eroded by inflation, there are almost certainly better ways to store value.

Finally, money serves as a standard of deferred payment or a unit of account over time. When you borrow, the amount to be repaid next year is measured in pounds sterling. Although convenient, this is not an essential function of money. UK citizens can get bank loans specifying in dollars the amount that must be repaid next year. Thus the key feature of money is its use as a medium of exchange. For this, it must act as a store of value as well. And it is usually, though not invariably, convenient to make money the unit of account and standard of deferred payment as well.

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TEXT ASSIGNMENTS

V. Answer the following questions:

Text A

1)How can money be used as a medium of exchange?

2)What are three other functions of money?

3)What is a barter economy?

4)What is the behavior of sellers and buyers in a barter economy?

Text B

1)What is the unit of account?

2)What else besides money can serve as stores of value?

Text A

1)The medium through which people exchange goods and services is

money.

2)In a barter economy they sell goods directly or swap for other

goods.

3)In a barter economy, each person is both a seller and a buyer.

4)Commerce is very economical in a barter economy.

5)Money makes the trading process simpler and more efficient.

6)Money is a store of value because they can use it to make purchases in the future.

7)The unit of account is the unit in which prices are kept and accounts are quoted.

8)Money is the unequalled store of value.

9)Money is a standard of deferred payment or a unit of account over

time.

VII. Fill in the gaps with the prepositions in black type. Some of them may be used several times. Consult the text if necessary. Translate these sentences:

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