11 Aggregate demand

decision-making units – самостійна господарча одиниця, наділена правом приймати рішення aggregate demand – сукупний попит

expenditures – витрати, видатки household – домашнє господарство, сім’я purchases – закупівлі

The economy of any advanced country is very complex. It involves millions of individual decision-making units – individuals, business and governments make billions of decisions daily.

Microeconomics is the branch of economics that deals with decision-making and other behaviour by these individual units. Another branch of economics, known as macroeconomics, deals with large groups or aggregates. Because GNP deals with the output of the country as a whole, it is macroeconomic concept.

As a first step in understanding the macroeconomics we think of the economy as being made up of several different parts called sectors. These sectors represent individuals, business, government and foreign markets. The sum of expenditures of these sectors is known as aggregate demand. When aggregate demand or spending falls over a period of one to two years, the economy tends to go into recession, while a rise in aggregate demand tends to lead to booms in the economy.

One part of the economy is the consumer sector. The basic unit in this sector is the household, which is made up of all persons who occupy a house, flat, or room.

The business or investment sector is made up of proprietorships, partnerships, and corporations. It is the productive sector responsible for bringing the factors of production together to produce output.

The public sector is the part of the economy of a country that is owned or controlled by the government. It includes the local, regional and state levels of government.

The foreign sector includes all consumers and producers outside the country.

Ukraine, for example, exports aeroplanes and farm products to foreign buyers. It also imports a large number of different items from foreign countries. It makes no difference whether foreign buyers are governments or private investors or if purchases are made from governments or private individuals. They are all part of the foreign sector.

1 What does microeconomics deal with? 2 Macroeconomics deals with large groups or aggregates, doesn’t it? 3 Why is GNP considered as macroeconomic concept? 4 What do the sectors of the economy represent? 5 What is the basic unit in the consumer sector? 6 What is the business or investment sector made up of? 7 Is the business sector of the economy responsible for bringing the factors of production together to produce output? 8 What does the public sector include? 9 Does the foreign sector include all consumers and producers outside Ukraine?

I. Match the antonyms:

To export, income, to import, demand, to consume, to produce, supply, private sector, expenditure, buyer, external, microeconomics, public sector, macroeconomics, boom, unlike, native, internal, different, recession, similar, like, foreign, seller.

ІI. Match the terms with their definitions:

1. microeconomics	a. A fall in business activity lasting more than a few months, causing stagnation in a country’s output.
2. macroeconomics	b. Quantity of goods and services produced or provided by a business organization or economy.
3. aggregate demand	c. The study of the individual parts of the economy, with special attention to the market process and how it works.
4. recession	d. The total demand for goods and services in the economy.
5. boom	e. The peak of the business cycle; the economy is expanding and aggregate demand is rising quickly.
6. output	f. The study of the economy as a whole.
7. public sector	g. Regular fluctuations in the level of economic activity in an economy.
8. investment	h. Part of the economy that is owned and controlled by the state, namely central government, local government, and government enterprises.
9. business cycle	i. Using money to purchase real capital (equipment, new tools, industrial buildings) to be used in the production of goods and services.

ІІІ. Define which of the following items best completes the statement:

1 An increase in aggregate demand would most likely mean an increase in spending by ...

a. business b. government

c. consumers d. all of them

2 The macroeconomics is:

a. government’s share of the nation’s output b. goods and services that are produced but not sold in the marketplace

c. everything produced in the nation d. none of these

3 Rising unemployment, together with a reduction in business spending and production, is characteristic of ..

a. boom b. contraction

c. recession d. expansion

ІV. Fill in the blanks below with the most appropriate terms from the list:

aggregate demand; recession; decision-making; economics; corporations; consumers; items; services; proprietorships; the public sector; producers; goods; booms; the private sector

1 Microeconomics is the branch of ________ that deals with ________ and other behaviour by these individual units. 2 The sum of expenditures of these sectors is known as _________. 3 When aggregate demand or spending falls over a period of one to two years, the economy tends to go into ________, while a rise in aggregate demand tends to lead to ___________ in the economy. 4 The business or investment sector is made up of __________, partnerships, and ___________. 5 In a free market economy, __________ is responsible for allocating most of the resources within the economy. 6 Most _________ and __________ provided by __________ in any economy are allocated on the basis of need rather than on ability to pay. 7 Foreign sector includes all _________ and _______ outside the country. 8 Ukraine imports a large number of different _________ from foreign countries.