5. Answer the following questions:

1. What forces confront each other in the market place?

2. What is the aggregate spending?

3. How do we call the demand, that is derived from demands for final goods and services?

4. What factors influence the rate of consumption?

5. What does disposable income represent?

6. What do we call saving?

7. What is investment?

5. Define the terms:

alternative price level real output

aftertax income equilibrium

total expenditure final goods

current consumption business inventories

5. Translate into English:

1. Загальний попит і загальна пропозиція протистоять одне одному. 2. Зрештою покупці та продавці з'ясову­ють, що тільки єдина комбінація «ціна — продукція» прий­нятна для обох сторін. 3. Збалансування — це комбінація рівня цін і реального випуску продукції, що поєднується з загальним попитом і загальним постачанням. 4. Похідний попит — це потреба в робочій силі та інших чинниках ви­робництва, що залежать від попиту на кінцеву продукцію і послуги. 5. Споживання — це витрата готових товарів і послуг споживачами. 6. Наявний прибуток становить пев­ну суму прибутку, яку споживачі можуть витрачати або ні за певний період. 7. Накопичення — та частина чистого прибутку, що не витрачається на поточне споживання.

5. Read and dramatize the following dialogue:

A.: Tell me please, when were many Americans out of work?

C.: During the Great Depression of the 1930 as many as 13 million Americans were out of work. They were capable people and eager to work. But no one would hire them. As sympathetic as employers might have been, they simply could not use any more workers. Consumers were not buying the goods and services already being produced. Employers were more likely to cut back production and lay off still more workers than to hire any new ones. As a consequence, an «army of the unemployed» was created in 1929 and continued to grow for nearly a decade. It was not until the outbreak of World War II that enough jobs could be found for the unemployed, and most of these «jobs» were in the armed forces.

A.: You see, the Great Depression was known to be the springboard for the Keynesian approach to economic po­licy. John Maynard Keynes concluded that the growing ranks of unemployed persons were caused by problems on the demand side of product markets.

C.: What was the reason?

A.: People simply were not able and willing to buy all the goods and services the economy was capable of producing. As a consequence, producers had no incentive to increase output or to hire more labor. So long as the demand for goods and services was inadequate unemployment was inevitable. What did Keynes seek to explain?

C.: Keynes sought to explain how a deficiency of demand could arise, then to show how and why the government had to intervene. Keynes was convinced that government intervention was necessary to ensure optimal macro out­comes. And what can you say about Keynes's theory of macro instability?

A.: His theory of instability was developed in nominal terms, not the real values used in aggregate supply and demand graphs. Keynes focused on how many dollars we spend, not on the quantity of output we purchase. Keynes asked how many dollars people will spend and how that rate of expenditure is related to (dollar) income. This is Keynesian concept of aggregate spending.