3. Illustrate the consequences of high inflation using the information from the text.

4. Give the best definition for the following economic terms.

Inflation, hyperinflation, stagflation, deflation, cost-push inflation, demand-pull inflation, wage-price spiral.

5. Choose the variant that best explains the idea of the sentence below.

In this way, the dollar loses value over time.

1. The dollar declines when it loses value in relationship to foreign currencies.

2. A weak dollar influences whether Americans can afford a trip overseas and how much they spend in a foreign country.

3. The U.S. dollar has decreased in value against the world's major foreign currencies, more than 22% since early 2002.

6. Explain the relationship between the terms in each of these pairs.

1) Consumer price index – producer price index; 2) demand-pull inflation – cost-push inflation; 3) hyperinflation – deflation; 4) to reduce consumers’ purchasing power – to increase consumers’ purchasing power.

7. Comment on the sentence “Inflation also encourages speculation”.

8. Give profound answers to the following questions:

1. Why does inflation occur? What does inflation affect? How?

2. How is a CPI compiled?

3. Why might a person who is working cope with inflation better than a retired person?

4. How are cost-push inflation and demand-pull inflation alike and how are they different?

5. What does the wage-price spiral explain?

6. How can inflation distort the distribution of income?

7. Who do you think loses from inflation? Who wins from it?

8. Why is stagflation considered to be the result of cost-push inflation but not demand-pull inflation?

C. How the text is organised

1. What do these words refer to in the text?

1) which (§1); 2) that (§4); 3) this (§4); 4) that (§4); 5) that (§6).

2. Find the paragraphs of the text dealing with.

1) the demand-pull and cost-push inflation theories; 2) the concept of a market basket; 3) the concept of CPI; 4) the period of long inflation; 5) consequences of high inflation; 6) the way economists measure inflation; 7) inflation mechanism in economy; 8) basic causes of inflation.

V. Speaking

A. Giving your opinion

Express your opinion on the following statements.

1. Too much money chases too few goods.

2. If everyone expects inflation to occur, it will.

B. Discussion

Work in pairs or groups. Discuss your views on the following issues.

1. Who would be the first to experience inflation, producers or customers?

2. Suppose you live in a country that is experiencing a period of hyperinflation. Imagine a scene at a town market where you are making purchases to meet your basic needs.

3. If you were a business owner, what decisions might you make on the news of a steady rise in inflation?

C. Project Work

Use the diagram below to reveal causes and effects of inflation. Present your information to the group. Be ready to answer your fellow students’ questions.

D. Case Study

Read the text and do the tasks given below.