Английский язык экономика. Учебно-методическое пособие по научно-техническому переводу, аннотированию и реферированию

bond market – рынок облигаций; black market– «черный» рынок; commodity market – товарная биржа;

domestic / home / internal market – внутренний рынок; Eurocurrency market – международный евровалютный рынок; Eurodollar market – международный евродолларовый рынок; exchange market – валютный рынок;

foreign / external market – внешний рынок; gold market – рынок золота;

job / labour market – рынок труда; stock market– фондовая биржа;

supply-and-demandmarket – рынок,накоторомценыустанавливаются спросом и предложением.

Make some sentences of your own with the above expressions. Exercise 7. Describe the graph given in Fig. 8.

Exercise 8. Do the written translation of the passage.

“Public goods have this special feature ... each person consuming that quantity”.

Exercise 9. Review questions.

1.An economy has ten goods to share between two people. The expression (x, y) denotes that the first person gets x and the second person y. For allocations a) to e) say if they are efficient, equitable, or neither:

a) (10,0); b) (7,2); c) (5,5); d) (3,6); e) (2,8).

Would you prefer allocation d) or e)?

2.Driving your car in the rush hour, you slow down other drivers. Is this an externality? How might it be offset efficiently? Discuss the merits of fuel taxes that also penalise rural drivers on deserted roads.

3.Should it be compulsory to wear seat belts in cars?

4.Which of the following are public goods: a privatised coastguard system, a tolerant society, a state-owned post office. In each case explane your answer.

Exercise 10. Look through the text once more, find key-words in it and write an abstract of the text using the key-words.

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Part 2. An insight into how economics applies to the real world

Economics: a Nobel Science

The 2001 Nobel Prize for Economic Science was shared by three economists who pioneered the analysis of inside information.

George Akerlof first analysed adverse selection in the used car market, where sceptical buyers know sellers may try to offload useless cars about which the seller has much more information than the buyer. Akerlof showed that, in market equilibrium, buyers assume all cars are bad. Sellers of good cars cannot get a fair price. The same analysis helps us understand loan sharks, junk bonds and street traders offering supposedly genuine Armani perfume at silly prices.

Michael Spence showed that this problem is partly solved if those with good characteristics take costly actions to reveal credibly that they must be the good guys. Higher education can signal that you are smart and determined, valuable things in a worker. Investment banks hire history as well as economics graduates because they value these attributes, not because they want to know more about Queen Elizabeth I.

Joseph Stiglitz, until recently Chief Economist of the World Bank, developed another solution to adverse selection, relying on screening by the buyer rather than signalling by the seller. Offering lower initial wages but correspondingly higher salaries later in life is attractive only to those workers who plan to remain with the firm in the long run. It allows the firm then to invest in training, knowing that its workers will not then take years out to surf in Australia.

Assignments

1. Study the article and do the assignment.

Project: writing biography of a famous economist. Explain your choice. 2. Discuss in your group.

Why are these statements wrong?

a)Society should ban all toxic discharges.

b)Railways must be made completely safe.

c)Anything the government can do the market can do better.

In a completely free, capitalist economy all allocation of resources depends upon the profi t-motive.

There is often a conflict between individual and community interests and the state has to intervene.

When does it occur?

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UNIT 6

Part 1. Text. Taxation

Table 3 shows UK government spending over nearly 50 years. Governments buy goods and services - schools, defence, the police, and so on – which directly use resources that could have been used in the private sector. Governments also spend on transfer payments – subsidies such as social security, state pensions and debt interest – that do not directly use scarce resources. Rather, they transfer purchasing power to people who then buy goods and services.

Sources: ONS, UK National Accounts;

HM Treasury, Budget 2001

Between 1956 and 1976 the scale of government got bigger. Since then, the trend has been reversed. One reason has been the desire of governments to make tax cuts.

If T is the amount paid in tax, and Y is income, then T/Y is the average tax rate. The marginal tax rate shows how total tax T increases as income Y increases.

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Note: Taxable income after deducting allowances. In 2001–02 a single person’s allowance was £4535.

Taxes are progressive if the average tax rate rises as income rises, taking proportionately more from the rich than from the poor. Taxes are regressive if the average tax rate falls as income level rises, taking proportionately less from the rich. Table 4 shows that the UK, like many other countries, has cut tax rates in the last two decades, especially for the very rich.

UK government spending, and the taxes that finance it, are now 40 % of national output. Nearly half of total government spending goes on transfer payments such as pensions and debt interest. Just over half goes to buy goods and services, especially health, defence and education. Most government spending is financed by taxation, mainly direct taxes related to income (income tax itself, national insurance contributions and corporation tax paid by firms) and indirect taxes on expenditure [value added tax (VAT) and excise duties on fuel, alcohol and tobacco].

Direct taxes are taxes on income, indirect taxes are taxes on spending.

We now assess the UK tax system against our two criteria, equity and efficiency.

How to tax fairly

In taking proportionately more from the rich than from the poor, income tax reflects the principle of ability to pay, based on a concern about vertical equity, In contrast, the benefi ts principle argues that people who get more than their share of public spending should pay more than their share of tax revenues. Car users should pay more than pedestrians towards public roads.

The benefits principle often conflicts directly with the principle of ability to pay. If those most vulnerable to unemployment have to pay the highest contributions to a government unemployment insurance scheme, it is hard to redistribute income, wealth or welfare. If the main objective is vertical equity, the ability to pay principle must take precedence.

Two factors make the tax and benefit system more progressive than income tax alone. First, transfer payments actually give money to the poor. The old get pensions, the unemployed get jobseekers allowance and the poor get income support. Second, the state supplies some public goods

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available to the poor even if they do not pay taxes. The rich sunbathe in their own gardens, but the poor sunbathe in public parks.

There are some regressive elements that take proportionately more from the poor. Beer and tobacco taxes, and the National Lottery, are huge earners for the government. Yet the poor spend much more of their income on these goods than do the rich. These things effectively redistribute from the poor to the rich!

Tax incidence

The ultimate effect of a tax can be very different from its apparent effect.

Tax incidence is the final tax burden once we allow for all the induced effects of the tax.

Fig. 10 shows labour demand DD and labour supply SS. With no tax, equilibrium is at E. Now an income tax is introduced. If we measure the gross wage on the vertical axis, the demand curve DD is unaltered since the gross wage is the marginal cost of labour to the firm.

Fig. 10. A tax on wages

However, it is the wage net-of-tax that induces workers to supply labour. SS still shows labour supply in terms of this net wage, so we must draw the higher schedule SS’ to show the supply of labour in terms of the

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gross wage. The vertical distance between SS’ and SS is the income tax on earnings from the last hour of work.

The new equilibrium is E’. The gross wage is W’ at which firms demand L’ hours. The vertical distance A’E’ is the tax paid on the last hour of work. At the net wage W”, workers supply L’ hours. Relative to the original equilibrium, a tax on wages raises the gross wage to W’, but cuts the net wage to W”. It raises the wage firms pay, but cuts the wage workers get.

The tax wedge is the gap between the price paid by the buyer and the price received by the seller.

The incidence of the tax fell on both firms and workers even though, for administrative convenience, the tax was collected from firms. The incidence or burden of a tax does not depend on who hands over money to the government. Taxes alter equilibrium prices and quantities. These induced effects must also be taken into account. However, we can draw a general conclusion. The more inelastic the supply curve and the more elastic the demand curve, the more the final incidence will fall on the seller rather than the purchaser.

Fig. 11. Taxing a factor in inelastic supply

Fig. 11 shows the extreme case of a vertical supply curve. Without a tax, equilibrium is at E and the wage is W. А vertical supply curve SS implies that a quantity of hours L are supplied whatever the net wage. A tax on wages leads to a new equilibrium at A’. Only if the gross wage is unchanged will firms demand the quantity L that is supplied. The entire incidence falls on the workers. To check you have got the idea of incidence, draw for yourself a market with a horizontal supply curve but down-slop-

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ing demand curve. Show that the incidence of a tax now falls only on consumers.

Taxation, effi ciency and waste

Having examined taxation and equity, we now look at taxation and efficiency. We can use Fig. 10 again. Before the tax, labour market equilibrium is at E. The wage W is both the marginal social benefit of the last hour of work and its marginal social cost. The demand curve DD shows the marginal benefit of labour, the value of extra output. The supply curve SS shows the marginal social cost of work, the value of leisure sacrificed to work another hour. At E marginal social cost and benefit are equal, which is socially efficient.

A tax shifts equilibrium to E’. The tax A’E’ raises the gross wage to firms to W’ but cuts the net wage for workers to W”. The triangle A’E’E is a deadweight loss or pure waste. By cutting hours from L to L’, the tax stops society using hours on which the marginal social benefit, the height of the demand curve DD, exceeds the marginal social cost, the height of the supply curve SS. By driving a wedge between the wage firms pay and the wage workers get, the tax makes market equilibrium inefficient.

Must taxes distort?

Most taxes do, but Fig. 11 showed a tax when supply is completely inelastic. With equilibrium quantity unchanged, there is no distortion triangle. This is a general principle. If either the supply or the demand curve is inelastic, a tax induces a small change in quantity. Hence the deadweight loss triangle is small. Since the government needs some tax revenue, the smallest waste occurs if the goods most inelastic in supply or demand are taxed most heavily. Another reason for high taxes on alcohol and tobacco is that they have inelastic demand.

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Exercises

Exercise 1. Suggest the Russian equivalents for the words and word-combinations given below.

Debt interest, tax cuts, income tax, national insurance contributions, value added tax (VAT), excise dutes, welfare, jobseekers allowance, income suport, gross wage, net wage, to take into account, conclusion, tax revenue, pollution taxes, congestion charges.

Exercise 2. Explain in English.

The average tax rate, the marginal tax rate, direct taxes, indirect taxes, tax incidence, the tax wedge, a regressive tax, a progressive tax.

Exercise 3. The table shows how words are formed around the verb to pay.

able

ing

ee

pay

er

ment

off

out

Use these words in the suitable blanks in the sentences below.

1.We expect prompt ... .

2.I got a big ... on this month’s lottery.

3. ... is a person to whom money, esp. a cheque, is or should be paid.

4.This bill is ... now.

5.The bank ... interest of 9 % on savings.

6.She tried to leave the shop without ... for the dress.

7.Every person who has bought something on credit is considered to be a ... .

8.He got a big ... for agreeing to lose the game deliberately.

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Exercise 4. Describe the graph given in Fig. 11.

Exercise 5. Do the written translation of the passage

“The benefits principle often conflicts ... effectively redistribute from the poor to the rich”.

Exercise 6. Review questions.

1. Which of the following are public goods?

a)The fire brigade;

b)clean streets;

c)refuse collection;

d)cable television;

e)social toleration;

f)the postal service. Explain and discuss alternative ways of providing these goods or services.

2. Classify the following taxes as progressive or regressive.

a)10 per cent tax on all luxury goods;

b)taxes in proportion to the value of owner-occupied houses;

c)taxes on beer;

d)taxes on champagne.

3. There is a flat-rate 30 % income tax on all income over 2000 pounds. Calculate the average tax rate (tax paid divided by income) at income levels of 5000 pounds, 10000 pounds and 50000 pounds. Is the tax progressive? Is it more or less progressive if the exemption is raised from 2000 pounds to 5000 pounds?

4. a) Suppose labour supply is completely inelastic. Show why there is no deadweight burden if wages are taxed. Who bears the incidence of the tax?

b)Now suppose labour supply is quite elastic. Show the area that is the deadweight burden of the tax. How much of the tax is ultimately borne by firms and how much by workers?

c)For any given supply elasticity show that firms bear more of the tax the more inelastic is the demand for labour.

5. Why are these statements wrong?

a)Taxes always distort.

b)If government spends all its revenue, taxes are not a burden on society as a whole.

Exercise 7. Look through the text once more, find key-words in it and write an abstract of the text using the key-words.

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Part 2. An insight into how economics applies to the real world

Betting Tax Scrapped Early

The tax on punters will be abolished three months ahead of schedule on the first weekend in October, the Financial Secretary Paul Boateng announced today (13 July 2001). Gordon Brown announced in his March Budget that by 1 January 2002, the current tax on betting stakes would be replaced with a tax on bookmakers’ gross profits, a radical reform which means Britain’s bookmakers will end the deductions they currently charge punters, and look to grow their domestic and international business from a UK base.

Source: www.hm-treasury.gov.uk

This example illustrates the limits to government sovereignty. Betting tax had been a big earner for the Treasury. Competition from offshore bookies offering online betting put an end to this. The government was forced to change betting tax to stop onshore bookies being wiped out. How the internet and globalisation are changing the nation state is a key issue of the new millennium. Economics helps you understand better what is going on.

Assignments

1.Study the article and express your opinion.

2.Comment on the following.

“But in this world nothing can be said to be certain, except death and taxes”.

(Benjamin Franklin)

3. Cope with a task.

What are the principal taxes you and your family pay? Add the sales taxes, property taxes and others together to determine what percentage of your family’s income is actually spent in taxes.

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