Get Ready for the Postgraduate Entrance English Exam. Working with Texts. Часть 1. Учебное пособие

depending upon how may stages of production there are), as the intermediate good. If intermediate goods were included, the Goodyear tire would be counted as it was produced by Goodyear for purchase by Chrysler, and also as it was produced as part of a car or truck by Chrysler for purchase by consumers, businesses or the government.

Real versus Nominal Gross Domestic Product

GDP in current dollars (nominal) is calculated by multiplying the number of goods and services produced by their current prices. So if prices double from one year to another nominal GDP will double even though the number of goods and services produced may stay the same. Real GDP (GDP in constant dollars) adjusts for price increases and only measures the changes in the volume of goods and services produced (a better indicator of economic activity).

Net domestic product

Each year machinery, equipment and other capital goods wear out (depreciation) because of the constant use in production or sometimes because they become obsolete. Businesses who produce new capital goods supply businesses with new machinery to replace the worn out or obsolete machinery. If no new machinery or capital goods are produced, you can imagine that soon the country's capital stock would be depleted. If on the other hand, more capital goods are produced than became obsolete or worn out, then we would experience additions to the country's capital stock. Finally, if businesses produce exactly enough machinery to just replace the worn out or obsolete capital goods, then our capital stock would stay the same. Subsequently, only if we produce more than the depreciated or worn out machinery we will add to the capital stock. In order to measure these additions (or declines) to the capital stock, economists use Net Domestic Product. Net Domestic Product includes everything in Gross Domestic Product, but subtracts the value of depreciated capital goods.

Interpretation of Gross Domestic Product

Gross Domestic Product and most notably real Gross Domestic Product is a measure of how economically active a country is. The higher real GDP, the more products we produce during that year. It measures, therefore, the total or aggregate supply of goods and services, consumer and capital goods, produced in a country during one year. The more we

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produce, the more goods we enjoy for consumption and production, and typically, the better off we are.

There are a few instances where a higher real GDP does not necessarily mean a greater standard of living. If increased production is accompanied by considerably greater amounts of pollution, then there may be a trade-off. Environmentalists today point at this relationship and claim that increased pollution and the dangers from the depletion of natural resources has lowered people's standard of living. Environmentalists therefore argue in favor of halting economic growth to preserve the environment, natural resources, wildlife, etc.

The environmentalist claims are exaggerated and economic progress is needed and desired to improve our standard of living. Economic progress needs to be stimulated through freedom of competition and maximum opportunities for rewards to those who produce and contribute to technical advances. This can best be done by less government interference, fewer laws, not more, and lower taxation. More economic growth will, in the long run, lead to a more prosperous country and a cleaner environment.

Another instance where it is claimed that a higher GDP does not necessarily mean a higher standard of living involves the consideration of leisure time. If people decide to work an additional ten hours per week, production may increase. However, the sacrifice of leisure time could mean a decrease in well being which outweighs the benefits of the increase in earnings.

In reality this would be unlikely to occur, however. The past several decades have seen decreases in working hours and considerable increases in leisure time which have actually been accompanied by a rising real GDP. The explanation for this is that as the economy progressed and businesses were able to afford to pay workers higher salaries, people could afford to cut back on their hours, enjoy more leisure time and still earn enough to pay for all of their necessities and a few luxuries. Workers decided on this voluntarily though, so that there can be no case made that this increase in leisure time was accompanied by a decrease in standard of living. As everyone is well aware, the standard of living of workers in industrialized countries has improved in revolutionary ways during the past century.

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II. Vocabulary Items

aggregate a – совокупный benefit n – преимущество, благо

business n – коммерческое предприятие, фирма capital goods – основной капитал

capital stock – основной капитал, основные производственные фонды

constant dollars – доллары базового периода, используемые для реальной покупательной способности

consumer n – потребитель consumption n – потребление depreciation n – амортизация

environmentalist n – сторонник защиты окружающей среды equipment n – оборудование

expenditure n – расход

final goods – готовые изделия goods n – товар, товары government n – правительство

Gross Domestic Product – внутренний национальный продукт Gross National Product – валовой национальный продукт intermediate goods – промежуточные товары

investment n – инвестирование leisure n – досуг

luxury n – предмет роскоши

machinery n – машины, машинное оборудование natural resources – природные богатства, ресурсы net a – чистый

outweigh v – перевешивать, быть более значительным pollution n – загрязнение окружающей среды purchase n – покупка

real a – реальный service n – услуга supply n – запас

taxation n – налогообложение value n – стоимость

wear out v – изнашиваться well-being n – благосостояние

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III. Exercises

1.Read the text.

2.Learn the vocabulary items by heart.

3.Translate the text in written form.

4.Retell the text using the following expressions and terms: Gross Domestic Product, Gross National Product, Net Domestic Product, Nominal Gross Domestic Product, in current prices, to measure economic activity, final goods, intermediate goods, a government expenditure, in current dollars, to replace the worn out or obsolete machinery, the country’s capital stock, total (aggregate) supply, standard of living, natural resources, technical advances, leisure time.

IV. Test I (1)

1. Read the text again and decide which statements are true.

1.Government accountants include intermediate goods, final goods and services produced for purchase by consumers, businesses, and the government, as well as changes in business inventories, in the calculation of GDP.

2.Net Domestic Product includes everything in Gross Domestic Product, but deducts the value of depreciated capital goods.

3.The past several decades have seen reductions in working hours and considerable increases in leisure time which have actually been accompanied by a rising real GDP.

4.If businesses produce exactly enough machinery to just replace the worn out or obsolete capital goods, you can imagine that soon the country's capital stock would be depleted.

2. Match the words given in the left column with the words in the

Unit 2

I. Information for study

Unemployment

When GDP declines over a period, businesses reduce their output. Cutbacks in production inevitably mean that firms will use less labor and materials. Some workers will lose their jobs and those seeking new jobs will have a harder time finding employment. Increased unemployment is therefore a major consequence of cyclical declines in GDP during periods of contraction or recession.

Some unemployment naturally exists even during periods of peak economic activity. The portion of unemployment attributable to a cyclical downturn or production below the economy's potential can be identified on what constitutes "normal" unemployment. In this way the concept of "full" or high employment for the economy can be defined.

Macroeconomic stabilization policies seek to minimize excessive unemployment. However, to intelligently formulate such policies, it is first necessary to understand what unemployment is and how it is measured. In this way excessive or cyclical unemployment can be distinguished from normal unemployment.

The Unemployment Rate

The total labor force is the sum of the number of persons over the age of 16 with jobs and workers who are actively seeking a job but currently do not have one. The unemployment rate measures the ratio of the number of people classified as unemployed to the total labor force. An unemployed person is defined as one over the age of 16 who is available for work and has actively sought employment during the previous 4 weeks. Note that this definition does not include people who choose not to have or seek jobs and therefore are not part of the labor force. For example, full-time students over the age of 16, people who choose to devote their time to household chores or to raising their children, retired people, people unable to work because of disability, and people in mental or correctional institutions, although they are not working for pay, are not con-

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sidered to be unemployed. These groups by definition are not part of the labor force.

The official unemployment statistics do include people who are temporarily let out of service without pay by their employers but are waiting to be recalled to work in the same job. These people, though not actively seeking a new job, are counted among the ranks of the unemployed. A layoff is the temporary suspension of employment without pay for a period of 7 consecutive days or more. Workers who are on layoff are not fired. Instead they are let go because of reduced demand for the product they are employed to produce. Layoffs are a consequence of cyclical declines in aggregate demand. A worker who is laid off has some expectations of being recalled by his or her employer should business pick up again. Of course, some layoffs end up being permanent, in which case the worker must search for a new job to regain employment.

Types of Unemployment

Frictional, Structural, Cyclical and Seasonal Unemployment

When a worker leaves a job for any reason, a job separation occurs. Job separation can result when a worker quits, is fired, or is laid off. Job separations are always to be expected because of poor matches of workers to jobs and changes in the pattern of demand for goods and services. Few of you, especially at the outset of your careers, would be willing to sign a lifetime contract with an employer. Similarly, employers can't be expected to retain workers who don't perform up to a minimum standard.

Unemployment would always be zero if the time between a job separation and the discovery of a new job for each worker were zero and if new entrants and reentrants into the labor force immediately found a job. The time, effort, and transaction costs involved in gathering information to find a new job guarantee that there will always be some unemployed workers looking for jobs. Job search is the process of looking for a suitable job either by those just entering the labor force or by those having just experienced a job separation. Job finding occurs when an unemployed worker accepts an offer of a new job.

Members of the labor force search for jobs that best suit their skills and preferences. Workers and employers make mistakes in the process of matching workers to jobs. It's normal for workers to leave jobs they find unsuitable and for employers to fire workers who aren't perform-

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ing their tasks up to required standards. Frictional unemployment represents the usual amount of unemployment resulting from people who have left jobs that didn't work out and are searching for new employment, or people who are either entering or reentering the labor force to search for a job. For example, if you were to graduate and spend 6 months looking for the right job, you would be counted among the frictionally unemployed during that period. If a worker who is dissatisfied with a job managing a fast-food restaurant quits and takes 2 months to find a new job, that worker would be among the frictionally unemployed for that period.

Structural unemployment is unemployment resulting from shifts in the pattern of demand for goods and services or changes in technology in the economy that affect the profitability of hiring workers in specific industries. Structural unemployment often requires that workers who lose their jobs learn new skills or move another location to find a satisfactory new job. When the demand for goods decreases, some workers will naturally be dismissed as production of those goods declines. For example, a decline in the demand for petroleum products causes a decrease in the demand for oil held and refinery workers. Oil workers who lose their jobs as a result of this reduction in demand are said to be structurally unemployed. Similarly, if a decrease in demand for Chevrolets and Chryslers occurs because consumers choose to buy more Mazdas and BMWs, then U.S. auto workers who lose their jobs will be part of structural unemployment.

Seasonal unemployment. People who are out of work during the off season: ice cream vendors during the winter; school teachers during the summer (if they are looking for a job during this time).

The Natural Rate of Unemployment

The natural rate of unemployment is the percentage of the labor force that can normally be expected to be unemployed for reasons other than cyclical fluctuations in GDP. In other words, the natural unemployment rate is the sum of frictional and structural unemployment expected over the year.

II. Vocabulary Items

aggregate a – совокупный chore n – работа по дому

contraction n – ограничение, сокращение (деловой активности)

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cutback n – сокращение cyclical a – циклический decline n – падение, спад demand n – спрос dismiss v – увольнять

downturn n – спад (экономический) employer n – наниматель, работодатель employment n – работа, занятость excessive a – чрезмерный, избыточный

fire v – амер. разг. увольнять, выгонять с работы frictional a – частичный

full-time a – занимающий полный рабочий день household n – домохозяйство

labor n – труд, трудовые ресурсы

lay off v – увольнять рабочих (обыкн. временно)

layoff n – период временного увольнения, временная безработица

output n – производительность pattern n – схема, диаграмма

percentage n – процентное содержание, процент quit v – уйти с работы

rate n – уровень recession n – спад

retired a – ушедший на пенсию shift n – изменение, сдвиг structural a – структурный unemployment n – безработица

III. Exercises

1.Read the text.

2.Learn the vocabulary items by heart.

3.Translate the text in written form.

4.Retell the text using the following expressions and terms: to seek new jobs, cyclical declines in GDP, periods of peak economic activity, a cyclical downturn, macroeconomic stabilization policies, labor force, unemployment rate, frictional (structural, cyclical, seasonal) unemployment, the natural rate of unemployment.

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IV. Test I (2)

1. Read the text again and decide which statements are true.

1.Unemployment would be zero if the time between a job leaving and the discovery of a new job for each worker were zero and if new entrants and reentrants into the labor force immediately found a job.

2.Frictional unemployment is unemployment resulting from shifts in the pattern of demand for goods and services or changes in technology in the economy that affect the profitability of hiring workers in specific industries.

3.Structural unemployment represents the usual amount of unemployment resulting from people who have left jobs that didn't work out and are searching for new employment, or people who are either entering or reentering the labor force to search for a job.

4.The natural rate of unemployment is the percentage of the labor force that can normally be expected to be unemployed for reasons other than cyclical fluctuations in GDP.

2. Match the words given in the left column with the words in the

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Unit 3

I. Information for study

Business Firm

A business firm is an organization under one management set up for the purpose of earning profits for its owners by making one or more items available for sale in markets. The terms firm, business and enterprise are often used interchangeably to mean the same thing.

In the early 1980s there were over 17 million business firms operating in the United States. Firms operating out of one or more plants, which are physical structures or locations, at which a firm’s owners or employees conduct business. In the case of a manufacturing firm like General Motors, the plant is one or more factories. For a restaurant like Taco Bell, the plant is the structure in which employees produce and serve meals to customers. A farmer operates an agricultural firm, and the plant is the location or locations at which the farmer has fields, barns, factors and other equipment.

Some firms operate many similar or identical plants: A&P Supermarkets, J.C. Penney and Western Auto. Some large Firms operate different plants for various stages of production. For example, your supermarket might own a dairy and a bakery and sell their products in its stores. A firm producing petroleum products, such as gasoline and lubricants, might own oil wells and supertankers. The term used to describe the ownership of plants used in various stages of its production by a single firm is vertical integration. These firms operate different kinds of plants to provide themselves with raw materials, parts and services they need to produce their final product. Finally, many modern business firms operate plants that produce very different kinds of goods. For example, CBS produces television programming, makes records and has other operating subsidiaries. A firm operating plants that produce many different kinds of goods and services is called a conglomerate.

The Functions of Business Firms

Whether they make microwave pizzas or space shuttles, all firms are first organization of people. As such, they must make daily decisions

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