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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 numlvr of transactions don't really change. The only things that change in this equation are the money supply and average prices This means that when the motley supply increases, prices will increase too. For this reason, printing пюпеу is rarely a solution for economic crises.
(lost-push inflation, on the other hand, occurs when prices rise without an increase in 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. S<>, as usual, we are the ones who pay!
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 o£ life
Before you listen
Discuss the following with your partner.
people
on
a
fixed income
banks
businesses
exporters
A lose money on loans
В can't get investment
С are not so competitive
D can't buy as much with their money
Before you read
Discuss these questions with your partner.
Look at the photo and answer these questions:
What are these people doing? -» Нот» do yon think they ieel? Why? -* Why do you suppose they are in this situation?
ff D Vocabulary
л
- bnomEii JAMH
MAX
it
84
can't be bothered ■ contracts freelance mobility obsolete region i relocate» retrain shipyard tastes
People's ш clothes change with
fashion and with their 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.
If you lose your |ob due to mechanisation, you
may have to go to college and for
something else.
A is where ships are built.
Your is your ability to move from
one place to another.
В Reading 2
Unemployment
There will always be a certain amount of unemployment in (lie eeonoinv. When economists talk alxHit/u// employment they mean that everyone who can work ami wants to work has got a job Able workers who are not working are simply not happy with the salaries that are offered or just can't be bothered'
However, economies rarely reach full employ niein. There are a number of reasons for this, and a number of different types of unemployment. < >m ofthesi is cyclical unemployment. This type of unemployment varies with the growth and recession cycle of the economy As the economy grows, demand l'or labour grows and unemployment falls As the economy contracts, unemployment grows
800
w
ЧЕЛОЬЕК
<
БЕЗ
РАБОТЬЯ
forced many shipyards to closc. This caused huge unemployment in the region.
How long structural unemployment lasts will depend on two things. Firstly, how easily the workforce can retrain for new jobs. This may he difficult for older workers who tind it hard to learn new skills. There is also the question of who pays for the training. The second issue is mobility. Workers who arc able to relocate easily to another part of the country will find new jobs more quickly.
There are two other kinds of unemployment which we should mention here. These are less serious, perhaps, but they are still difficult for governments to get rid of. The first is /fictional unemployment. This is a natural kind of unemployment that occurs when someone leaves a job and is looking for another one that suits them. Frietional unemployment often happens Ivcausc people want to leave their job in order to change careers. Few people walk straight into another job. However, when the economy is in recession, frietional unemployment will be more common because jobs are harder to tind.
The second kind is seasonal unemployment Some industries have busy |x>riods and jieriods where there is 110 work at all. Some freelance farm workers, for example, get most of their work in the spring and summer. Like structural unemployment, seasonal unemployment can affect whole regions of a country. Areas that rely 011 summer tourism, for example, suffer serious unemployment during the autumn and winter months.
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?
T
F Listening H)))
Now listen and write the correct percentages on the chart.The first answer has been done for you.
E Comprehension
-Germany
USA
1997
1995
1999
2001
2003
2006
Which kind of unemployment happens regularly every year?
Unemployment inGermany and the usa 1995-2005
M I ■. ш 11 n (in (■» to ttononc ь U »> • t »<■ 85
G Speaking
Discuss these questions with your partner.
Is inflation a problem in your country? Why- Why not?
How does unemployment affect people psychologically?
What kmd(s) 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 likt> the diagram in exercise Г Intoning on page 85?
Work in groups of three or four. Imagine you and your friends are running the country.Things are not going well! Here 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.
Notes:
9 H Writing
Imagine you are a shipyard worker who has just become 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
Thank your friend for his/her last letter. Respond to apiece of news he she had in his/ her lettor.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 (retrain relocate?).
Sign off
*
|L
Pronunciation guide
Culprit kslprn Velocity v;»li»oti Deflation ii tk-i n, Equation rkw^tyi Freelance tri:k::;i-. Revolutionise rew>iu:|.->nau Shipyard |ipi<::il Inflation mtleijn
86
Mifieilim Guida to ttononin Uait 14
Revision Vocabulary Units 13 to 16
Circle the word in each group which does not fit.
kinds of money
things you can do in a bank
kinds of inflation
DOWN
This is the cost of borrowing money.
-
A kind of income tax system.
The whole income of a country is called the gross national
When money is paid back.
The oil crisis of the 1970s caused an economic
kinds of unemployment
economic problem
otliei 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.
A bank loan given to house buyers.
Governments try to get the economy working so it uses all its resources.
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
Mirn, I г t» ■ $ V !o tconoi-' [J Rev.*ifiVcah i»r U - n l) u- (• 8/
plus ■ purse ■ relocated ■ transport
Unit
Before you read
Discuss this question with your partner.
What do you think makes an economy grow?
|
people |
generations |
family |
|
ownership |
having |
belonging |
|
boils over |
overheats |
warms up |
|
bang |
boom |
balloon |
|
roller-coasters |
big wheels |
bumper |
|
|
|
cars |
|
growth |
increase |
progress |
|
discovery |
recovery |
slump |
|
overheat |
recover |
struggle |
|
plenty |
a shortage |
none |
|
hard-working |
rich |
lucky |
|
challenge |
race |
boom |
|
economist |
prime minister |
chancellor |
|
sustainable |
sustained |
sustaining |
Choose the correct answer А, В or С from the list opposite.
In many ways life for previous was
much more difficult.
Home . has increased ш many parts
of Europe.
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
88
J ■ "v : Г.4 A.
t гя
[• - "pvn ,■( 17
Economic growth
Many millions of people enjoy a quality of life today that previous generations could not have dreamed of. Home ownership, private ears and holidays are now standard for most families in industrialised countries. And yet at the same time, billions of people in other countries live without even clean drinking water. How can this be? The answer is that the fortunate few live in countries with sustained economic growth.
An economy is growing w hen the gross luttionul jmnhict 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 <S51" billion from one year to another That's an increase of two per cent in output. Very impressive! Howev er, 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. < iovermnents 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
instance, the long run growth of the ГК economy since lc>5<> has Ix'cn a steady 2.5"» per year. However, if you look closely at any decade you'll see that there is a cycle of growth, recession and recovery. The truth is. steady growth in the short term is very lianl to achieve.
Nevertheless, many countries are still struggling u> achieve any kind of 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 ol 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 ean 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. (letting the right balance between consumption ami saving is another part of the challenge of economic growth.
but 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!
GNP and economic growth are the same thing. An increase in GNP always means the economy is growing.
Ar. increase in GNP may not show economic growth.