9. The nation's economy. Gnp. Economic indicators. (Unit 7. Ex. 7.3;

ex. 7.5.2; ex. 7.5.3; ex. 7.5.4)

Economists study different sides of the economy in different ways. Microeconomics is the part of economics that analyses specific data affecting an economy. Macroeconomics is the branch of economics that analyses interrelationships among sectors of the economy.

Macroeconomists measure gross national product, or GNP, which is the value of all goods and services produced for sale during one year. Three factors limit the types of products counted.

First, only goods and services produced during a specific year are counted. Second, economists count a product or a service only in its final form. Third, GNP includes only goods sold for the first time. When goods are resold or transferred, no wealth is created.

One way in which economists measure GNP is the flow-of-product approach. Using this method, they count all the money spent on goods and services to determine total value. Each time a new product is sold, GNP increases.

Spending for products falls into four categories. The first, and the largest, consumer spending, includes all expenditures of individuals for final goods and services. This category accounts for about 65%of GNP. The second category includes all spending of businesses for new capital goods. It accounts for about 13 % of GNP. The third category includes spending of all levels of government. Government purchases of goods and services account for about 21% of GNP. The fourth category is net exports of goods and services, about 1% of GNP.

Another way of determining GNP is the earnings-and-cost approach. This method accounts for all the money received for the production of goods and services, it measures receipts. Figuring GNP by counting what people receive requires calculating what the entire country earns for the goods it makes and the services it performs.

Business and government planners, investors, and consumers make decisions based on their expectations of future economic performance. To help predict expansion or contraction of the economy, government economists identified a number of indicators. They fall into three categories: leading, coincident, and lagging. Leading economic indicators rise or fall just before a major change in economic activity. Coincident economic indicators change at about the same time that shifts occur in general economic activity. Lagging economic indicators rise or fall after a change in economic activity.

Following and interpreting all economic indicators is time-consuming. Therefore a composite index was created for each of the three sets of indicators. These composite indices are an average of all the indicators in each category.

10. Money. Banking and monetary policy. Money: role, forms, functions. (Unit 8. Ex. 8.3). (Unit 8. Ex. 8.6. Dialogue)

Money is necessary in most economies. It serves as a means of exchange and a store and a standard of value. Currency, used in modern societies fulfills these functions. In addition to currency, people may use near money. They may be savings accounts, stocks, and bonds, insurance policies. All these is a store of value that can easily be exchanged for money. Money comes in several forms. Money in the form of paper bills and metal coins is currency, or cash. But in a modern world people are more used to electronic money and banking or credit cards. Most money is in the form of checking accounts.

People use money every day. In general, money is any item that is widely accepted as payment for products. Most of the items used as money have had value only because people agreed that they could be exchanged for goods and services. In other words, what is used as money often has little value of its own. Its value comes from the product for which it can be exchanged.

In most modern economies money serves several functions. As a means of exchange money is used to trade for goods and services. It helps to avoid barter.

As a store of value people use money to save their wealth for the future. Storing money is much more easier than storing perishable goods. Money can be kept in a bank or a safe or a pocketbook until it is needed.

As a standard of value money is used to compare the worth of one product with that of another. The value of all goods and services the economy produces can be determined by adding up their prices.

Money is very important in our society. As a store and a standard of value and as a means of exchange, money helps the economy run smoothly. The market system determines how much money everything is worth. Thus, people often are judged by how much money they earn.