Inflation

mild inflation – слабка інфляція

unforeseen inflation - непередбачувана інфляція

galloping hyperinflation - галопуюча інфляція .

deflation - делефляція

in inflation - при інфляції

by inflation - під інфляцією

relative prices - відносний рівень цін

to tend to favour

debtors - приносити зиск боржникам

price trend - тенденція руху цін

to send prices up - викликати подальше зростання цін

to bid prices up - сприяти зростанню цін

total spending - сукупні витрати

at the expense of smb. - за рахунок когось

fixed income receivers - отримувачі фіксованих прибутків

purchasing power - купівельна спроможність •

output is near capacity - випуск продукції наближається до виробничих можливостей

to be wiped out - бути знищеним

full employment economy - економіка повної зайнятості

uncollectible debts - нестягнені платежі за кредит

By inflation we mean a time of generally rising prices for goods and factors of production. By deflation we mean a time when most prices and costs are falling.

Neither in inflation nor in deflation do prices all move in the same direction or in exactly the same proportion. As a result of changes in relative prices and in total spending, the two processes of inflation and deflation cause definite and characteristic changes in the distribution of income among economic classes and total output.

Unforeseen inflation tends to favour debtors and profit receivers at the expense of creditors and fixed income receivers. Deflation has an opposite effect.

Suppose you lend $1.000 today and are paid back one year from now. If in the meantime prices have doubled, then your debtor will be paying back only one-half as much real purchasing power as you gave him.

On the other hand, one who invests his money in real estate, common stocks, or sacks of flour makes a great money profit during unforeseen inflation.

In time of deflation the shoe is on the other foot. Creditors and fixed-income receivers tend to gain at the expense of debtors and profit receivers.

Modern research suggests that the greatest redistribution of income resulting from inflation is from older people to younger people. The dollars one puts aside at 25 for retirement at 70 often shrink in purchasing power: if prices rise at an average rate of about 3 per cent per year, the real purchasing power of a dollar held for 45 years will halve and halve again in that period.

Wildest inflations historically come with periods of war.

Aside from redistributing incomes inflation may affect the total real income and production of the community.

An increase in prices is usually associated with high employment. In mild inflation the wheels of industry are initially well-lubricated and output is near capacity. Private investment is brisk, jobs are plentiful.

In deflation on the other hand the growing unemployment of labour and capital causes the community's total well-being to be less; so in a sense, the gainers get less than the losers loose. As a matter of fact, in deep depression, almost everyone-including the creditor who is left with uncollectible debts -suffers.

Slow price increases are one thing. But when each increase in prices becomes the signal for an increase in wages and costs, which again sends prices up still further, we might be in the midst of galloping hyperinflation. Production and even the social order are then disorganized. The total wealth of large groups of the population is wiped out as money becomes worthless. Debtors ruthlessly pursue creditors in order to pay off their obligations in valueless money. Speculators profiteer. Housewives rush to spend their husbands' paycheques before prices rise still further, but in doing so they only bid prices up even further.

Ideally we all want a progressive, full-employment economy in which the excesses of the business cycle are moderated and there is no inflation.

QUESTIONS AND TASKS

1. Revise the content of the text. Take the part of a teacher and prepare series of questions to check your fellow-students understanding of the text.

2. Be prepared to take part in discussion on the following questions: What types of inflation do you know? Which type is the worst? Why? What is more preferable in hyperinflation to buy or to sell goods? Would you hoard up money or would you try to get rid of it in any way in the period of great inflation?

Can you give own examples of how inflation in Ukraine influenced your family budget?

3. Are we suffering inflation or deflation in this country nowadays? Analyse the state of its economy, the price trend, the purchasing power of gryvnya.