ECONOMIC STABILITY

1. Do you agree that economics is helpful in everyday life? Give your arguments.

2. Try to think of several important decisions that you have made recently. What was the opportunity cost of each decision?

3. Do you think economics is a theoretical or applied discipline?

4. Imagine a world without a problem of scarcity. Would you enjoy living in such a world?

5. Are there any countries with traditional economies nowadays?

6. Is it correct to say that all major economies in the world are market economies?

7. How can you define the economic system of Belarus?

VOCABULARY

GLOSSARY

· Economics is the study of how individuals and society choose to allocate scarce resources in order to satisfy unlimited wants.

· Economy is a system by which industry, trade and money are organized.

· Entrepreneurship is a special type of labour. An entrepreneur combines resources to produce innovative products.

· Macroeconomics applies an economy wide perspective that focuses on such issues as inflation, unemployment, and the growth rate of the economy.

· Microeconomics examines individual decision-making units within an economy.

· Models are simplified descriptions of reality used to understand and predict economic events. An economic model can be stated verbally or in a table, graph, or equation.

· Needs are basic necessities or requirements.

· Opportunity cost is the value of what is foregone in order to have something else.

· Resources are factors of production classified as land, labour, and capital.

· Scarcity is the fundamental economic problem that human wants exceed the availability of time, goods, and resources. Individuals and society therefore can never have everything they desire.

· Types of economies:

In command economies the basic economic questions are answered by government officials.

In a market economy, basic economic questions are answered by individual households and businesses through a system of freely operating markets.

In mixed economies, a distinction is usually made between the private sector, in which decisions are made primarily by individual households and businesses, and the public sector, in which decisions are made by the government.

Transition economies face the task of moving from a centrally-planned system of resource allocation towards a more market-oriented approach.

· Want is a desire for sth.

· s or requirements.

· Opportunity cost is the value of what is foregone in order to have something else.

· Resources are factors of production classified as land, labour, and capital.

· Scarcity is the fundamental economic problem that human wants exceed the availability of time, goods, and resources. Individuals and society therefore can never have everything they desire.

ECONOMIC STABILITY

I. Read and memorize the following words, word-combinations and word-groups:

circumstance — обставина

e.g. In some circumstances the President and Congress can choose to increase taxes or reduce government spending or both.

to have serious drawbacks — мати серйозні недоліки

e.g. Fiscal policy solutions have several serious drawbacks.

revenue — прибуток

e.g. A budget deficit means that the government's revenues will be less than its expenditures, and the government's debt wiII increase.

fiscal policy — фінансова політика

e.g. Fiscal policy is applied by changing the level of tax receipts relative to federal spending.

monetary policy — грошова політика

e.g. Monetary policy refers to regulating the supply of monеу as a way of stabilizing the economy.

tax receipts — грошові надходження від оподаткування

e.g. It is the responsibility of the President to control the level of this tax receipts in the country.

budget deficit — дефіцит бюджету

e.g. Budget deficit occurs when government's revenues are less than its expenditures.

money supply — грошові надходження

e.g. A reduction in the money supply will serve to reduce demand and lower prices.

II. Give English equivalents of the following:

підвищувати податки –

зменшувати податки –

стабілізувати економіку –

контролювати податки та витрати –

застосовуватися в потрібний момент –

змінювати рівень грошових надходжень за рахунок податків –

випускати гроші –

попит на товари –

дефіцит бюджету –

спад виробництва –

III. Fill in the blanks with appropriate words:

a) reduced; b) fiscal policies; c) inflation; d) federal spending; e) timed;

f) budget deficit; g) money; h) drawbacks; i) circulation

1. Fiscal policy is applied by changing the level of tax receipts relative to ... .

2. When taxes are ..., individuals and business firms will have more money available to spend for the things they want.

3. When properly applied, ... can provide effective tools with which to fight recession and ... .

4. Fiscal policy solutions have several serious ... .

5. When government reduces taxes to fight a recession, it often creates a ... .

6. The federal government can also finance its debts by printing ....

7. Fiscal policies must be ... so that they are applied at the right moment.

8. There is a direct relationship between the amount of money in ... and the level of business activity.

IV. Read and translate the text

Ever since the days of the Great Depression, the federal government has sought to stabilize the economy.

To achieve these goals the government relies upon two sets of «tools» or strategies: fiscal policy and monetary policy.

Fiscal Policy. Fiscal policy is applied by changing the level of tax receipts relative to federal spending. It is the responsibility of the President and Congress because they control taxing and spending.

When taxes are reduced, individuals and business firms will have more money available to spend for the things they want. As business and consumer spending begins to increase, the economy will enter the expansion phase. If taxes are increased consumers and business would have less to spend. This would create a contraction in the total demand for goods that should reduce inflation.

Fiscal Policy Has Its Critics: Many economists feel that when properly applied, fiscal policies can provide effective tools with which to fight recession and inflation. Others, however, believe fiscal policy solutions have several serious drawbacks.

— When government reduces taxes to fight a recession, it often creates a budget deficit. That is its revenues will be less than its expenditures, and the government's debt will increase. When taxes are reduced, the government can still spend because it can borrow or print money.

If the government chooses to borrow from the public to offset a tax reduction, the money it borrows cannot be spent by the lenders.

— The federal government can also finance its debts by printing money.

Unfortunately, such increases in the money supply tend to fuel inflation by pushing up prices. For that reason a number of economists are opposed to this strategy.

Fiscal policies must be timed so that they are applied at the right moment.

Monetary Policy. Monetary policy refers to regulating the supply of money as a way of stabilizing the economy. Monetary policy is the responsibility of the Federal Reserve System.

There is a direct relationship between the amount of money in circulation and the level of business activity. When the mo­ney supply is increased, consumer spending and business spending tend to increase with it. It follows that in time of contraction and recession, an increase in the money supply will help to bring about economic recovery. When the opposite situation prevails and the booming economy is pushing up prices in an inflationary spiral, a reduction in the money supply will serve to reduce demand and lower prices.

V. Answer the following questions:

1. What strategies does government rely upon to promote maximum employment, production and purchasing.

2. What is fiscal policy?

3. How is fiscal policy applied?

4. In what ways could the recession be reversed?

5. What will happen when business and consumer spending begins to increase?

6. Can fiscal tools be used to slow the economy?

7. What serious drawbacks have fiscal policy solutions?

8. What is monetary policy?

VI. Define the terms:

revenue –

receipts –

inflation –

recession –

regulating the supply of money –

fiscal policy –

monetary policy –

budget deficit –

tax –

VII. Translate into English:

1. Економісти шукають шляхів, щоб стабілізувати еко­номіку. 2. Для того щоб досягти мети стабілізації економіки, уряд звертається до двох стратегій: фіскальної та грошової політики. 3. Коли податки зменшуватимуться, фірми та при­ватні особи матимуть у розпорядженні більше грошей, щоб витрачати їх на речі, які вони хочуть придбати. 4. Деякі економісти стверджують, що фінансова політика має кілька серйозних недоліків. 5. Коли уряд зменшує податки, він може створити дефіцит бюджету. 6. Дефіцит бюджету озна­чає, що прибутки будуть меншими за витрати, і заборго­ваність уряду зросте. 7. Уряд може покривати дефіцит бюджету, роблячи позички або випускаючи нові гроші. 8. Прикро, що збільшення грошової маси є поштовхом до інфляції. 9. Існує прямий зв'язок між наявною в обігу кількістю грошей та рівнем виробництва.

VIII. Read and dramatize the following dialogue:

A: Can you tell what times we are living through. As I know when people speak of prosperity and depression, they think of things like business cycles.

B: Yes! The business cycle is the pattern of periodic ups and downs of business activity.

A: And how does the government try to stabilize the ups and downs of the economy?

B: In its efforts to stabilize the economy and achieve its goals the government relies on the fiscal and monetary policy.

A: Do you know anything about fiscal policies?

B: Certainly, I do. Fiscal policies seek to adjust total demand through the appropriate use of the government's powers to tax and to spend. Fiscal policy is in the hands of the President and Congress.

A: Then monetary policies must be quite different.

B: Not exactly. Monetary policies seek to achieve similar goals by regulating the money supply. Monetary policies are determined by the Board of Governors of the Federal Reserve System.

A: And how do fiscal policies influence the events in times of recession?

B: In times of recession fiscal policies would call for some combination of tax reductions and increases in government spending.

A: And what about monetary policies?

B: Monetary policies in those times would seek to increase the money supply through strategies such as the increased purchasing of government securities by the Open Market Committee, a lowering of discount rate, and a reduction in the reserve ratio.

A: And what happens in the times of inflation?

B: In times of inflation both fiscal and monetary policies would follow an opposite course.

A: Oh! I came to know very much about some things I've never heard before. Thanks a lot.

B: You're welcome.

IX. Make up your own dialogue using the following expressions:

Date: 2014-12-21; view: 1763