Inflation

Tokyo is very high. People prefer to shop in supermarkets because

they find a wide of goods there. The : i industry includes shops,

supermarkets and department stores.

' In statistics, when a number ie

it is multiplied by another number to show- its importance. The is the person or thing that is responsible for doing somelliing bad.

It is difficult for old people to with living on a small pension.

• In maths, a/an is a sum which

is equal on both sides.

The speed that something travels at is called

velocity / capacity.

82 м . , „ j > G i. • d m I с Г >•>••• m r v Unit 16

Inflation is an overall increase in prices over a certain period of time. It s also a worry tor anybody who's trying to make ends meet, ami a headache lor many governments. The rate ol'inflation is often in the headlines. However, inflation isn't really news. In most ot Kurope. for example, prices have risen year after year for a I least the last 5o years. Deflation (overall decreasi in prices) docs happen occasionally, but ihc trend is mostly for the cost of liv ing to increase.

There are lots of ways to measure inflation. ( ) n e of the most popular ways is the retail price ituie.x This is calculated by recording increases in price for a range ot goods and serv ices. This is .sometimes called a luisket of goads. Sonic ol' the goods are weighted more heavily than others K cause the\ arc more important For example, food will be weigh let I more than the cost of a cinema ticket, because a 5'V. increase 111 food is more important than a 10% increase in the cost of seeing a film. Inflation is worked out from an average of all the price increases in the basket.

Inflation can happen for a number of reasons. Init economists say there are two main culprits. I hese are denutntl-pull inflation and cost-push inflation. Demand-pull inflation can happen when tin- economy is growing last. Aggregate demand begins to grow faster than suppliers can eope with. This causes ,i shortage, and prices rise. At tirst. customers may be able to pay the higher prices, and demand grows again. This forces prices up even more, and the cycle continues.

< >ne of the characteristics of demand-pull inflation is that there is often too much money going round the economy I bis is explained by the quantity theory of inone> This theory uses the following equation

money supply x velocity average price x transactions

Wlocity is the speed that money is passed on from one jx-rson to another. Some economists say that velocity and the n u m l v r of transactions

Iff В Comprehension

Now read the text again and match each paragraph with the correct heading.

PARAGRAPH 1

PARAGRAPH 2 PARAGRAPH 3 PARAGRAPH 4 PARAGRAPH

Measuring inflation.

Too much cash The effects of aggregate demand on inflation Production cost changes Inflation is a fact of life

Before you listen

ilon t really change. The only things that change in this equation are the money supply and average prices This means that when the money supply increases, prices will increase too. For this reason, printing money is rarely ;i solution for economic crises.

(lost-push inflation, on the other hand, occurs when prices rise without an increase 111 demand This happens when suppliers' variable costs increase sharply. For example, workers may demand higher wages or raw materials may become more expensive. Producers then pass these increases on to consumers by raising prices. So, as usual, we are the ones who pay!

Discuss the following with your partner.

High inflation affects the whole economy in different ways. How do you think inflation affects the p e o p l e and organisations listed below? Try to match the p e o p l e and organisations 1 -4 with the effects A-D.

1 p e o p l e on A lose money on loans

a fixed income

В can't get investment

2 banks

С are not so competitive

3 businesses

D can't buy as much

4 exporters

with their money

Before you read

800

w

Discuss these questions with your partner. ЧЕЛОЬЕК <

Look at the photo and answer these questions: БЕЗ Р А Б О Т Ь Я

What are these people doing? -» Нот» do yon think they ieel? Why? -* Why do you suppose they are in this situation?

ff D Vocabulary

C o m p l e t e each sentence with a word or phrase from the box.

can't be bothered • contracts

freelance mobility obsolete region i relocate» retrain

shipyard

tastes

В

Reading 2

People's ш clothes change with Unemployment

fashion and with then age.

If you to do something, you just don't feel like doing it.

. When something it gets smaller.

A is an area of a country.

When a company to another part of the country or abroad, many workers lose their jobs.

-workers are not employees for a company, but are self-employed. If something is it no longer exists because it isn't needed anymore. Ii you lose your |ob due to mechanisation, you may have to go to college and for

T h e r e will always be a certain amount of u n e m p l o y m e n t ill the e c o n o m y . W h e n economists talk about/;;// employment they mean that e v e r y o n e w h o can work ami wants to work has got a j o b A b l e workers w h o arc not working arc simply not happy with the salaries that are offered

or just can't be b o t h e r e d '

However, e c o n o m i e s rarely reach full employ metit. T h e r e are a number of reasons for this, and a n u m b e r of different types of u n e m p l o y m e n t . ' >m o f t h e s i is cyclical unemploymetit. This type of unemployment varies with the growth and recession c y c l e of

something else. the economy As the e c o n o m y grows, demand

AYour

is where ships are built.

is your ability to move from

l'or labour grows and unemployment falls As the economy contracts, unemployment grows

one place to another.

л - AnomEix

JAMH MAX

84

it

A second kind of u n e m p l o y m e n t is structural unemi>loymcnt This occurs when changing public tastes or advances in technology cause a fall in d e m a n d for some types of work. 1 or e x a m p l e , c o m p u t e r technology has revolutionised the printing industry, and many traditional printers' jobs have b e c o m e obsolete. .Sometimes whole regions of a country suffer from high structural u n e m p l o y m e n t . T h e north-east of Knghmd. for e x a m p l e , was famous for m a n y years for its shipbuilding industry (Competition tp-in abroad

forced many shipyards to closc. This caused huge u n e m p l o y m e n t in the region.

How long structural u n e m p l o y m e n t lasts will depend on two things. Firstly, h o w easily the w o r k f o r c e can retrain for new jobs. T h i s may he difficult for older workers w h o find it hard to learn new skills. T h e r e is also the question of w h o pays for the training. T h e second issue is mobility. Workers w h o are able to relocate easily to another part of the c o u n t r y will find n e w j o b s m o r e quickly.

T h e r e are two other kinds of u n e m p l o y m e n t which we should mention here. T h e s e are less serious, perhaps, but they are still difficult for governments to get rid of. T h e first is /fictional unemployment. T h i s is a natural kind of unemployment that occurs w h e n s o m e o n e leaves a j o b and is looking for another o n e that suits them. Frietional u n e m p l o y m e n t o f t e n happens I v c a u s e people want to leave their j o b in order to change careers. Few people walk straight into another j o b . However, w h e n the e c o n o m y is in recession, frietional u n e m p l o y m e n t will be m o r e c o m m o n because j o b s arc harder to find.

T h e second kind is seasonal unemployment S o m e industries h a v e busy |x>riods and |>eriods where there is 110 work at all. S o m e freelance farm workers, for example, get most of their work in the spring and summer. Like structural u n e m p l o y m e n t , seasonal u n e m p l o y m e n t can affect whole regions of a country. Areas that rely 011 s u m m e r tourism, for e x a m p l e , suffer serious unemployment during the autumn and winter months.

E Comprehension

N o w read the text again and choose the best answer or answers for each question.

Which kind of unemployment happens regularly every year?

cyclical unemployment structural unemployment frietional unemployment seasonal unemployment

Which kind of unemployment happens because of advances in technology?

cyclical unemployment structural unemployment frietional unemployment seasonal unemployment

Which kind of unemployment may happen because someone wants it?

cyclical unemployment structural unemployment frietional unemployment seasonal unemployment

Which kind of unemployment happens because of changes in economic growth?

cyclical unemployment structural unemployment frietional unemployment seasonal unemployment

Which kind of unemployment happens in particular parts of the country? (2 answers)

cyclical unemployment structural unemployment frictionai unemployment seasonal unemployment

Before you listen

Discuss these questions with your partner.

The chart below shows the trends in unemployment in two countries. Look at the chart, and answer these questions.

What does the vertical axis show? What does the horizontal axis show? What two countries are shown?

-» How many years are shown?

Are there any similarities between the curves

for the two countries?

TF Listening H))) N o w listen and write the correct percentages on the chart.The first answer has been done for you. Unemployment in Germany and the USA 1995-2005

-Germany

USA

1995 1997 1999 2001 2003 2006

Mj-.mii n (J ч f v to ttonont' ь U »> • t 85

G Speaking 9 H Writing

Discuss these questions with your partner.

Is inflation a problem in your country? Why- Why not? How does unemployment affect people psychologically? What kmd(«) of unemployment do you think affect the area where you live? Can you talk About the lustory of unemployment in your country since the 70s like the diagram in exercise Г listening on page 85?

W o r k in groups of three or four. Imagine you and your friends are running the country.Things are not going well! H e r e are some of your problems.

unemployment is high (12%)

the rate of inflation is also high workers are going on strike for

higher wages your large steel industry is losing money because of foreign competition

Talk to each other and decide which of those problems is the most important. Then decide what you can do to make things better. In your discussion think about:

retraining / relocation of workers cost-push inflation the money supply

Use the space below to make your notes.

Imagine you are a shipyard worker who has just b e c o m e unemployed because the government has decided to close down the shipyards.Write a letter to a friend explaining what's happened and how you feel about it.

Informal letter

Use this plan to help you.

Greeting

PARAGRAPH 1

Think your friend for his/her last letter. Respond to a piece of news he she had in lus/ her letter. Tell your friend your bad news

PARAGRAPH 2

Explain how you lost your job. Explain what the government's reasons were for closing the yard (inflation made exports uncompetitive'.

PARAGRAPH 3

Explain how you feel about losing your job. How is it affecting you and your family?

PARAGRAPH 4

Explain what you're planning to do i retrain relocate?).

Sign off

W r i t e 100-140 words

*

|L

Notes:

Pronunciation guide

Culprit kslprn Velocity v;»li»oti Deflation ii tk-i n. Equation rkw^ryi Freelance tri:k::;i-. Revolutionise ievoiu:|.->nai/ Shipyard |ipi<-:il Inflation ml!ei[n

V J86 Hife.lim Gulda to tconomn Uait 14

Revision Vocabulary Units 13 to 16

DOWN

Circle the word in each group which does

not fit.

kinds of money

things you can do in a bank

kinds of inflation

kinds of unemployment

economic problem

other words for money

Now write six example sentences using as many words as possible from this exercise.

ACROSS

3 People buy these from the government as a way to

invest their money.

2 The money that a bank keeps ir. its account at the

central bank. 8 A bank loan given to house buyers. 9 Governments try to get the economy working so it

uses all its resources. 10 This is another word for fake money.

1 This is the cost of borrowing money.

2 A kind of income tax system. 4 The whole income of a country is called the gross

national 5 When money is paid back. 6 The oil crisis of the 1970s caused an economic

С Read this letter and fill in the gaps with the words and phrases from the box.

• allowance • cash till И knock-on effect

• lend • make ends meet • obliged

• plus • purse • relocated • transport

Dear Gill.

How are you getting or. at university? As you know,

rather than studying, 1 decided to get a job but you will bo surprised to hear my news

I didn't take the job I was offered in the

11 department because 1 was also offered another job in a bank! You may well be wondering why and the answer is simple - money! It would have been hard to (21 or the salary the first job paid. As a single }x;rsor. my personal (3) isn't very much so I have to pay a lot of tax. Being paid well is always a

14 > in any job! Added to that. I'm not ! 5) to work in the city centre which

is something I'd prefer to avoid and neither do I

run the risk of being (6) I'd hate to have to move.

Anyway, the position I have is working at a

(71 As you can imagine. I see a lot of things in a day it's never boring Take yesterday. Well, an old lady came to my counter, opened her bag and took out her (St Then she began to count a huge pile of coins and notes in front of me. This went on for a while, then the man behind her started to complain. Of course that had a(n) (9) and soon the whole bank was going crazy, all the customers arguing. Throughout all of this the old woman continued her counting! Well, she deposited her life savings and the customers calmed down. 1 must say. perhaps there's a bit too much excitement sometimes. I may move to the loans department in the future. It might be easier to (10) people money.

Anyway, let me know how you're getting on. Love. Helen xxx

M j r n, I г t» • $ V !o tconoi-' [J Rtv.lienVc^lb I » r U - n I) u- (• 8/

people generations family ownership having belonging

Unit

Before you read

Discuss this question with your partner.

What do you think makes an economy grow?

boils over bang roller-coasters

growth

discovery overheat plenty hard-working challenge economist sustainable

overheats boom big wheels

increase

recovery recover a shortage rich race prime minister sustained

warms up balloon bumper

cars progress slump struggle none lucky boom chancellor sustaining

Choose the correct answer А, В or С from the list opposite.

Economic growth

In many ways life for previous was much more difficult. Many millions ol' people enjoy ;i quality ol' life

Home . of Europe.

has increased in many parts

today that previous generations could not have dreamed ot. Home ownership, private cars and holidays are now standard tor most families in

When the economy grows dangerously fast, we say it

A is when the economy is growing quickly.

are fairground rides like trains that

go up and down very fast.

in technology in the last 30 years has been incredible.

is when you get better after something bad like an illness - or economic depression.

When you you fight or work hard for something.

Don't buy anymore milk. We've got in the fridge. A fortunate person is very Mountain climbers are people who enjoy a

The is the government minister responsible for the economy.

growth is growth that can continue for a long time.

industrialised countries. And yet at the same time, billions of people in other countries live without oven clean drinking water. How can this be? File answer is that the fortunate few live in countries with sustained economic growth.

An economy is growing when the gross luttionul jmnhtct is increasing year after year. When economists calculate economic growth, though, they must take into account the effects of inflation. For example, imagine that the gross national product of a country increased from S500 billion to <S5H> billion from one year to another That's an increase of two per cent in output. Very impressive! However, if the rate of inflation was two per cent, then there has been no real growth at all.

The other thing to remember about economic growth is that not all growth is good. (ioverninents want steady, sustainable growth. Sudden, sharp increases in growth - a boom - can cause the economy to overheat and fall into recession For many economies, the long run growth over many years is steady, but the short run is a roller-coaster ride of boom and depression. For

88 J • "v : Г.4 _A. t гя ( r ^ ' n ^ ' f l ,•( 17

instance, the long run growth of the ГК e c o n o m y since l')5o has Ix'en a steady 2.5"» per year. However, it' you look closely at any decade you'll see that there is a cycle ol' growth, recession and recovery. The truth is. steady growth in the short term is very hard to achieve.

Nevertheless, many countries are still struggling u> achieve un у kind <>i grow th at all. Why is this- W hat is necessary for growth to happen'r Many economists have tried to find the answer to this question, and there are plenty of theories to choose from. However, most economists agree that three things are essential for economic growth to occur: capital growth, savings and technological progress.

Capital refers to the factories and machinery that the labour force uses to turn raw materials into products More workers and more raw materials will only lead to a certain amount of growth. Kventually. the economy needs more capital for the labour to use. Capital growth can also include training and education for the labour force. This makes the workforce more efficient, creative and productive.

Of course, someone has to pay for the new machines and training. In other words, capital growth needs investment. Money for investment needs to 1н> borrowed from banks. Banks can only lend if customers make savings. This is why- savings are so important for growth. However, the economy will not grow if everyone is saving and no one is spending. (Jetting the right balance between consumption ami saving is another part of the challenge of economic growth.

Hut above all. technology is the real miracle worker of economic growth An advance in technology can increase productivity from the same amount of capital and resources: just what the chancellor ordered!

* В Comprehension

Now read the text again and choose the sentence which best summarises each paragraph.

Economic growth does not happen everywhere. Econortuc growth did not happen in the past. Economic growth happens only in industrialised countries.

GNP and economic growth are the same thing. An increase in GNP always means the economy is growing. An increase in GNP may not show economic growth.

All growth is good. Fast growth is good. Steady growth is good.

The majority of economists believe three factors positively influence economic growth. Economists are sure about what causes economic growth. Economists have no idea about what causes economic growth.

The economy needs more raw materials to grow. The economy needs more machines and factories in order to grow. The economy needs more labour to grow.

For economic growth there needs to be more spending and less saving. For economic growth there needs to be more saving and less spending. Tor economic growth there needs to be the right amount of saving and spending.

Technology creates more raw materials with less labour. Technology creates greater output from the same amount of capital, labour and materials. Technology creates more labour with fewer raw materials.

N i < гл | „ < -i i ri e i 1 л ч e * ₁11 i_i( I ? 89 5

Before you listen

Discuss these questions with your partner.

Look at the photo below and answer these questions:

What country is this? What do you know about its economy?

-> What countries are sometimes called the East

Asian Tigers. Do you know why? Which of the? things listed in С Listening helped the East Asian Tigers to grow?