Last year was a good year in the USA and the economy grew / declined by 3.4%. The slump /growth was caused by consumer spending and borrowing. However, sales in the shops are now falling and the economy is experiencing a slight downturn / boom. The fear is that if the government does not act, this may become a long boom /recession.
Last year, the housing market began to slow down and now decline / demand for new houses is strong / weak and prices of new homes are falling. The main concern is that the buoyant / sluggish demand for housing may result in a fall in consumer spending.
In Japan, growth has stopped. The size of this now has contracted / expanded in the last two quarters of the year. The risk is that the economy will now move into a recession / recovery. Domestic demand is strong / sluggish and the construction industry is expanding / experiencing a recession. On the positive side, exports remain strong fed by world supply / demand for consumer goods and cars, but the fear is that companies will suffer from buoyant / sluggish conditions.
The Eurozone economy last year enjoyed one of its best years for a decade and contracted / grew by 3.4%. In Germany, the engineering sector experienced / suffered a strong recovery with buoyant / weak demand for machinery and cars. After many bad years, consumer has turned positive and now is experiencing a slump / recovery and the European Central Bank is trying to cool / stimulate demand by increasing interest rates.
Mediterranian countries performed less well. With families facing higher fuel and food costs, consumer demand in Italy was strong / sluggish. The fear is that, if this continues, the economy will fall into a boom / recession next year unless there is a change in government policy. Government efforts so far to decline / stimulate demand have not had much success.
15. a) Complete the text by using the following words:
Inflation is a rise in the general level of prices. It is caused by an (1) _____ of demand over supply, and is related to an increase in the money (2) ______. Single-digit inflation is usually described by economists as moderate inflation. Double or triple-digit inflation, which some countries have survived for quite long period, is known as galloping inflation. Inflation of four or more digits, as in Germany in the early 1920s, and Argentina in the early 1980s, is known as (3) _____. Prices in general tend to remain at the same anticipated level unless there are demand-pull or cost-push shocks. If aggregate demand exceeds what a country can produce at full (4) _____ , prices will rise (including wages, the prices of labour): this is demand-pull inflation. But, for the last fifty years, costs have pushed up prices and wages, even in recessions and period of high (5) ______ this is cost-push inflation. Cost-push inflation is caused, for example, when unions demand wages that employers cannot afford or when oil (6) _____ are able to raise their prices. The opposite of inflation, when prices fall (generally for short periods), is (7) _______. Government policies can be inflationary, disinflationary or reflationary. Disinflationary policies might be aimed at slowing down price inflation or at reducing imports; they involve reducing demand by raising taxation and/or cutting government (8) _____. Reflationary policies, on the contrary, involve revitalizing a sluggish economy by increasing consumer demand, either by cutting taxes or raising benefits, or relaxing monetary and credit (9) ____. Inflation is measured by the retail price index (RPI) in Britain and the (10) _____ consumer price index (CPI) in the US. These measure the cost of a ‘basket’ of goods and services, including food, clothing, housing, fuel, transport and medical care. The individual items in price and services, including food, (11) _______, meaning that allowance is made for their relative importance in people’s spending. Unless inflation is both balanced (affecting all prices and costs equally) and anticipated, it distors relative prices, tax rates and real (12) ______ rates. Unexpected inflation tends to benefit people with fixed nominal interest rate (13) _______, and to disadvantage creditors and people with fixed nominal interest rate (14) ______ or non-index-linked pensions.
b) Answer the following questions:
1. What is the inflation rate in your country at present?
2. Can you give current examples of double and triple-digit inflation?
3. What is your government’s policy at the moment? Does it seem to be more concerned with pricestability or whit reducing unemployment?