Module 2 Legendary people

Pronunciation

1. Read the words and find the word in each line with a different sound.

abroad source because saw

amount could without around

growth flow gold how

bought other country enough

Reading

2. Before you read try to answer these questions.

1. Can you name any world famous economists?

2. Can you name any famous Russian economists?

3. Do you know anything about the first schools of economic theory?

3. This chronicle traces the development of the major schools of economic thought through the work of a few important economists. These economists were the leading exponents of their schools, and their ideas represent the major contributions to economic thought made by each school. Read this text and complete it with a suitable word in the box.

market returns wages flow

development property inflation productivity

1. Mercantilism was the economic philosophy adopted by merchants and statesmen during the16th and 17th centuries. Mercantilists believed that a nation’s wealth came primarily from the accumulation of gold and silver. Nations without mines could obtain gold and silver only by selling more goods than they bought from abroad. Mercantilism represented the elevation of commercial interests to the level of national policy.

2. Physiocrats, a group of 18th century French philosophers, developed the idea of the economy as a circular ¹_____ of income and output. They opposed the Mercantilist policy of promoting trade at the expense of agriculture because they believed that agriculture was the sole source of wealth in an economy.

3. The Classical School of economic theory began with the publication in 1776 of Adam Smith’s monumental work, The Wealth of Nations. The book identified land, labor, and capital as the three factors of production and the major contributors to a nation's wealth. In Smith’s view, the ideal economy is a self-regulating ² _____ system that automatically satisfies the economic needs of the populace. He described the market mechanism as an “invisible hand” that leads all individuals to produce the greatest benefit for society as a whole.

4. While Adam Smith emphasized the production of income, David Ricardo focused on the distribution of income among landowners, workers, and capitalists. Ricardo saw a conflict between landowners on the one hand and labor and capital on the other. He posited that the growth of population and capital, pressing against a fixed supply of land, pushes up rents and holds down wages and profits.

5. Thomas Robert Malthus used the idea of diminishing ³_____ to explain low living standards. Population, he argued, tended to increase geometrically, outstripping the production of food, which increased arithmetically. The force of a rapidly growing population against a limited amount of land meant diminishing returns to labor. The result, he claimed, was chronically low ⁴_____, which prevented the standard of living for most of the population from rising above the subsistence level.

6. Alfred Marshall emphasized that prices also depend upon the level of demand, which in turn depends upon the amount of consumer satisfaction provided by individual goods and services. He provided modern macroeconomics with the basic analytic tools of demand and supply, and consumer utility.

7. The Marxist School challenged the foundations of Classical theory. Writing during the mid - 19th century, Karl Marx saw capitalism as an evolutionary phase in economic ⁵_____. He believed that capitalism would ultimately destroy itself and be succeeded by a world without private ⁶_____.

8. The publication of the General Theory of Employment, Interest, and Money made John Maynard Keynes the most notable economist of the twentieth century. He insisted that direct government intervention was necessary to increase total spending. Keynes’ arguments proved the modern rationale for the use of government spending and taxing to stabilize the economy. Government would spend and decrease taxes when private spending was insufficient and threatened a recession; it would reduce spending and increase taxes when private spending was too great and threatened inflation. His analytic framework, focusing on the factors that determine total spending, remains the core of modern macroeconomic analysis.

Economic theories are constantly changing. Troubling ⁷_____ and lagging ⁸_____ make economists look for new solutions and new theories.

4. Match the underlined words from the text with their definitions.

1. _________ production

2. __________ the owner of a retail business

3. __________  not enough

4. __________ advantage

5. __________ decrease the amount of something

6. __________ plenty of money

7. __________ money to finance public expenses

8. __________ an increase in size

5. Read the text again and do the tasks.

5.1. Is this statement …

The Classical School was for minimal government interference in the economy.

a. true b. false c. there is no information

5.2. Is this statement …

Keynes fiercely advocated interventionist government policies which were responsible for causing worldwide inflation, depressions and recessions.

a. true b. false c. there is no information

5.3. Is this statement …

Adam Smith’s idea was that there were market forces that operated on and affected both an individual and a society as a whole.

a. true b. false c. there is no information

5.4. Is this statement …

The market system works on the basis of supply and demand: if there is a lot of something without much demand for it the price will be lower; if something is scarce and in high demand, the price will be higher.

a. true b. false c. there is no information

5.5. Which paragraph (1,2,3,4,5,6,7,8) contains the following idea?

He thought that the earth would run out of food and other resources quite soon because of the problem of overpopulation.

5.6. Which paragraph (1,2,3,4,5,6,7,8) contains the following idea?

This theory rejects the capitalistic market system in favor of one in which everything is owned by the state.

5.7. Choose the answer for the question: Who was known as “the father of macroeconomics”?

1. Adam Smith b. John Maynard Keynes c. Alfred Marshall

5.8. Choose the sentence which reveals the main idea of the text:

1. Economic theories are constantly changing.

2. Only a few economists made important contributions in economics.

3. Each school of economic thought played a great role in the development of economic theory.

4. Each school was developing its own economic theory.

6. Match the famous economists to the contributions they made in economics.

David Ricardo John Maynard Keynes Karl Marx

Alfred Marshall Thomas Malthus Adam Smith

1. His book “The Wealth of Nations” showed the power of the “invisible hand” of the market.

2. He developed the theory of comparative advantage.

3. His principles of economics brought the ideas of supply and demand, marginal utility and the costs of production into a coherent whole. He developed the concepts of consumer surplus.

4. The “father of modern macroeconomics” and author of “The General Theory of Employment, Interest and Money” book.

5. His Essay on the Principle of Population predicted that population growth would drive living standards toward the subsistence level.

6. He believed that all production belongs to labor because workers produce all value within society.

A Russian Expert

Reading and speaking

7. You are going to read a summary of the life of a famous economist and answer the questions. Put the verbs in brackets into the past simple. Guess who this man was.

“I (be born) in Moscow in 1956 into a prominent intellectual family. Both my grandfathers (be) well-known authors.

I (graduate) from Moscow State University in 1978 and (receive) a doctorate in economics in 1980. After several years as a researcher in various economic institutes, I (become) a journalist.

I (begin) my political career in 1991, taking the post of Deputy Chairman of the Government of Russia, in charge of matters of economic policy. In the autumn of 1991, at the age of 35, I (have) to deal with the collapse of the Soviet economy as I (be appointed) Finance Minister. In 1992 I (undertake) some economic reforms to save the country from collapse, but (become) a hate figure for many ordinary Russians because my reforms (result) in an increase in prices and (lead) to hyperinflation. Moreover, I was often criticized for the privatization.

From 1993 to 2004 I (be) a member of the Russian Duma, where I (take) an active role on the budget and fiscal policy committee. Even after leaving office, I (continue) to advise the government.”

1. When was he born?

2. Where did he study?

3. Where did he work?

4. What duties was he in charge?

5. Did people like him as a reformer? Why?

6. What is this man famous for?

8. What facts do you know about the lives of other famous economists? Answer the questions in 7 for a man in economics you know well and speak about this person.

The first forms of money

Reading

9. Before you read try to answer these questions.

1. What do you know about the first money?

2. Do you know anything about the first forms of money?

3. How did people trade without money?

10. Read this text and answer the questions.

The word barter comes from the French word barrater meaning “to trade”.

As man satisfied his basic needs, his want to make hunting, building shelter, and access to water easier, grew. Some people were good hunters, some were better gardeners, and some built huts faster. That was the beginning of barter.

An example of early barter is a man would trade ten rabbits for a man to build him a hut. This worked for a little while. However people needing huts couldn’t always carry around ten rabbits. They needed something easier and smaller. So people started using beads, shells, small animals and crops as early forms of money. Later money evolved into crude lumps of different metals. Now people needing huts could pay the builder a given number of those lumps in exchange for a hut. Very soon people understood about how many lumps they spent because it was getting harder for them to find such metals, and they wanted to know if their trade is fair. Next, people started stamping those lumps into coins only a little bigger than our present-day coin. They were only made of certain metals and were given a value. The earliest metal coins came from China, where people used small pieces of bronze to trade things starting around 1500 BC. People knew how many of those coins they needed for a certain thing, but all of those coins could get heavy fast.

Because of that, people started using paper money which soon brings us to present-day banks and things like that. Paper money, a promise to pay gold or silver or bronze in exchange for this piece of paper, was first used around 1150 AD, in China. So people in China had the first idea for both coins and paper money.

Now money is a very important part of our everyday lives whether we know it or not!

1. What is barter?

2. Why did people need money?

3. What could they exchange money for?

4. Why did paper money appear?

11. Give English equivalents for the following words and phrases from the texts.

Развиться в, торговать, наделять стоимостью, в обмен на, честная, первые монеты, обещание оплатить, штамповать, необработанные куски металла, бумажные деньги, современная.

12. Choose a, b or c.

1. Before there was money, people ______ .

1. exchanged goods b) traded c) found metals

2. The exchange of a good or a service is called ______.

1. a profit b) a loss c) a barter

3. Coins were made of _____.

1. different metals b) precious metals c) heavy metals

4. People started using coins because it was _____ .

1. convenient b) valuable c) important

5. Name 3 things people used to trade.

1. ______ b) _____ c) ______

6. First money appeared in China and looked like ______ .

1. small pieces of paper b) small pieces of metals c) heavy coins

7. Money is basically _____ between people.

1. a piece of paper b) metal coins c) an agreement

8. Money is a good that acts as _____ in transactions.

1. a medium of exchange b) a unit of account c) a store of value

9. The value of modern money is equal to _____ .

1. nothing b) the value of the metals they contained c) gold

10. People started to use paper money and coins at _____ .

1. the same time b) different times c) different ages

13. In pairs, answer the questions.

1. Do you agree that … ?

• barter is not always convenient

• present-day money has no real value

• money is a very important part of our everyday lives

2. What do you think of the first forms of money? Would you like to use them today?

Banks

Reading

14. Banks are very important. Just like a piggy bank, banks are places where we can save our money, keep track of how much we have and keep it safe. Read about the first bank of the USA and say what services the First Bank offered.