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Т. А. Барановская, А. В. Захарова, Т. И.

Ласточкина,
Т. Б. Поспелова, Ю. А. Суворова

АНГЛИЙСКИЙ ЯЗЫК
ДЛЯ ЭКОНОМИСТОВ
Учебник И Практикум
для академического бакалавриата

Допущено Учебно-методическим отделом


высшего образования в качестве учебника для студентов
высших учебных заведений, обучающихся
по экономическим направлениям и специальностям

Êíèãà äîñòóïíà â ýëåêòðîííîé áèáëèîòå÷íîé ñèñòåìå


biblio-online.ru

Москва  Юрайт  2015


УДК 811.111
ББК 81.2Англ-923
А64
Авторы:
Барановская Татьяна Артуровна — профессор, доктор психологи-
ческих наук, заведующая кафедрой английского языка департамента
английского языка факультета экономики НИУ ВШЭ, директор цен-
тра языковой подготовки НИУ ВШЭ;
Захарова Анна Викторовна — старший преподаватель кафедры
английского языка департамента английского языка факультета эко-
номики НИУ ВШЭ;
Ласточкина Татьяна Ивановна — доцент, заместитель заведую-
щей кафедрой английского языка департамента английского языка
факультета экономики НИУ ВШЭ;
Поспелова Татьяна Борисовна — старший преподаватель кафе-
дры английского языка департамента английского языка факультета
экономики НИУ ВШЭ;
Суворова Юлия Александровна — старший преподаватель кафе-
дры английского языка департамента английского языка факультета
экономики НИУ ВШЭ.
Рецензенты:
Ляпунова Е. Э. — кандидат филологических наук, доцент кафедры
английского языка факультета экономики Национального исследова-
тельского университета «Высшая школа экономики»;
Шевлякова О. Н. — кандидат филологических наук, доцент кафе-
дры английского языка факультета экономики Национального иссле-
довательского университета «Высшая школа экономики».

Английский язык для экономистов : учебник и практикум для
А64 академического бакалавриата / Т. А. Барановская [и др.]. — М. : Изда-
тельство Юрайт, 2015. — 505 с. — Серия : Бакалавр. Академический
курс.
ISBN 978-5-9916-3763-3
Данный учебный комплекс содержит учебник и рабочую тетрадь.
Языковой материал носит академический характер и включает изуче-
ние специальной терминологии в области экономики. В результате
освоения материала данного комплекса учащиеся овладеют умени-
ями и навыками, необходимыми для ведения иноязычной профессио­
нально-ориентированной коммуникации в академической и научной
среде. Учебник также предлагает курс повторения грамматики, кото-
рый позволит выработать навык структурирования высказывания как
в письменной, так и в устной речи.
Соответствует Федеральному государственному образователь­­но­­му
стандарту высшего профессионального образования третьего поколения.
Для бакалавров, обучающихся по экономическим направлениям и
специальностям, продолжающих изучение английского языка на уровне
Intermediate — Upper Intermediate.
УДК 811.111
ББК 81.2Англ-923

© Коллектив авторов, 2013


ISBN 978-5-9916-3763-3 © ООО «Издательство Юрайт», 2015
Contents

Book map................................................................................ 4
Preface ................................................................................... 8
Short forms and labels.............................................................10

Part I
Student’s book

Unit 1. What is economics about?.................................... 12


Unit 2. Basic economic questions.................................... 40
Check your progress (1).................................................................................... 69
Unit 3. Positive and normative economics........................ 75
Unit 4. Free and economic good.....................................102
Check your progress (2).................................................................................. 127
Unit 5. The role of the market.........................................132
Unit 6. Demand and supply............................................157
Check your progress (3).................................................................................. 180
Unit 7. Government in the economy................................185
Unit 8. Micro- and macroeconomics................................213
Check your progress (4).................................................................................. 240
Unit 9. Economic growth and development......................245
Unit 10. Economics and globalization..............................272
Check your progress (5).................................................................................. 297

Part II
Workbook

Reading file.................................................................405

GLOSSARY................................................................427

KEY SECTION............................................................449
Part I. Student’s book...................................................450
Part II. Workbook........................................................487

3
Book map

PART I. Student’s Book


Units Topics Vocabulary Grammar Skills
focus
1 What is • economics • words eas- • subject and reading
eco- as a science ily confused verb agree- writing
nomics • society’s • colloca- ment speaking
about? needs and tions • nouns with
wants different
• scarcity of singular and
resources plural mean-
• alternative ings
uses • nouns
• importance with foreign
of economics plurals
• preposi-
tions
2 Basic • what, • words eas- • articles: reading
eco- how and for ily confused zero article writing
nomic whom to • word sets: or the with speaking
ques- produce synonyms place names
tions • types of • colloca- • preposi-
economic tions tions
systems • abbre-
• the viations and
production acronyms
possibilities
curve
Check your progress (1)
3 Positive • positive • words eas- • quantifiers: reading
and nor- and norma- ily confused few/a few, writing
mative tive state- • words of little/a little speaking
econo­ ments Greek and • preposi-
mics • objective Latin origin tions
and personal • colloca-
value judge- tions
ments
• ceteris
paribus

4
Units Topics Vocabulary Grammar Skills
focus
4 Free and • free and • words eas- adjectives reading
eco- economic ily confused with a writing
nomic good • metaphors change in speaking
good • opportu- of growth meaning
nity cost • colloca-
• capital, tions
labour, land,
entrepre-
neurial skills
Check your progress (2)
5 The role • market • words eas- if-clause (I reading
of the • adjustment ily confused and II type) writing
market of prices • idioms speaking
• the “invis- with issue
ible hand” and problem
• Adam • colloca-
Smith The tions
Wealth of
Nations
6 Demand, • demand, • words eas- Passive reading
supply quantity ily confused Voice writing
and demanded • colloca- speaking
equilib- • supply, tions
rium quantity
supplied
• the law of
demand and
the law of
supply
• determi-
nants of
demand and
supply
Check your progress (3)
7 Govern- • the role of • words eas- tenses: Pres- reading
ment the govern- ily confused ent Perfect, writing
in the ment • colloca- Present speaking
economy • govern- tions Perfect Con-
ment regula- • synonyms tinuous, Past
tions Simple
• transfers,
social pay-
ments
• public
goods, exter-
nalities

5
Units Topics Vocabulary Grammar Skills
focus
8 Micro- • macroeco- • words eas- tenses: Past reading
and nomics ily confused Simple, Past writing
macro- • microeco- • economics Continuous, speaking
econom- nomics idioms Past Perfect
ics • the mea-
surements of
the economy
• GDP vs.
GNP
Check your progress (4)
9 Eco- • economic • faux amis tenses:
nomic growth and (pseudo- types of
growth development international future
and • measures words) I
develop- and variables • colloca-
ment • poverty- tions
weighted
index of
social wel-
fare
10 Econo­ • the global • faux amis gerund/
mics and economy (pseudo- infinitive
globa­ • the top ten international
lization economies words) II
• multina- • inter-
tional and national
transnational economic
corporations organisations
Check your progress (5)

PART II. Workbook (additional grammar and vocabulary


activities)
Unit 1. What is economics about?
Unit 2. Basic economic questions
Unit 3. Positive and normative economics
Unit 4. Free and economic good
Unit 5. The role of the market
Unit 6. Demand and supply
Unit 7. Government in the economy
Unit 8. Micro- and macroeconomics
Unit 9. Economic growth and development
Unit 10. Economics and globalization

6
Reading file (economics related texts with exercises for self-
studing)
1. What is economics all about?
2. Basic types of economic systems
3. Positive versus normative analysis in economics
4. Scarcity and choice
5. The Chinese economy
6. And the Nobel goes to ...
7. Government involvement in the American economy
8. Micro stars, macro effects
9. W. W. Rostow and the stages of economic growth
10. The fastest growing economies in 2013
Glossary (300 economics related terms and other vocabulary
units)
Key section
PART I. Student’s book
PART II. Workbook
Preface

Данный учебный комплекс, который включает в себя


учебник и рабочую тетрадь, предназначен для студентов-
экономистов, изучающих английский язык на уровне Inter­
mediate — Upper Intermediate.
Целью создания данного комплекса является развитие
таких видов речевой деятельности, как письмо, чтение, ауди-
рование и устная речь.
Языковой материал носит академический характер
и включает изучение специальной терминологии в области
экономики. В результате освоения материала данного ком-
плекса учащиеся овладеют умениями и навыками, необходи-
мыми для ведения иноязычной профессионально-ориенти-
рованной коммуникации в академической и научной среде,
а именно: говорение в монологовом и диалоговом форматах,
чтение и анализ академических и научно-популярных тек-
стов, умение конспектировать прочитанную и услышанную
информацию, составлять развернутые письменные высказы-
вания.
Учебник также предлагает курс повторения грамматики,
который позволит выработать навык структурирования
высказывания как в письменной, так и устной речи.
В результате освоения материала учащиеся приобретут
следующие умения и навыки по различным видам речевой
деятельности:
1. Чтение: умение быстро ознакомиться с текстом, выде-
лить важную информацию, передать его основное содержа-
ние, определить актуальность рассматриваемых положений
и найти ответы на вопросы, связанные с содержанием текста.
2. Говорение: в диалоговой речи умение дать подробный
ответ на интересующие собеседника вопросы из академиче-
ской и профессиональной сферы, умение описать экономи-

8
ческое явление или ситуацию, а также развить отдельные
мысли, подкрепляя их дополнительными положениями
и примерами. В монологической речи студенты должны
уметь построить четкую систему аргументации, пояснить
собственную точку зрения по актуальным вопросам, ука-
зывая на достоинства и недостатки различных систем или
теорий, а также уметь включаться в дискуссию и выходить
из нее, используя необходимую лексику и лексико-грамма-
тические обороты.
3. Письмо: умение сопоставлять или противопоставлять
имеющиеся данные, умение делать заметки по ходу прочи-
танного или прослушанного материала, умение обобщить
прочитанный материал и кратко изложить его содержание.
Тематическое содержание учебника включает в себя такие
темы, как фундаментальные вопросы науки экономики, роль
рынка в регулировании экономических процессов, функции
правительства в экономике, вопросы макро- и микроэконо-
мики, проблемы экономического роста и развития, а также
глобализации мировой экономики.
Short forms and labels

Word classes
adj = adjective
adv = adverb
n = noun
v = verb
phr v =phrasal verb
Grammar сodes
Nouns Verbs
C = countable nouns I = intransitive verb
U = uncountable nouns T = transitive verb
sing. = singular
pl. = plural

Other codes and labels


abb. = abbreviation
syn. = synonym
ant. = antonym
esp. = especially
smb = somebody
smth = something
AmE = American English
BrE = British English
PART I
Student’s book
Unit 1
What is economics about?
Learning outcomes
After studying this unit you should be able to:
1) define economics as a social science of scarcity and choice;
2) identify the ways society uses its scarce resources;
3) distinguish between society’s needs and wants;
4) use the active vocabulary of the unit in speaking and writing;
5) read for different purposes (skimming, scanning);
6) use grammar effectively (subject/verb agreement, singular/plural
forms of a noun, prepositions).

Lead-in
1. Read the following sentences and decide which word from
the list a—d is synonymous to the word in bold.
1. Tangible goods are merchandise that you a) insufficient
can put your hands on. Stuff like jewellery, b) non-physical
computers, clothing or even CD’s are all tan- c) plentiful
gible products. ____ d) physical
2. On the other side of tangible are intangi-
ble goods which are products that cannot be
seen or touched. Things like domain names
or computer programs are intangible goods.
____
3. Libya, Saudi Arabia, Kuwait, any other
Arabic nations have abundant oil resources.
They are the main exporters of oil and its
derivatives. ____
4. Many African nations suffer from limited
resources such as water and food, so these
scarce resources put tight constraints on
their social and economic development. ___

12
2. Answer the questions and do the tasks.
1. Think of some of your most important needs and wants, and
then explain whether these are satisfied by goods or by ser-
vices.
2. Try to guess why services are called “non-physical activi-
ties”.
3. Think of some resources that are (a) scarce and (b) abun-
dant.
4. What would happen to our society if resources were unlim-
ited?
5. Is it possible to overcome scarcity of resources? Justify your
opinion.

TOPICS
Text A
Defining economics
1. The social sciences are academic disciplines that study
human society and social relationships. They are concerned with
discovering general principles describing how societies function
and are organised. The social sciences include anthropology, eco-
nomics, political science, psychology and sociology.
2. Economics is a social science because its approach to
studying human society is based on the scientific method. It is
a social science because it deals with human society and behav-
iour, and particularly those aspects concerned with how people
organise their activities and how they behave in order to satisfy
their needs and wants.
3. Human beings have very many needs and wants. Some of
these are satisfied by physical objects and others by non-phys-
ical activities. All the physical objects people need and want
are called goods (food, clothing, houses, books, computers, cars,
televisions, refrigerators and so on); the non-physical activities
are called services (education, health care, entertainment, travel,
banking, insurance and many more).
4. The study of economics arises because people’s needs and
wants are unlimited. Whereas some individuals may be satisfied
with the goods and services they have or can buy, most would
prefer to have more.

13
5. They would like to have more and better computers, cars,
educational services, transport services, housing, recreation,
travel and so on; the list is endless.
6. Yet it is not possible for societies and the people within
them to produce or buy all the things they want. Why is this
so? It is because there are not enough resources. Resources are
the inputs used to produce goods and services wanted by people.
They include things like human labour, machines and factories,
and “gifts of nature” like agricultural land and metals inside the
earth. Resources do not exist in unlimited abundance: they are
scarce, or limited and insufficient in relation to unlimited uses
that people have for them.
7. Scarcity is a very important concept in economics. It
arises whenever there is not enough of something in relation to
the need for it. For example, we could say that food is scarce
in poor countries. Or we could say that clean air is scarce in
a polluted city. In economics, scarcity is especially important
in describing the condition of insufficient resources, because the
scarcity of resources causes scarcity in goods and services. Defin-
ing scarcity, we can therefore say that: Scarcity is the condition
in which available resources are not enough to produce every-
thing that human beings need and want.
8. It follows that societies face a fundamental problem,
which is the conflict between unlimited human needs and wants
on the one hand, and limited or scarce resources on the other.
The subject of economics is how to best resolve this conflict.
9. The conflict between unlimited needs and wants, and
scarce resources has an important consequence. Since people
can’t have everything they want, they must make choices. The
classic example of a choice forced on society by resource scar-
city is that of “guns or butter”, or more realistically the choice
between producing defence goods (guns, weapons, tanks) or
food: more defence goods mean less food, while more food means
fewer defence goods. Societies must choose how much of each
they want to have. Note that if there were no resource scarcity,
a choice would not be necessary, since society could produce as
much of each as was desired. But resource scarcity forces the
society to make a choice between available alternatives. Eco-
nomics is therefore a study of choices.

14
10. The conflict between unlimited needs and wants, and
scarce resources has a second important consequence. Since
resources are scarce, it is important to avoid waste in how they
are used. If resources are not used effectively and are wasted,
they will end up producing less; or they may end up producing
goods and services that people don’t really want or need. Eco-
nomics must try to find how best to use scarce resources so that
waste can be avoided. Defining economics, we can therefore say
that:
Economics is the study of choices leading to the best possible
use of scarce resources in order to best satisfy unlimited human
needs and wants.
11. As you can see from this definition of economics, econo-
mists study the world from a social perspective, with the objec-
tive of determining what is in society’s best interests.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 2.

Target vocabulary of text A


abundance (n) = when there is more than enough of smth
We had natural resources in abundance.
alternative (n) = smth that is different from smth else, espe-
cially from what is usual, and offering the
possibility of choice
There must be an alternative to people sleep-
ing on the streets.
goods (n) = everything that is produced in the economy
The government will pay for the new schools
by increasing the tax on luxury goods.
needs and wants = the things that a person must have in or-
der to have a satisfactory life
They don’t have enough food to meet their
needs and wants.
produce (v) = to make smth or bring smth into existence
France produces a great deal of wine for
export.
satisfy (v) = to have or provide smth that is needed or
wanted
She satisfies all the requirements for the job.

15
scarce (adj) = not easy to find or get
Food and clean water were becoming scarce.
service (n) = a system or organisation that provides for
a basic public need
the ambulance/health/postal/prison service
social sciences = the study of society and the way people
live
Examples of social sciences are sociology,
psychology, economics, etc.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
science, discipline, society, scarce, consequence, perspective,
anthropology, psychology, sociology
b) Read text A and do the tasks/answer the questions below.
1. Why does the study of economics exist? Why is it necessary
to study economics?
2. Divide the following concepts into the two groups “goods” and
“ser­­vices”: Oxford University tuition, engineering, a house,
marketing research, a luxury Swarovski necklace, currency
exchange, transport, a tuna sandwich, the Moscow Times sub-
scription, a box of chocolate.
3. Give some examples of unlimitedly abundant resources. Does
economics show interest towards these resources? Why?
4. How to avoid waste in the use of resources in modern econo-
mies?
5. Which consequences does a conflict between our wants and
limited resources have?
2. Decide whether the following statements are True or False
according to text A.
1. Economics is a science because it uses principles of anthro-
pology, sociology and psychology. ___
2. Most individuals are satisfied with what they have and do
not strive for more goods and services. ___
3. The amount of resources available for consumption is limi­
ted. ___

16
4. The subject of economics is to teach individuals how to con-
sume less. ___
5. Societies have to make choices because resources are scarce.
___
6. Economists try to find out how to satisfy society’s wants in
the best possible way. ___
3. Scan through text A and find the words corresponding
to these definitions.
para 2
1) to make someone feel pleased by doing
what they want (v) ________________
para 3
2) things that are produced in order to be
sold (n) ________________
para 6
3) a large quantity of smth (n) ________________
4) limited (adj) ________________
para 7
5) smth that is able to be used or can easily
be bought or found (adj) ________________
6) to make smth to be bought, used, or
enjoyed by people (v) ________________
para 8
7) to find a satisfactory way of dealing with
a problem or difficulty (v) ________________
para 9
8) smth that happens as a result of a par-
ticular action or set of conditions (n) ________________
9) smth you can choose to do or use instead
of smth else (n) ________________
para 10
10) the ineffective use of smth (time or
money) (n) ________________
para 11
11) a way of thinking about smth (n) ________________
12) smth that you are trying hard to achieve
(n) ________________

17
4. Match the term with its definition.
1) resources a) the provision of payments facilities,
credit and capital to individuals, firms and
the government
2) human labour b) society’s decision on the kind, quality,
and quantity of goods for consumption
3) banking c) anything which can contribute to eco-
nomic activity. This includes natural
resources, capital goods, etc.
4) insurance d) human beings as factors of production
5) choice e) the use of contracts to reduce and redis-
tribute risk

5. Use the words from exercise 4 to fill in the gaps.


1. _________ is a form of risk management primarily used
to hedge against the risk of a contingent, uncertain loss.
_________ is defined as the equitable transfer of the risk of
a loss, from one entity to another, in exchange for payment.
2. ___________ is the stock of competencies, knowledge and
personality attributes embodied in the ability to perform
labour so as to produce economic value.
3. A __________ is a source or supply from which benefit is pro-
duced. Typically __________ are materials or other assets
that are transformed to produce benefit and in the process
may be consumed or made unavailable.
4. __________ is the business of operating a financial institu-
tion. A bank connects customers that have capital deficits to
customers with capital surpluses.
5. If the product doesn’t work, you are given the __________ of
a refund or a replacement.
6. Fill in the gaps using the prepositions from the box below.
with (x2)  •  to (x4)  • in • of •  on

1. Their relationship was based _______ mutual respect.


2. Nowadays the department operates with the objective
______ raising as much taxes as possible.
3. All the people concerned ________ children’s education
should be submitted to testing.
18
4. I’m not satisfied ______ the way the company served me.
5. Women’s earnings are still low _____ relation ______ men’s.
6. Since our research so far has not produced any answers
______ this problem, we need to adopt a different approach
______ it.
7. A degree in English could lead ______ a career in journal-
ism.
7. a) Choose the correct letter (a, b or c).
1. If you are __satisfied with this product, please return it.
a) un b) mis c) dis
2. It is ___realistic to expect these changes to happen over-
night.
a) in b) un c) dis
3. The system can support an ___limited number of users.
a) in b) un c) dis
4. His salary was ___sufficient for their needs.
a) in b) un c) non
5. Various drugs have proved ___effective against the virus.
a) in b) un c) dis
6. It would be ___profitable to pursue this argument any fur-
ther.
a) in b) dis c) un
7. The parking facilities are ___adequate for a busy shopping
centre.
a) in b) non c) dis
8. Prices for natural resources are ___normally high at the
moment.
a) in b) un c) ab
9. We have been ___successful in finding a new manager.
a) in b) un c) dis
10. Never ___estimate the power of the press.
a) in b) dis c) under
b) Group the words from exercise 7. a) under the following
headings.
un- in- dis- ab- under-
__________ __________ __________ __________ __________
__________ __________
__________ __________
__________

19
8. Give a definition of the word in bold using the words given
in the list below.
need resource goods
situation useful things
to want to use to produce
necessary production to sell
to produce scarce problem
to make not much situation
goods available to cause
resources resources difficulties
conflict choice to buy
disagreement to choose to get
argument things to pay
people several money

Text B
Scarcity and importance of economics
1. Naturally, reality constrains our choices. There has never
been enough to satisfy everyone completely. That is what scar-
city means. Although per capita real income in the United States
increased 50 per cent in just one generation, these middle-class
families have had to work hard for their modest gains. (Were
they expecting manna from heaven?) As for how hard they
worked and the modesty of their gains, it is doubtful whether
most other people in the world would regard Americans’ work
in air conditioned offices with coffee breaks as “hard” or their
standard of living as “just getting by”. However, as someone
once said: “Just as soon as people make enough money to live
comfortably, they want to live extravagantly.” Even millionaires
can have a hard time making ends meet if they try to live like
billionaires. The New York Times reporter wrote of one of these
middle-class families: After getting in over their heads in credit
card spending years ago, their finances are now in order. “But if
we make a wrong move,” Geraldine Frazier said, “the pressure
we had from the bills will come back, and that is painful.”
2. To all these people — from academia and journalism,
as well as the middle-class people themselves — it apparently
seemed strange somehow that there should be such a thing as
scarcity and that this should imply a need for both productive
efforts on their part and personal responsibility in spending. Yet
20
nothing has been more pervasive in the history of the human
race than scarcity and all the requirements for economising that
go with scarcity. Not only scarcity but also “alternative uses”
are at the heart of economics. If each resource had only one use,
economics would be much simpler. But water can be used to
produce ice or steam by itself or innumerable mixtures and com-
pounds in combination with other things. A virtually limitless
number of products can also be produced from wood or from
petroleum, iron ore, etc. How much of each resource should be
allocated to each of its many uses? Every economy has to answer
that question, and each one does, in one way or another, effi-
ciently or inefficiently.
3. Doing so efficiently is what economics is all about.
Whether the people in a given economy will be prosperous or pov-
erty-stricken depends in large part on how well their resources
are allocated. Rich resources often exist in very poor countries,
simply because the country lacks the economic mechanisms, as
well as specific skills, for efficiently turning those resources into
abundant output. Conversely, countries with relatively few nat-
ural resources — Japan or Switzerland, for example — can have
very high standards of living, if their people and their economy
are well adapted for allocating and using whatever resources
they have or can purchase from other countries. Economics is
not about the financial fate of individuals. It is about the mate-
rial well-being of society as a whole. It shows cause and effect
relationships involving prices, industry and commerce, work and
pay, or the international balance-of-trade — all from the stand-
point of how this affects the allocation of scarce resources in a
way that raises or lowers the material standard of living of the
people as a whole. Money doesn’t even have to be involved to
make a decision be economic.
4. Most of us hate even to think of having to make such
choices. Indeed, as we have already seen, some middle-class
Americans are distressed at having to make much milder choices
and trade-offs. But life does not ask what we want. It presents
us with options. Economics is just one of the ways of trying to
make the most of those options. While there are controversies in
economics, as there are in science, this does not mean that eco-
nomics is just a matter of opinion. There are basic propositions
and procedures in economics on which a Marxist economist like

21
Oskar Lange did not differ in any fundamental way from a con-
servative economist like Milton Friedman.
5. All sorts of economies — capitalist, socialist, feudal,
etc. — must determine in one way or another how the available
resources are directed toward their various uses. But how well
they do it can lead to poverty or affluence for a whole country.
That is what the study of economics is all about and that is what
makes it important.
Thomas Sowell. Basic Economics: A Citizen’s Guide to the Economy. — Basic
Books, a Member of the Perseus Books Group, 2004. — Ch. 1.

Target vocabulary of text B


income (n) = money that is earned from doing work or
received from investments
Average incomes have risen by 4.5% over
the past year.
standard of living = the amount of money and comfort people
have in a particular society
The standard of living in many developing
countries is low.
economise (v) = to try to save money by reducing the
amount that you are spending
You could economise on food by not eating
in restaurants all the time.
alternative use = the cost of any activity measured in terms
of the value of the next best alternative
forgone (that is not chosen)
prosperous (adj) = rich and successful
a prosperous landowner
poverty-stricken extremely poor
(adj) = poverty-stricken families
purchase (v) = formal to buy smth
You can purchase insurance on-line.
well-being (n) = the well-being of a country is the state in
which it is strong and doing well
We are now concerned about the economic
well-being of the country.

22
balance-of-trade the difference in value between the goods
(n) = a country buys from abroad and the goods
it sells abroad
a positive balance-of-trade
trade-off (n) = a balance between two opposing things,
that you are willing to accept in order to
achieve smth
There has to be a trade-off between quality
and quantity if we want to keep prices low.
proposition (n) = a statement that consists of a carefully
considered opinion or judgment
The theory is founded on two basic proposi-
tions.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
scarcity, per capita, pressure, pervasive, innumerable, ore,
mechanism, procedures, Marxist, feudal, affluence, to vary, variable
b) Read text B and answer the questions below.
1. Why do people become extravagant with money when they
get well-off?
2. Which two concepts lie at the heart of economics?
3. How can a country decide which way of resources allocation
is the most effective?
4. Do rich resources guarantee prosperity for their owner (e.g.
a country)?
5. Which factors affect the standard of living in a country?
2. Decide whether the following statements are True or False
according to text B.
1. People eagerly welcome the opportunity to economise on
their spending. ___
2. Wrong decisions on resource allocation lead to economic
inefficiency. ___
3. Countries with the immense resource supply are the richest
in the world. ___
4. Oskar Lange’s and Milton Friedman’s economic theories had
little common ground. ___
5. The chief objective of economics is to make people more
well-off and happy. ___

23
3. Scan through text B and find the words corresponding to
these definitions.
para 1
1) used to describe the average amount of ___________________
smth in a particular place, calculated ac-
cording to the number of people who live
there (adj)
2) financial profit, especially when this ___________________
seems to be the only thing someone is in-
terested in (n)
3) events or conditions that cause changes ___________________
and affect the way a situation develops, es-
pecially in economics or politics (n)
para 2
4) to suggest that smth is true, without ___________________
saying this directly (v)
5) existing everywhere (adj) ___________________
6) smth that you must do, or smth you ___________________
need (n)
7) almost (adv) ___________________
para 3
8) rich and successful (adj) ____________________
9) to not have or not have enough of smth ____________________
that is needed or wanted (v)
10) in an opposite way (adv) ____________________
11) the state of feeling healthy and happy ____________________
(n)
12) a set of beliefs and ideas from which ____________________
opinions and decisions are formed (n)
para 4
13) a situation in which you balance two ____________________
opposing situations or qualities (n)
14) a lot of disagreement or argument ____________________
about smth (n)
15) an idea or opinion (n) ____________________
para 5
16) to make a strong decision (v) ____________________
17) welfare, riches (n) ____________________

4. Match the term with its definition.


1) real income a) the money which is used for a particular
purpose, especially by a government or orga­
nisation

24
2) standard of b) the difference in value between the goods
living a country buys from abroad and the goods it
sells abroad
3) spending c) the value of earnings/income, etc. after the
effect of rising prices is considered
4) alternative d) a balance between two opposing things,
uses that you are willing to accept in order to
achieve smth
5) balance-of- e) the amount of money and comfort people
trade have in a particular society
6) trade-off f) ways of using smth differently

5. Use the words from exercise 4 to fill in the gaps.


1. _____________ refers to the level of wealth, happi-
ness, comfort, material goods and necessities available to
a certain socioeconomic class in a certain geographic area.
______________ includes factors such as income, quality
and availability of employment, class disparity, poverty rate,
quality and affordability of housing, etc.
2. A ____________ is a situation that involves losing one
quality or aspect of something in return for gaining another
quality or aspect. It implies a decision to be made with full
comprehension of both the upside and downside of a particu-
lar choice.
3. The ______________ is the difference between the mon-
etary value of exports and imports of output in an economy
over a certain period. It is the relationship between a nation’s
imports and exports.
4. ______________ includes all government consumption,
investment but excludes transfer payments made by a state.
5. ______________ and scarcity lie at the heart of economics.
This science would not exist at all if resources were abun-
dant or had only one use.
6. _____________ is the income of individuals or nations after
adjusting for inflation. It is calculated by subtracting infla-
tion from the nominal income.
6. Fill in the gaps using prepositions from the box below if
necessary.
from  •  on (x2)  •  for (x3)  •  to (x2)
1. The government is allocating £10 million ___ health education.
25
2. As project leader, you will have to allocate jobs ___ people.
3. “I have to put aside my emotions,” he says, “and consider it
___ a professional standpoint.”
4. It was the event that led ___ the start of the First World
War.
5. The airline is legally responsible ___ the safety of its pas-
sengers.
6. As a political party they are trying to effect ___ a change in
the way that we think about our environment.
7. Several factors are likely to influence ___ this decision.
8. The Council had influence ___ many government decisions.
9. They managed to agree ___ a date for the meeting.
10. There is a huge demand ___ new cars.
7. Choose the correct letter (a, b or c).
1. Works of art were lost, many of them ___replaceable.
a) un b) in c) ir
2. They have decided to ___continue the production of Prod-
uct P because sales have fallen.
a) de b) un c) dis
3. The experiment produced some ___expected results.
a) in b) un c) non
4. Punishment of ___desirable behaviour should be severe.
a) in b) un c) non
5. The government plans to ___regulate the banking industry.
a) de b) un c) dis
6. One shouldn’t ___estimate the difficulties of getting all the
political parties to the conference table.
a) in b) under c) un
7. She owes $30 000 in unpaid taxes based on $100 000 of ___
reported income.
a) in b) non c) un
8. The minister maintained that the coal mines were ___eco-
nomic and would have to be closed.
a) in b) un c) non
9. If you’re ___satisfied with the service, why don’t you com-
plain to the hotel manager?
a) in b) un c) dis
10. The project has been delayed by ___numerable problems.
a) un b) dis c) in

26
VOCABULARY

1. Look at the following pair of words, spot the difference and


do the task.
TO AFFECT ≠ TO EFFECT

to affect — to influence some- to effect — to make smth


one or smth, or cause them to happen
change The civil rights movement
It’s a decision which affects effected a huge change
our life. in America.
1. Did the newspapers really ________________ the outcome
of election?
2. It is known that poor housing significantly ______________
educational achievement.
3. The area has been badly ______________ by pollution.
4. We have tried out our best to ____________ a reconcilia-
tion between the two parties.
5. It will take years to ____________ meaningful changes in
the educational system.
6. The building was badly ____________ by the fire.
7. As a political party they are trying to ___________ a change
in the way that we think about our environment.
8. Trading has been adversely ___________ by the downturn
in consumer spending.
9. The transfer of a business is governed or ____________ by
the law of the country in which the business is situated.

2. Look through the two sets of sentences and decide which


word affect or effect should be inserted to make these sentences
complete.
1. Foreign trade is excluded from consideration, since it is
assumed that such trade will not ________ the value of pro-
duction, but merely affect its material form.

27
2. How will the Board’s decision ________ householders?
3. National resources, combined with policy choice, ________
both the appropriateness of various forms of firm strategy
and the nation’s attractiveness to existing and potential
investors.
The missing word is _______________
1. Increasingly people looked to the state to provide services,
to regulate more of the affairs between men and to ________
overall improvement in the quality of the nation’s life.
2. They lack confidence in their ability to ________ change or
improve the quality of their lives.
3. In order to ________ these objectives a number of changes
were to be made in the provision and funding of social care.
The missing word is _______________

3. Match the words in the box on the left with the words that
they collocate with on the right.
1) agricultural a) perspective
2) poor b) stricken
3) social c) well-being
4) real d) responsibility
5) personal e) land
6) poverty f) income
7) material g) country

4. Use the collocations from exercise 3 to complete the sen­tences.


1. Economic justice, as it is claimed, demands economic equal-
ity — defined as an equalised after-tax _______________.
2. Preventing pollution is one dimension of maintaining a
safe environment which is largely a public rather than a
___________________.
3. The war muffles the voices of humanity, of ordinary people
who care about democracy, _______________, the protec-
tion of nature, and above all, human life.
4. I think the County Council looked at government guidance
in relation to the need to protect and safeguard National
Parks, greenbelt, high quality ______________, to the need
to protect the countryside for its own sake.

28
5. Others say the best way to get private sectors working is to
reform the public sector: the World Bank can use its clout
with _____________ to insist on structural reforms when
it lends them money.
6. The result in Chile is that poor, small farmers exist alongside
medium-sized farms which are capital intensive and produce
for export, and a large number of the rural population have
become landless and are ________________.
7. Despite these problems, natural law and rights-based
theories undoubtedly have something to contribute to
an understanding and development of law in a broader
_________________.

5. Translate the sentences from Russian into English using the


collocations from exercise 3.
1. Сегодня Россия напоминает «африканскую» модель
колониальной экономики, которая распродает по дешевке
минеральное сырье и сельскохозяйственные земли.
2. Нынешний этап торговых переговоров ВТО провалился
в 1999 г. в Сиэтле, так как более бедные страны поняли,
что они не дождутся от этой организации ничего, в то
время как богатые мировые корпорации получают новые
и новые права.
3. Теоретически выгоднее платить больше налогов и нор-
мальную зарплату чиновникам, поскольку решения, при-
нятые коррумпированным чиновником, с общественной
точки зрения, заведомо хуже, чем честным.
4. Министр уверяет, что реальный доход у всех бюджет-
ников к началу следующего года при этом увеличится
почти на 40 процентов.
5. Фундаментальными ценностями либерализма являются
личная свобода и личная ответственность, свобода
слова и объединений.
6. Беднейшие государства обвиняют богатые в нежелании
увеличивать им финансовую помощь, открывать рынки
для их товаров.
7. Цель социальной политики — обеспечить каждому граж-
данину России достаточное материальное благосостоя-
ние и цивилизованный образ жизни.

29
GRAMMAR

1. Look through the two definitions and try to guess which one
refers to “a collective noun”.
a) a noun which you cannot make plural by adding -s, because
it only has a singular form
b) a noun that can be singular in form whilst referring to a
group of people or things

2. Choose the examples of the collective nouns from the list


below.
audience, news, economics, committee, government, species,
means, craft, council, team, belongings, staff, data, riches, jury,
company, people

3. Use either a word singular or plural to make rules 1 and 2


complete.
1. When a group is considered as a single unit, the collective
noun is used with a ____ verb and ___ pronoun.
2. When the focus is on the individual parts of the group, Bri­
tish English sometimes uses a _____ verb and ___ pronouns.

4. Choose either is or are to complete the sentences below.


1. Government ___ one of humanity’s oldest and most impor-
tant institutions.
2. The company ___ almost entirely dependent on Royal Navy
orders, although it has built the odd merchant ship of a more
complex kind.
3. The staff ___ all expert stylists, accustomed to helping cus-
tomers create their own individual look from their marvel-
lous range of exclusive labels.
4. It is an attempt to deal with a prevalent problem, but I fear
a distortion — the Government ___ considering only one
aspect of the issue.
5. The staff ___ frequently consulted by national bodies in the
UK, as well as by international organisations, the UN family,
World Bank, etc.
30
6. The government has announced that an environmental com-
mittee ___ to be set up to advise the Forestry Commission.
7. The Government ___ helping to support the idea that coal is
a pollutant but that nuclear power is green friendly and that
gas is green friendly.
8. This system has been in operation for three months now so
the staff ___ gradually becoming more settled.
9. Check if the company ___ a member of the Hamper Indus-
try Trade Association.
10. Such work is not without its dangers and the Committee
___ currently making enquiries about an insurance policy.

5. Group the nouns under the two headings.


noun + singular verb noun + plural verb
news people

advice  • arms • Athens • billiards
binoculars  • Brussels • earnings • economics
education  • evidence • mathematics
money  • Naples •  news  • outskirts
people  • premises • quarters • riches
stationery  •  the blind  •  the clergy
the military  •  the police

6. The nouns below have different meanings in the singular


and plural. Fill in the gaps using either singular or plural form
of these nouns.
Example:
content / contents
1. Please empty out the contents of your pockets.
2. The content of the article was controversial.

31
custom / customs
1. The _____ of naming women after flowers is becoming less
common.
2. She was stopped at ______ and questioned.
damage / damages
1. The court awarded him £15 000 in _____.
2. The insurance covers accidental _____ to the vehicle.
experience / experiences
1. My trip to Australia was full of _____ I’ll never forget.
2. He had no previous ______ of managing a farm.
minute / minutes
1. Has everyone seen the _____ of last month’s meeting?
2. The train arrived at four _____ past eight.
saving / savings
1. Buying a house had taken all their ______.
2. For many companies this can mean _____ of up to 10% per
year on energy, maintenance and labour costs.
work / works
1. There isn’t a lot of _____ at this time of the year.
2. The exhibition includes _____ by Picasso and Klee.
people / peoples
1. Europe is made up of many different _____.
2. Our company employs over 400 _____.

7. Divide the following nouns of foreign origin into the two


categories: nouns with both foreign and anglicised plurals (A)
and nouns with foreign plurals only (B).

antenna  •  alumnus  • stratum • phenomenon


index  • criterion • appendix • axis
alumnus  •  medium  • automaton • analysis

A B
1) antenna/antennae/antenna 1) alumnus/alumni      
2) ______________________ 2) ______________________
3) ______________________ 3) ______________________
4) ______________________ 4) ______________________
5) ______________________ 5) ______________________
6) ______________________

32
SKILLS FOCUS

Reading
1. Read the text which focuses on the definition of economics
given by the famous economist of the past Adam Smith.
In the second part of the text match the criticisms of Smith’s
definitions (they are given in the left-hand column) to their
headings (the right-hand column).

(I) Adam Smith and his definition of economics


There is no unique definition of economics which has a gene­ral
acceptance. The formal roots of the scientific framework of eco-
nomics can be traced back to classical economists. The pioneers
of the science of economics defined economics as the science of
wealth.
Adam Smith (1723—1790), the founder of economics,
described it as a body of knowledge which relates to wealth.
Accordingly to him if a nation has larger amount of wealth, it
can help in achieving its betterment. He defined economics as:
“The study of nature and causes of generating of wealth of
a nation.”
Adam Smith in his famous book, “An Enquiry into the Nature
and Causes of the Wealth of Nations”, emphasised the production
and expansion of wealth as the subject matter of economics.
The main points of the definitions of economics given by
Adam Smith and other classical economists are that:
(1) Economics is the study of wealth only. It deals with
consumption, production, exchange and distribution aspects of
wealth.
(2) Only those commodities which are scarce are included
in wealth. Non-material goods such as air, services, etc. are
excluded from the category of wealth.
(II) Criticism on the classical definition of economics
The definitions given by Adam Smith and other classical
economists were severely criticised by social reformers and men
of letters of that time Ruskin and Carlyle. They dubbed econo­
mics as a “dismal science” and a “science of getting rich”. The
main criticisms on these definitions are as under:

33
CRITICISM HEADINGS
1. ______________ The definitions of econo­ a) Defective
mics give primary importance to wealth and logic
secondary importance to man. The fact is that b) Narrow
the study of man is more important than the meaning
study of wealth of wealth
2. ______________ The word “wealth” in the c) No men-
classical economist’s definitions of economics tion of man’s
means only material goods such as chair, book, welfare
pen, etc. These do not include services of doc- d) Too much
tors, nurses, soldiers, etc. In modern economics, importance
the word “wealth” includes material as well as to wealth
non-material goods e) Concept
3. ______________ According to “wealth” of economic
definitions, man works only for his self-interest. man
Social interest is ignored. Dr. Marshall and his f) It does not
followers were of the view that economics does study means
not study a selfish man but a common man
4. ______________ The “wealth” definitions ig-
nore the importance of man’s welfare. Wealth is
not be all and the end all of all human activities
5. ______________ The definitions of econom-
ics lay emphasis on the earning of wealth as an
end in itself. They ignore the means which are
scarce for the earning of wealth
6. ______________ The definitions economics
given by classical economists were unduly criti-
cised by the literacy writers of that time. The
fact is that what Adam Smith wrote in his book
The Wealth of Nations (1776) still holds well.
The central argument of the book that market
economy enables every individual to contrib-
ute his maximum to the production of wealth
of nation still not only holds good but is also
being practised and advocated throughout the
capitalistic world. Since the word “wealth” did
not have clear meaning, therefore the defini-
tion of economics became controversial. It was
regarded unscientific and narrow. At the end of
the 19th century, Dr. Alfred Marshall gave his
own definition of economics and therein he laid
emphasis on man and his welfare

34
2. Read more about economics as a social science in Reading
file: Unit 1.

Speaking
A
Women and work
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the two
economists: Linda Basch and Christina Hoff Sommers. They
discuss the question “Is a woman’s place at work?” The brief
description of the problem is given below:
Nearly two-thirds of women in rich countries now have paid
jobs, not far off the proportion for men, compared with under
half only a few decades ago. This house believes this to be a good
thing all round: for the national economies concerned, because
it provides extra labour as working populations in many coun-
tries are beginning to age and shrink; for employers, because
they are able to draw on a much larger and more diverse pool
of talent; and for women themselves, because they now enjoy
a wider choice of careers and more financial independence at a
time when many marriages end in divorce. But more remains
to be done. The pay gap between women and men for compa-
rable work remains substantial, and women in top positions in
any field are still relatively rare. For women to get the most out
of work, and workplaces to get the most out of women, it needs
to become easier for them to combine work and family. This will
involve a change in men’s attitudes too.
Your task is to visit http://www.economist.com/debate/over-
view/219 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.
a) Linda Baschs is a … She is defending the idea of … Her
arguments in favour of the statement are …
b) Christina Hoff Sommers is a … She is against the idea of …
because … Her arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.

35
B Discuss the following questions with the partner.
1. Who are the greatest women in your country’s history?
2. Harriet Beecher Stowe said: “Women are the real archi-
tects of society.” Do you agree?
3. What common characteristics do all women share?
4. How would the world be different if all leaders were
women?
5. Do men and women have equal career opportunities?

Writing

1. Render1 the following text using the plan:


1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.
Мужчины недооценивают роль женщин в экономике
5 ошибок, которые совершают руководители-мужчины,
когда их клиенты — женщины
Мужчины, управляющие бизнесом, зачастую не задумы-
ваются о том, какую фундаментальную роль играют жен-
щины как потребители товаров и услуг. Между тем именно
женская половина человечества представляет собой самую
стремительно развивающуюся «экономику» мирового
рынка, которая превышает даже вместе взятые потребитель-
ские рынки Китая и Индии.
Согласно исследованию Бостонской консалтинговой
группы (BCG), в ходе которого было опрошено 15 тысяч
женщин и 5 тысяч мужчин в 22 странах, женщины покупают
70% всех потребительских товаров не первой необходимо-
сти. При этом они не удовлетворены тем, что предлагает им
рынок во многих сферах, в особенности в области здравоох-
ранения, финансовых услуг и товаров длительного пользо-
вания.
Большинством компаний руководят мужчины, значи-
тельная часть из которых не понимают женщин и не осоз-
1  Rendering is the exposition of the content of the Russian text in English.

36
нают ту фундаментальную роль, которую женщины играют
в экономике и которую сложно игнорировать. Между тем
женщины приобретают товары и услуги иначе, чем муж-
чины, у них больше опыта в шопинге, они уделяют процессу
и результату больше эмоций.
Мужчины-боссы плохо знакомы со столь важной потре-
бительской категорией по ряду причин. Прежде всего, про-
изводители товаров не проводят достаточного количества
исследований в отношении особенностей потребления жен-
ским полом, а на этапах разработки новых продуктов, опре-
деления цены и создания маркетинговой концепции муж-
чины-руководители привыкли взаимодействовать с другими
мужчинами, нежели с женщинами.
В свою очередь руководители финансовых компаний не
всегда в курсе того, какое обслуживание требуется женщи-
нам, являющимся потребителями услуг финансового сек-
тора. Как правило, в центре внимания консультантов чаще
оказывается мужчина, даже если «добытчиком» в семье
является женщина.
По результатам исследований BCG Wall Street Journal
публикует 5 основных ошибок, которые совершают муж-
чины-руководители при разработке и продаже товаров,
предназначенных преимущественно для женщин.
1. Игнорирование значимости эмоционального фактора.
Мужчины-руководители часто не осознают, что женщины
покупают тот или иной товар, ориентируясь на эмоции, кото-
рые он вызывает. Они прислушиваются к своим ощущениям
от процесса и результата покупки. Мужчины обычно более
прагматичны: покупая новые товары на замену старым, они
руководствуются привычкой. Вот почему, например, мода
в женской одежде гораздо более переменчива, чем в муж-
ской.
2. Неизменный ассортимент из года в год.
Руководители часто не видят необходимости в разработке
чего-то нового, если бизнес идет достаточно успешно. Они
могут увеличивать цикл разработки продукции, внося незна-
чительные изменения от сезона к сезону, мало чем отличаясь
на фоне конкурентов. Женщин больше, чем мужчин, интере-

37
суют новинки, им нравится пользоваться чем-то обновлен-
ным и улучшенным.
3. То же самое, но в розовом цвете.
Если тот или иной товар достаточно успешно продается
среди мужской потребительской группы, то руководители
компаний часто считают, что достаточно внести минималь-
ные изменения формы и цвета, чтобы он приобрел такую же
популярность среди женщин. Однако если по сути ничего не
изменилось, женщины оказываются не удовлетворены тем,
что мужскую вещь просто перекрасили в розовый цвет.
4. Неуклюжая маркетинговая стратегия.
Маркетинговые кампании часто базируется на стереоти-
пах, а не на глубоком понимании действительных потреб-
ностей женщин. Руководители компаний зачастую даже
не осознают, что их продукция работает совсем не так, как
обещает реклама. В результате товары, предназначенные
той или иной части потребителей, попросту проваливаются
в продаже.
5. Игнорирование проблемы дефицита времени.
По данным BCG женщины называют своей основной проб­­
лемой нехватку времени. Производители упускают из вни-
мания и тот факт, что современная женщина живет в посто-
янном состоянии цейтнота, в большей степени это касается
работающих замужних женщин. Хотя в современном обще-
стве мужчины берут на себя все больше ответственности за
воспитание детей и ведение домашнего хозяйства, все это
по-прежнему остается прерогативой женщины. По­этому рабо-
тающая женщина нуждается в товарах и услугах, позволяю-
щих максимально сэкономить время.
http://www.rb.ru/article/mujchiny-nedootsenivayut-rol-jenshhin-v-eko-
nomike/6246157.html

2. Write a summary of the article Russia economic structure


(100 words). Use the plan given below:
Thesis statement (the main idea of the text)
Main points of para 1
Main points of para 2

Conclusion

38
Russia economic structure
The economic structure that exists in the Russian Federation
today was created mostly as a consequence of decisions made
during the prior economic regime.
For nearly 60 years, the Russian economy operated on the
basis of centralized planning where the Russian state govern-
ment controlled virtually all means of production, investment
and consumption decisions throughout the economy. Economic
policy was made according to directives from the Communist
Party, which controlled all aspects of economic activity. The
State Planning Committee formulated countrywide output
targets for stipulated planning periods. Regional planning bod-
ies then refined these targets for economic units such as state
industrial enterprises and state farms and collective farms, each
of which had its own specific output plan.
Since 1991, under the leadership of Boris N. Yeltsin, the
country has made great strides toward developing a market
economy by implanting basic tenets such as market-determined
prices. Critical elements such as privatisation of state enterprises
and extensive foreign investment went into place in the first few
years of the post-Soviet period.
But other fundamental parts of the economic infrastructure,
such as commercial banking and authoritative, comprehensive
commercial laws, are still lacking in Russia today, limiting its
potential growth and ability to attract and sustain investments.
Russia Economic Structure: The Road Ahead
Although Russia is well placed in its path to economic growth
and development, given the feeble global economy, it needs to
take lessons from its 1998 crisis to avoid the pitfalls of debt and
balance sheet crises. Russia, an emerging economy, must structure
its fiscal policies in line with government policies and the exter-
nal environment. With its over reliance on energy and oil exports,
Russia needs to guard itself from the fluctuating oil prices and the
US dollar, and create diversity in its economic structure.
With interest rates set to decline further and bank deposits
continuing to grow, Russian financial institutions are also likely
to restart their credit facilities and reorganise their consumer
and investment banking policies.
http://www.economywatch.com/world_economy/russia/structure-of-eco­
no­my.html

39
Unit 2
Basic economic questions
Learning outcomes
After studying this unit you should be able to:
1) identify the basic economic questions, and their relationship to
resource allocation;
2) use the production possibility curve to analyse a variety of economic
choices;
3) distinguish between the basic types of economic systems;
4) use the active vocabulary of the unit in speaking and writing;
5) read for different purposes (skimming, scanning);
6) use grammar effectively (articles: zero article or the with place
names, prepositions).

Lead-in

1. There are four basic types of economic systems: traditional,


market, command, mixed. Match the description of the economy
(1—8) with its type.
1. Its decisions regarding investment, pro- ______________
duction and distribution are based on sup-
ply and demand.
2. Its decisions regarding production and in- ______________
vestment are embodied in a plan formulated
by a central authority, usually by a govern-
ment agency.
3. It is based on custom and tradition or ______________
command, with economic decisions based
on the traditions of community, family or
religion.
4. It is an economy where both the state and ______________
private sector direct the economy.

40
5. It is popularly conceived of as a “primi- ______________
tive” or “undeveloped” economic system,
having tools or techniques seen as outdated.
6. The government of this economy allows ______________
and protects ownership of property and vol-
untary exchange.
7. It is considered as a compromise between ______________
state socialism and free-market capitalism
that is superior in net effect to either of
those.
8. It may consist of state-owned enterprises, ______________
cooperative enterprises, or private enterpris-
es directed by the state.

2. There are some famous quotations which were brought to the


world by economists, humorists and politicians. Read them all
and decide how they characterise a market economy.
The market can stay irrational longer than you can stay solvent.
(John Maynard Keynes, English economist (1883—1946)
The government’s view of the economy could be summed up in
a few short phrases: If it moves, tax it. If it keeps moving, regulate
it. And if it stops moving, subsidize it. (Ronald Reagan, 40th presi-
dent of US (1911—2004)
Entrepreneurs and their small enterprises are responsible for
almost all the economic growth in the United States. (Ronald Rea-
gan)
The nine most terrifying words in the English language are, “I’m
from the government and I’m here to help.” (Ronald Reagan)
As scarce as truth is, the supply has always been in excess of the
demand. (Josh Billings, US humorist (1818—1885)

TOPICS

Text A
Three basic economic questions
1 Scarcity forces every economy in the world, regardless of
its form of organisation or its level of economic development, to
address three basic questions:

41
What to produce: all economies must choose what particular
goods and services and what quantities of these they wish to
produce.
How to produce: all economies must make choices on how to
use their resources in order to produce goods and services. Goods
and services can be produced by use of different combinations of
factors of production (for example, relatively more labour with
less capital, or relatively more capital with less labour), by using
different skill levels of labour, and by using different technolo-
gies.
For whom to produce: all economies must make choices
about how the goods and services produced are to be distributed
among the population. Should everyone get an equal amount of
these? Should some people get more than others? Should some
goods and services (such as education and health care services)
be distributed more equally?
2 The way that a country handles these questions is based on
their economic system. An economic system is basically the deci-
sion making that is done to answer these questions.
3 There are four main types of economic systems present in
the world: the traditional economy, the market economy, the
command economy, and the mixed economy. But there are also
unlimited amounts of variations of these systems.
4 A traditional economy is an economy that answers the three
questions based on their social customs and how the society has
dealt with these questions in the past. A country’s customs can
differ greatly to that of a neighbouring country so traditional
economies vary from one another.
5 A market economy is the type of economy that the United
States has and these questions are answered in the marketplace
by the interaction of buyers and sellers. For example, the ques-
tion of what to produce may be based on what trend is popular
right now. The producer would create a product that they think
would sell well to the public in hopes to make a profit. The ques-
tion of how to produce is usually based on the producer’s choice.
They might decide to produce a product with more workers or
they might decide to produce it more with machines and com-
puters to save on labour costs. The question involving for whom
to produce is based on the buyer who decides what they want or
need and what price they are willing to pay for it.

42
6 A market economy is great for motivating workers to work
harder because they are only paid based on what they do. A
worker can increase their income or profit by working harder
and this chance to profit motivates them.
7 A command economy is an economy where these questions
are all answered by the government. Rather than giving indi-
viduals the chance to decide what they want or need, the gov-
ernment decides these questions for the country. This type of
economy is difficult for the individual because it is impossible
for the government to know exactly what is best for each and
every citizen.
8 Also, command economies don’t help with their workers’
motivation because everyone is given the same amount of goods
and the same standard of living. A hard-working citizen would
not be given a chance to benefit from their extra work because
they cannot increase their standard of living any greater than
it currently is and they will make just as much as a person who
exerts little or no effort.
9 A mixed economy is an economic system that answers the
three questions both in the marketplace and in the government.
Although the United States government plays a role in our
economy, a mixed economy usually involves producers working
closer with the government than they do in the United States so
the US economic system is still a market economy.
10 The economic system a country has is based on what is
best for the country. One person might feel a market economy
is best for one country but it may not suit another. Determining
how an economy works can help you make better decisions as an
individual and participate more in issues involving the economy
as a whole. And becoming an economically-effective citizen helps
you benefit the entire country.
http://www.buckinvestor.com/basics/economic_systems.shtml

Target vocabulary of text A


capital (n) = an amount of money that you can use to
start a business or to make more money
It is a central thesis of Marxism that the ac-
cumulation of capital creates certain of the
economic conditions of existence of social-
ism.

43
custom (n) = a habit or tradition
The guide offers information on local cus-
toms.
distribute (v) = to share things among a group of people,
especially in a planned way
Clothes and blankets have been distributed
among the refugees.
exert (v) = to use your power, influence, etc. in order
to make smth happen
Environmental groups are exerting pressure
on the government to tighten pollution laws.
interaction (n) = a process by which two or more things af-
fect each other
Price is determined through the interaction
of demand and supply.
labour (n) = all the people who work for a company or
in a country
Labour shortages have forced the Japanese
into making heavy use of industrial robots.
profit (n) = money that you gain by selling things or
doing business, after your costs have been
paid
The property company made a huge profit
on the deal.
regardless (of) without being affected or influenced by
(adv) = smth
The law requires equal treatment for all, re-
gardless of race, religion, or sex.
standard of living = the amount of wealth, comfort, and oth-
er things that a particular person, group,
country, etc. has
a nation with a high standard of living
technologies (n) = new machines, equipment, and ways of
doing things that are based on modern
knowledge about science and computers
Many people are unwilling to embrace new
technologies.
vary (v) = if several things of the same type vary,
they are all different from each other
Medical treatment varies greatly from state
to state.

44
1. a) Use your dictionary to check the correct pronunciation
of the words below.
technology, care, command (economy), neighbouring, to vary,
to increase, an increase, although, to suit, entire, as a whole

b) Read text A and do the tasks/answer the questions below.


1. What are the three economic questions that must be
addressed by any economy?
2. What are the four basic types of economic systems?
3. How does a traditional economy answer the three economic
questions?
4. List the main characteristics of a market economy. How is
the question of how to produce settled within this type of
economic system?
5. Who is the main market regulator in a command economy?
6. Which role does a marketplace perform in a mixed economy?

2. Decide whether the following statements are True or False


according to text A.
1. There are only four basic forms of economic systems. ___
2. Social customs play an immense role in a mixed economy. ___
3. Societies belonging to traditional economies vary dramati-
cally. ___
4. In a market economy a manufacture decides which price to
charge for his produce. ___
5. The US economic system is the best example of a mixed
economy. ___

3. Scan through text A and find words corresponding to these


definitions.
para 1
1) to make someone do smth they do not ________________
want to do (v)
2) an amount of smth that can be counted ________________
or measured (n)
3) smth that is fairly small, easy, etc. com- ________________
pared to other things (adv)
4) the number of people living in a particu- ________________
lar area, country, etc. (n)

45
para 2—5
5) to deal with a situation or problem (v) ________________
6) in the main or most important ways,
without considering additional details or
differences (adv)
7) very large in amount (adj) ________________
8) people in general, considered in relation ________________
to the laws, organisations, etc. that make it
possible for them to live together (n)
9) the part of business activity that is con- ________________
cerned with buying and selling goods in
competition with other companies (n)
10) a general tendency in the way a situa- ________________
tion is changing or developing (n)
para 6—8
11) to make someone want to achieve smth ________________
and make them willing to work hard in or-
der to do this (v)
12) the group of people who govern a coun- ________________
try or state (n)
13) used to emphasise that a number, ________________
amount, or piece of information is or should
be completely correct in every detail (adv)
14) someone who lives in a particular town, ________________
country, or state (n)
15) more of smth, in addition to the usual ________________
or standard amount or number (adj)
para 9—10
16) to include or affect someone or smth (v) ________________
17) to be acceptable or convenient for a ________________
particular person or in a particular situa-
tion (v) ________________
18) smth that helps you or gives you an ad-
vantage (n)

4. Use the words from exercise 3 (1—12) to complete the


sentences.
1. Some retailers worry that new regulations will hurt their
ability to compete in _________.
2. Some agencies offer a comprehensive marketing research
service, some offer a range of specialised services and others
offer what is _________ an information-selling service.

46
3. Lately there has been ________ towards hiring younger,
cheaper employees.
4. ________ are planning further cuts in public spending.
5. Due to the high cost of borrowing, many companies have
been ________ to close.
6. Huge ________ of oil were spilling into the sea.
7. E-commerce is a ________ recent phenomenon.
8. Instead of thinking of ________ as made up of simple parts,
we must think of it as a collection of wholes which together
make up one “complex whole”.
9. Most of the world’s ________ doesn’t get enough to eat.
10. Most customers were satisfied with the way their complaints
were _______.
11. Implementing every law on every occasion implies _______
police resources.
12. The profit-sharing plan is designed _________ the staff to
work hard.

5. Look through the 6 sets of sentences and try to guess which


word from the list below is missing in every sentence.
to involve  • extra  •  to benefit
citizen  • exactly  •  to suit
Example: (0) depositor
1. A … was to be paid three-quarters of the amount of his
deposit, but limited to a maximum deposit of £10 000.
2. Money-Go-Round: Safety in numbers for the cautious …
3. The … can invest in any of the leading building societies and
receive special tax status, with interest taxed at 25%.
(1) _________________
1. These changes will … about 20 000 small firms.
2. Members of the scheme also … from a third party insurance,
for a premium of £2 a year.
3. The traders who trade around it can do nothing but … from
the new multi-storey car park with 1600 spaces.
(2) _________________
1. The … work is needed to cope with demand for its new Rover
800 saloon, which although launched just a year ago is ham-
mering opposition in the executive market.

47
2. Order two for £24.95 for … value.
3. Is there … pay for overtime?
(3) _________________
1. Although the school does not receive its budget share in
actual cash, it is still free to decide … how the money is to be
spent.
2. Your most important piece of equipment will be a sewing-
machine, and you should of course know … how it works.
3. It should be treated … the same as any of your other three
shifts.
(4) _________________
1. A personalised healing programme will be devised … your
temperament and specific needs.
2. They come in a range of models, all with a choice of options,
colours and fabrics … you and your home.
3. Equal rights aside, you can’t alter facts … your beliefs.
(5) _________________
1. At the time, there were over 2000 British … living in Iraq.
2. My husband became a British … in 1984.
3. In the United Kingdom, … may have the opportunity to vote
in a national election only once every five years.
(6) _________________
1. The enterprise is hard because it has to … mastering new lan-
guage in new ways.
2. Most investment projects, however, will … substantial ini-
tial costs and will generate sales revenue over an extended
period, so the problem arises of comparison of present costs
and future prospective revenues.
3. Thus any services which … the payment of fees will be under-
used by the lower socio-economic groups — dentists’ services
is a good example.

6. Fill in the gaps using the prepositions from the box below.
in  • by • for • on • from •  of
1. We will focus ______ three main topics.
2. If you want to succeed _____ business, think big.
3. There is a huge range of goods to choose _____.
4. The total level of demand _____ all products and services is
called the aggregate demand.
48
5. What a country can supply depends ____ the number of fac-
tories it has, the number ____ people working and the avail-
ability ____ raw materials.
6. A number of factors account _____ the differences between
the two companies.
7. This company would really benefit ____ some additional
investments.
8. A monopsony is when there is only one buyer _____ the
market.

7. Choose the correct letter (a, b or c).


1. But no sort of quantifiable data are available for anything
but small, and possibly ___typical, areas.
a) a b) un c) non
2. Public places are becoming more accessible to people with
____abilities.
a) un b) dis c) in
3. The recommendations from this report are ___acceptable to
many black people.
a) in b) un c) dis
4. The city’s council has decided that it no longer wants an
___limited number of gypsies or travellers, many of whom
are using illegal pitches, descending on the city.
a) in b) non c) un
5. The amount concerned — about £30 000 — is ___signifi-
cant given that such a tie would bring in £1 million in gate
receipts and television revenue.
a) in b) un c) dis
6. Health programs for the ___advantaged do not work prop-
erly.
a) in b) dis c) un
7. It is arbitrary, __rational, and does not reflect any principle.
a) un b) non c) ir
8. These equations are hard to solve, and even if one can find a
solution, it may be ___accurate.
a) in b) un c) ab
9. Two people are still ___accounted for after the floods.
a) in b) un c) dis

49
10. The ___affected youth from poor neighbourhoods were seen
destroying the bus stop.
a) un b) dis c) under

8. Give a definition of the word in bold using the words given


in the list below.
basic service to distribute
part to provide to share
important useful people
necessary needs resources
health education unlimited
condition process large
body to teach amount
well to learn limit
profit computer to pay
money machine to give
business information money
to sell to store goods
Text B
The two basic economic questions, what to produce and how
to produce, are about resource allocation, while the third is
about the distribution of income (or output).
Resource allocation refers to assigning available resources, or
factors of production, to specific uses chosen among many possible
and competing alternatives, and involves answering the what to
produce and how to produce questions.
When an economy makes a choice about what goods and ser-
vices to produce, it is also making a decision to assign resources
to the production of those goods and services. To illustrate the
choices made by the society let’s consider the production pos-
sibilities curve (or frontier).
A production possibility frontier (PPF) is a graph that com-
pares the production rates of two commodities that use the same
fixed total of the factors of production. Graphically bounding
the production set, the PPF curve shows the maximum speci-
fied production level of one commodity that results given the
production level of the other. By doing so, it defines productive
efficiency in the context of that production set.

50
Let’s consider a very simple hypothetical economy producing
only two goods: microwave ovens and computers. This economy
has a fixed quantity and quality of resources and a fixed techno­
logy. The table below shows the combinations of the two goods
that this economy can produce with the resources and technol-
ogy at its disposal. The figure plots the data of the table: the
quantity of microwave ovens is plotted on the vertical axis, and
the quantity of computers on the horizontal axis.
A point microwave computers
40 ovens
B G
35
A 40 0
Microwave ovens

30
C B 35 17
25 C 26 25
20 F D 15 31
15 D E 0 33
10
5
E
0 5 10 15 20 25 30 35 40
Computers
Figure 1. Production
possibilities curve
If all of the economy’s available resources are used to pro-
duce microwave ovens, the economy will produce 40 microwave
ovens and 0 computers, as shown by point A. If on the other
hand all resources are used to produce computers, the economy
will produce 33 computers and 0 microwave ovens; this is shown
by point E. All the points on the curve joining A and E repre-
sent other production possibilities where some of the resources
are used to produce microwave ovens and the rest to produce
computers. For example, at point В there would be production
of 35 microwave ovens and 17 computers; at point C, 26 micro-
wave ovens and 25 computers, and so on. The line joining points
A and E is known as the production possibilities curve (PPC) or
production possibility frontier (PPF).
In order for the economy to produce the greatest possible out-
put, in other words somewhere on the PPC, two conditions must
be met: all resources must be fully employed and all resources
must be used efficiently.

51
If the economy is initially at point B, it has allocated all its
resources to produce 35 microwave ovens and 17 computers. If
it wants to move to point C, where it reduces microwave oven
production to 26 units and increases computer production to
25 units, it must take some resources out of microwave oven pro-
duction and move them into computer production; this is called
a reallocation of resources: the economy has reassigned resources
to the production of a different combination of the two goods.
If the economy assigns too many resources to the production of
a good or service relative to what is socially desirable, in other
words if too much of a good or service is produced, this is referred
to as an overallocation of resources to the good or service. If too
few resources are assigned to what is socially desirable, there is
an underallocation of resources to the good or service.
When the economy makes a choice about how to produce
its goods and services, it is making a decision about which par-
ticular resources and in what quantities these are to be assigned
to the production of the goods and services; in other words, it
is once again allocating types and quantities of resources to its
production. Here, too, if a decision is made to change the parti­
cular combinations and quantities of resources used in producing
goods and services, there will result a reallocation of resources.
The distribution of income (or output) is concerned with how
much income different individuals or different groups in the popula-
tion will receive, and involves answering the for whom to produce
question.
The distribution of income and of output may be considered
together because the amount of goods and services that house-
holds can have is closely related to what they are able to buy,
which in turn is related to their income level. You can see this
in the circular flow model (figure), where households receive
income by selling the factors of production they own, and use
this income to buy goods and services. When the distribution
of income or output changes so that different social groups now
receive more, or less, income and output than previously, this is
referred to as redistribution.
In the real world the situation is more complicated because
governments (not shown in the simple circular flow model)

52
often intervene in the economy to influence both the allocation
of resources and the distribution of income and output.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press
2009. — P. 11.

Target vocabulary of text B


allocation (n) = the decision to allocate smth, or the act of
allocating it
the allocation of funds to universities
alternative (n) = smth you can choose to do or use instead
of smth else
Is there a viable alternative to the present
system?
assign (v) = to give a particular time, value, place, etc.
to smth
How much time have you assigned for the
meeting?
axis (pl. axes) (n) = a line at the side or bottom of a graph
vertical and horizontal axes
complicated (adj) = involving a lot of different parts, in a way
that is difficult to understand
The rules are rather complicated to follow.
curve (n) = a line on a graph that gradually bends and
represents a change in the amount or level
of smth
The curve illustrates costs per capita.
desirable (adj) = smth that is desirable is worth having or
doing
The ability to speak a foreign language is
highly desirable.
disposal (n) = available for someone to use
Tanner had a lot of cash at his disposal.
household (n) = a family or group of people who live to-
gether in a house
Many households own more than one televi-
sion.
hypothetical (adj) = imagined or suggested but not necessarily
real or true
a hypothetical example/situation

53
intervene (v) = to intentionally become involved in a dif-
ficult situation in order to improve it or
prevent it from getting worse
The Central Bank intervened in the cur-
rency markets today to try to stabilize the
exchange rate.
plot (v) = to make marks to show the position,
movement or development of smth, usual-
ly in the form of lines or curves between a
series of points on a map or piece of paper
We’ve plotted our projected costs for the
coming year, and they show a big increase.
unit (n) = a measure used to express an amount or
quantity
The kilogram is a unit of weight.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
assigning, frontier, graph, bounding, hypothetical, ovens, axis,
microwave, desirable, social, circular, to intervene

b) Read text B and answer the questions below.


1. How does an economy make a choice about what and how to
produce?
2. Which model helps economists illustrate the choice of
resource allocation? Explain how this model works.
3. Look at the figure in text B and decide at which point the
economy makes the most of its resources. Explain why.
4. What happens to the economy and its production at points
F and G? Does the economy operate efficiently?
5. What does the term redistribution mean? At which stage of
economic performance does distribution of income turn into
redistribution process?

2. Decide whether the following statements are True or False


according to text B.
1. For the economy to produce effectively all resources must be
fully employed. ___

54
2. At point B the economy uses its resources to produce the
greatest possible output. ___
3. Underlocation of resources takes place if the society assigns
too much resources for production of desirable goods and
services. ___
4. If the economy is at point F, it means that it lacks resources
and cannot produce the greatest possible output. ___
5. The PPF model, in its pure form, can be applied to real-
world situations. ___

3. a) Find word partners between the two lists of words (A


and B).
A B
resource employed
competing allocation
production desirable
hypothetical axis
vertical/horizontal rate
socially economy
fully alternatives

b) Use these collocations to complete the sentences.


1. It is hoped that the first unit will start production in one
year, and that by the end of 1995 the facilities will reach a
________ of 150 000 b/d.
2. To take an example, suppose it is considered generally
_______ (on the basis, say, of needs) that everyone has the
chance of access to a reasonable water supply.
3. An IS (Investment-Saving) curve is derived in Fig. 1 which
shows four interconnected graphs for a ________.
4. Most economists find the paradigm of perfect competition
indispensable for thinking about questions of ________ and
microeconomic efficiency.
5. Available resources of the economy must be efficiently shared
among the ________.
6. In Fig. 5.1 we have the price of bills on the ________ and
the stock of bills on the ________.
7. On an equilibrium path it is assumed that both capital and
labour are __________.

55
4. The verbs in the middle column have been jumbled. Put them
in the right sentences.
Example:
0. Ministers wanted to … their presentation and
change their content.
1. Finance ministers of … in financial markets if
the Group of Seven in- need be.
dustrial countries agreed
to ________
2. It is left to the reader … these points on figure
to __________ make 10.3, and to connect the
first and third.
change
3. Indian companies tend join … at most two per cent
to _________ of turnover to R&D as
receive against 15 per cent by
intervene US firms.
4. To get a curve you produce … all the points plotted
have to ________ plot recently.
5. The company expects allocate … 30 000 units every
to _________ week within a year.
6. It is scarcely possible … a choice between the
to _________ two alternatives.
7. Would you personally … a share of the profit at
be more motivated and the year end?
work more effectively if
you were to _________

5. Fill in the gaps using the prepositions from the box below.

on  • with • of •  in  • for • from • between

A PPF shows all possible combinations of two goods that


can be produced simultaneously during a given period of time,
ceteris paribus. Commonly, it takes the form (1) ___ the curve.
For an economy to increase the quantity of one good produced,
production of the other good must be sacrificed. For example,
butter production must be sacrificed (2) ___ order to produce
more guns. PPFs represent how much of the latter must be sac-
rificed (3) ___ a given increase in production of the former.

56
Such a two-good world is a theoretical simplification, due
to the difficulty of graphical analysis of multiple goods. If we
are interested (4) ___ one good, a composite score of the other
goods can be generated using different techniques. Furthermore,
the production model can be generalised using higher-dimen-
sional techniques such as Principal Component Analysis (PCA)
and others.
For example, assume that the supply (5) ___ the economy’s
factors of production does not change over time, in order to
produce more butter, producing guns needs to be sacrificed. If
production is efficient, the economy can choose (6) ___ combi-
nations (i.e. points) on the PPF.
In the PPF, all points (7) ___ the curve are points of maxi-
mum productive efficiency (i.e., no more output can be achieved
(8) ___ the given inputs); all points inside the frontier can be
produced but productively inefficient; all points outside the
curve cannot be produced (9) ___ the given, existing resources.

6. Read the text below. Use the words to the right of the text
to form a word that fits the context.
Why are graphs used in economics?
Economics is a (0) social science that at- (0) society
tempts to understand how supply and de-
mand control (1) ____________ of limited (1) distribute
resources. Since economies are dynamic and
constantly changing, (2)____________ (2) economy
must take snapshots of economic data at spec-
ified points in time and (3)____________ (3) comparison
them to other fixed timed data sets to un-
derstand trends and relationships. To un-
derstand the relationships between these
(4)____________, economists use graphs (4) vary
to (5) _______, interpret and explain com- (5) vision
plex ideas.
Since economists take snapshots of data,
a graph of these (6)____________ points (6) datum
helps to illustrate (7)____________ and (7) move
trends over time. Sets of information writ-
ten on paper are hard to translate into
(8)____________ bits of information. (8) understand

57
However, when economists put infor-
mation on a graph, it is easy to see if over
time the data is increasing, decreasing or
(9) _______. For example, a data set of gas (9) stagnation
prices over time could be plotted on a graph
to quickly see when prices were increasing
and when they were (10) _______. (10) decrease

VOCABULARY

1. Look at the following pair of words, spot the difference and


do the task.
FIGURES ≠ NUMBERS

• a symbol for a number or an • a symbol or word used in a


amount expressed in numbers; counting system or used to
• a number that expresses an show the position or order of
amount, especially in official smth;
documents • a group of numbers that rep-
resents smth
Insert the proper word figure or number.
1. Can you read this _________________? Is it a three or an
eight?
2. Think of a _________________ smaller than 100.
3. Look at item __________________ three on your agenda.
4. Write the _________________ in both words and figures.
5. I looked quickly down the column of _________________.
6. Pablo’s favourite ________________ is seven.
7. The Prime Minister lives at __________________ 10,
Downing Street.
8. Each person receives a membership ______________ when
they join.
9. Government ___________________ show a rise in unem-
ployment.
10. What’s your phone ______________________?

58
2. Look through the 2 sets of sentences and decide which word
figure or number should be inserted to make these sentences
complete.
1. If the _____ are for real GNP per head then West Germany
would fare better.
2. The corresponding _____ for Spain, Portugal and Yugosla-
via are 42/63, 38/64 and 30/58 per cent respectively.
3. Where analogy is made to the general population, compari-
son _____ are taken from Social Trends.
The missing word is _______________
1. It was the increase in the ______ of those in temporary
accommodation.
2. A relatively small _______ of players will be highly paid.
3. It investigated a large ______ of incidents and drew conclu-
sions about fault and responsibility.
The missing word is _______________

3. Match the words in the box on the left with the words that
they collocate with on the right.
1) specific a) axis
2) production b) quantity
3) productive c) uses
4) vertical/horizontal d) efficiency
5) income e) groups
6) social f) set
7) fixed g) level

4. Use the collocations from exercise 3 to complete the


sentences.
1. But with __________ at only 300 vehicles this year, limou-
sines are not a priority.
2. However it is not necessary to own all the available shapes,
some have very _________ which may only be needed on
rare occasions.
3. Birth rates began to decline for all _________ as a conse-
quence of changing attitudes towards economic conditions
and opportunities.
4. Has the transfer from public to private ownership improved
__________?

59
5. The PPF reveals the maximum amount of any two products
that can be produced from a __________ of resources and
the possible trade-offs in production between them.
6. The __________ is a time base and the _________ displays
positive and negative cash flow.
7. The poverty trap exists when a low-paid worker receives a
pay increase, but then, as a result of the higher ___________
attained, not only has to pay tax, but also loses various
means-tested benefits previously received.

5. Translate the sentences from Russian into English using the


collocations from exercise 3.
1. Часть трудовых мигрантов хочет накопить денег на какие-то
конкретные цели (женитьбу, строительство дома и т. п.).
2. А вот Путин действительно «президент всех россиян» —
в его электорате представлены практически все социаль-
ные группы.
3. Дешевле всего жить и питаться, по информации Госком-
стата, в Тамбове — там минимальный продуктовый набор
стоит меньше всего — 781 руб.
4. Чем выше уровень дохода респондентов, тем более тер-
пимо они относятся к различным видам рекламы.
5. Гибкость и эффективность производства, наличие сети
дилеров в США и Европе позволяет предлагать более
выгодные цены и осуществлять незамедлительные
поставки.
6. Экономика располагает ограниченным количеством
ресурсов, которые можно было бы использовать при про-
изводстве товаров длительного пользования.
7. Временной интервал указывается большинством иссле-
дователей на горизонтальной оси, а объемы производ-
ственного выпуска — на вертикальной оси.

6. Find synonyms among the following words.


available  •  to assign  •  commodities  •  to plot
curve  •  accessible  •  output
resources  •  to allocate  •  goods
to distribute  •  families  •  complex  •  cyclic
households  •  circular  •  complicated
to intervene  •  to mark  •  frontier  •  production
inputs  •  to interfere  •  to apportion

60
1) __________ — ________ 7) __________ — _________
2) __________ — ________ 8) __________ — _________
3) __________ — ________ 9) __________ — _________
4) __________ — ________ 10) _________ — _________
5) __________ — ________ 11) _________ — _________
6) __________ — ________ 12) _________ — _________

7. a) Read the two definitions (a and b) and decide which term


an abbreviation or an acronym should be inserted into the gap.
a) An __________ is a shorter version of something.
b) An __________ is a shorter version as well, but it is pro-
nounced as a word.

b) Complete what the following stand for. Decide which of them


are abbreviations and acronyms.
0) IMF abb. International Monetary Fund
1) OPEC ______ ________ of ________ ___________
2) NAFTA ______ ________ ___________ __________
___________ __________
3) OECD ______ _________ for ________ _________
________
4) ASEAN ______ _______ of _________ __________
_________ __________
5) NATO ______ __________ _________ __________
____________
6) WHO ______ ______________ _______________
__________________
7) ECB ______ ______________ _______________
________________

c) Match the name of the organisation/agreement from the list


above to its description.
1. An agreement signed by the governments __________
of Canada, Mexico, and the United States, cre-
ating a trilateral trade bloc in North America.

61
2. A geo-political and economic organisation of __________
ten countries located in Southeast Asia, which
was formed by Indonesia, Malaysia, the Philip-
pines, Singapore and Thailand.
3. A group of countries including the US and __________
several European countries, which give military
help to each other.
4. An international economic organisation of 34 __________
countries founded in 1961 to stimulate economic
progress and world trade.
5. An organisation of countries that produce and __________
sell oil.
6. The institution of the European Union (EU) __________
that administers the monetary policy of the 17
EU Eurozone member states.
7. A specialised agency of the United Nations __________
(UN) that is concerned with international pub-
lic health.

GRAMMAR

1. Choose the correct word between the two alternatives to


make the rule complete.
7 zero article or the (definite) article with place names
Most place names are used with the / zero article, but there
is some variation. In particular, the / zero article is used when
a countable noun like one of the following appears in the title:
canal, channel, kingdom, ocean, republic, river, union. The / Zero
article is often omitted on maps.

2. Group the names of geographic areas and countries (states)


under the two headings: zero and the article.
zero the

Central Asia, Netherlands, Middle East, Arctic, Lower Egypt,


Upper Austria, Arab Republic of Egypt, Germany, Finland, Vati­

62
can City, Bavaria, Ohio, North Pole, Surrey, Portugal, Inner
London, United Kingdom, Outer Mongolia, Balkans, West,
Argentine

3. Fill in the gaps using zero or the article with the following
groups of names.
Group 1. Historical references
1. Here in ___Victorian England they have no antibiotics, and
medicine is barely out of ___ Stone Age.
2. The association between youth and beauty has been evident
throughout history, particularly in ___ Ancient Greece and
during ___ Renaissance.
3. A similar argument can be advanced in connection with the
feudal or estate system of ___ Medieval Europe.
4. Vast masses of people were subject to conditions that would
barely have been tolerated in ___ Dark Ages.
5. Permission and Regulation: laws and morals in ___ post-war
Britain.
6. The conclusion can be drawn that ___ Roman Britain did
not attain the same degree of monetisation as the Mediter-
ranean cities.
Group 2. Cities
1. The war had made many businessmen conscious of the need
and opportunities for private banks in both ___ London and
the provinces.
2. The interest rates for Treasurer’s Deposits are based on ___
City of London money market rates.
3. This four star hotel is centrally located for all major attrac-
tions in ___ Hague.
4. The town of Charolle, about 100 km to the north west of
___ Lyons, is the ancient capital of the old province of ___
Charolais.
Group 3. Universities and buildings
1. “From State to market — the ethical implications” was the
title of a seminar held on 6 July at ___ Faculty of Journalism
of ___ Moscow State University.
2. A new and widespread mode of evolution has been described
by a research group led by Dr. Gabriel Dover, at ___ Univer-
sity of Cambridge.

63
3. Professor Day, head of ___ Institute of Public Health at ___
Cambridge University, said: “I think it would be a disaster if
the Government decided that …”
4. After a complete theoretical and experimental investigation
in ___ Cambridge University Engineering Department ...
Group 4. Other locations (stations, shops, bridges, theatres)
1. To the south is the endlessly fascinating sight of trains pull-
ing in and out of the platforms of ___ London Bridge Sta-
tion.
2. A trip around the bay under ___ Golden Gate Bridge, a visit
to ___ Alcatraz, riding the cable cars and dining out on Pier
49 are just some of the attractions of this jewel in Califor-
nia’s crown.
3. Do you ever see a price in ___ Marks and Spencers that doesn’t
have ninety-nine P on the end of it?
4. In ___ London’s Victoria Station, a kiosk displayed over
700 magazines — 40 on computing, 75 on music, and many
other categories that in 1945 did not exist.
5. ___ Coliseum in Green Lanes, ___ North London, was origi-
nally a Victorian music hall.
6. All tickets purchased at ___ Phoenix Cinema are non-
refundable and non-exchangable.

SKILLS FOCUS

Reading

1. Read the text How to read graphs and write one word which
is missing.
How to read graphs
A graph tells a story. The story a graph tells (0) us is how
two variables are related (1) ___ each other. (2) ___ of the vari-
ables is measured along the bottom of the graph, and it increases
in value (3) ___ we move from left to right. The (4) ___ variable
is measured along the left side of the graph, and it increases in
value as we move (5) ___ bottom to top. For example, Figure 1
shows the profits of a firm at different levels of output. Output

64
is measured along the bottom, and as we move from 0 to the
(6) ____, output is increasing. The bottom line is the horizontal
axis. Profits are measured along the side, and they in­crease as we
move up from 0. The side line is the vertical axis.
Graphs are read (7) _____
G a page, from left to right. Usu-
E ally, we think of the variable on
Profits (in dollars)

the horizontal axis as the cause


of the changes (8) ____ occur in
F the variable on the vertical axis.
D
In (9) ___, we begin to read
the graph at its left. When output
is 0, profits equal 0. (10) _____
0 output increases, we follow
A B C
Output the graph and see that profits
Figure 1 are increasing. For example, at
output level A, profits reach
(11) ___ D. As output continues to increase, profits continue to
climb (12) ___ we reach output level B. As the graph illustrates,
we have reached the “top of the hill”. Profits have reached their
highest level (E) at output level B. Increasing output (13) ___
В causes profits to fall, until they reach 0 at output level C.

2. Read the 4 short texts about variable relationships and decide


which panel (A—D) refers to the descriptions (1—4).

Y A Positive 1. This panel shows that X and Y are in-


Relationship versely related. When X goes up, Y goes
down, and when X goes down, Y goes
up. For example, X could be the amount
of safety equipment a firm installs and Y
0 X could be the firm’s accident rate.
Panel A

Y A Negative 2. This panel shows that Y has no effect


Relationship on X. No matter how large or small Y is,
X remains the same. Y could be the price
of a dead artist’s paintings and X could be
the world supply of the artist’s paintings.
0 X
Panel B

65
Y X Has No 3. This panel shows that X and Y are pos-
Effect on Y itively related. When X goes up, Y goes
up, and when X goes down, Y goes down.
For example, X could be workers hired
and Y, output.
0 X
Panel C

4. This panel shows that X has no effect


Y Y Has No on Y. No matter how large or small X is,
Effect on X Y remains the same. Y could be the size of
the moon and X, pencil production.

0 X
Panel D

3. Read more about types of economic systems in Reading file:


Unit 2.

Speaking
A
Immigration
This activity is based on the materials taken from http://www.
eco­­nomist.com/. The site presents the debate between the two
economists: David Goodhart and Philippe Legrain. They are
discussing the question “Is immigration endangering European
society?” The brief description of the problem is given below.
According to some, immigration is Europe’s biggest problem;
according to others, it is the only hope for the continent’s salva-
tion. The first camp argue that the big waves of immigration into
Europe over the past 20 years have led to fractures in national
communities, strains on infrastructure and resources and, in a
few extreme cases, the radicalisation of violent minorities in both
the immigrant and indigenous populations. The second camp
says that without an injection of immigrant labour, Europe’s
demographic situation will soon become dire. A wrinkle in the
dispute is that much of the immigration in Europe comes from
elsewhere in the continent. Does that movement, and the influx
of newcomers from elsewhere, enrich or threaten Europe?
66
Your task is to visit http://www.economist.com/debate/over-
view/210 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.
a) David Goodhart is a … He is defending the idea of … His
arguments in favour of the statement are …
b) Philippe Legrain is a … He is against the idea of … because …
His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.
4. Does Russia face the problems discussed in this debate?
B Discuss the following questions with the partner.
1. What comes to mind when you hear the word “immigra-
tion”?
2. Would you like to live and work in another country?
3. Is illegal immigration a problem where you live?
4. What do you think of the European Union’s idea of its
Blue Card (similar to the USA’s Green Card)?
5. Would you like to have a blue card or a green card?

Writing

Render the following text using the plan:


1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.
Россия-2030: сырьевой придаток
или технологическая держава?
Минэкономразвития представило в правительство две
концепции развития российской экономики. Власти в оче-
редной раз предоставлена возможность поразмыслить над
тем, идти ли и дальше по сырьевой модели и стать в перспек-
тиве «энергетической сверхдержавой» либо сделать упор на
«экономику знаний», совершив технологический рывок.
67
Стать энергетической сверхдержавой, говорится в докладе
Минэкономразвития, наша страна сможет, наладив масштаб-
ную разработку новых месторождений, активно импортируя
технологии, развивая соответствующую инфраструктуру,
в т. ч. строя новые электростанции, прокладывая трубопро-
воды и вообще развивая энергоемкие производства. Инно-
вационный сценарий отнюдь не отрицает положения пре-
дыдущего, однако предполагает больший упор на развитие
высоких технологий. При этом увеличиваются вливания —
собственно денежные и интеллектуальные («приток моз-
гов») — в образование, медицину, науку, развитие инфор-
мационных технологий, транспортную инфраструктуру,
машиностроение и т.п. При этом предполагается, что страна,
не отказавшись от той же разработки новых месторождений
и экспорта углеводородов, все же «слезает с сырьевой иглы».
Консервативный вариант развития не обещает прорыва,
но он более щадящий к и без того истерзанному федераль-
ному бюджету и даже предполагает его бездефицитным.
Правда, и выполнить данные премьером предвыборные обе-
щания в полном объеме при этом не представится возмож-
ным, равно как придется сокращать и уже запущенную про-
грамму перевооружения, а денежное довольствие военных
придется «откатывать» на дореформенный уровень. Сюда же
придется отнести и неизбежный рост дифференциации дохо-
дов населения и развития регионов. Все это в совокупности
чревато ростом социальной напряженности, предупреждают
в Минэкономразвитии. Инновационный сценарий, в свою
очередь, решает эти проблемы, однако и дефицит бюджета
преодолеть не удастся, равно как не удастся избежать и уве-
личения госдолга, который к 2030 г. может достигнуть чет-
верти ВВП.
Существуют доводы в пользу как первого, так и второго
вариантов. Консервативный выбор будет базироваться на
дальнейшей активной эксплуатации природных ресурсов,
их продаже, будет и в дальнейшем предполагать хроническое
недопроизводство потребительских товаров. Логика сторон-
ников такого выбора, коих очень немало во властных струк-
турах, предельно ясна и проста: есть ли смысл отказываться
от той деятельности, которая приносит деньги?
68
С другой стороны, инновационный вариант как раз пред-
полагает развитие или доразвитие тех отраслей, на продук-
цию которых есть устойчивый спрос внутри страны, кото-
рый сейчас пока что компенсируется за счет импорта. Т.е. мы
ввозим из-за рубежа товары, причем тратим те деньги, кото-
рые заработали от продажи сырья. Схема эта, в общем-то,
понятна и прозрачна, но вот только здравой ее при этом
никак не назовешь.
Конечно, минусы у инновационного сценария есть. У нас
сегодня экономика функционирует таким образом, что боль-
шинство отраслей монополизированы, в то же время в неко-
торых отраслях правят бал иностранные транснациональ-
ные компании, которые предлагают более дешевые товары и
при этом новейшие технологии, т. е. конкурировать с ними
невозможно. И с точки зрения здравого смысла как будто бы
не стоит отказываться от уже налаженной схемы гарантиро-
ванного заработка, пусть даже и обеспеченного эксплуата-
цией ресурсов.
Однако, независимо от выбранного сценария, мы должны
развивать внутренние рынки и нашу экономику и отрасли
таким образом, чтобы впоследствии оказаться в наименьшей
зависимости от мировой экономики, от международных эко-
номических отношений.
http://www.km.ru/v-rossii/2012/04/16/ekonomika-i-finansy/

Check your progress (1)

1. Match the word with its definition.


1) capital (n) a) to have or provide smth that is needed
or wanted
2) abundance (n) b) the amount of wealth, comfort, and oth-
er things that a particular person, group,
country, etc. has
3) satisfy (v) c) if several things of the same type vary,
they are all different from each other
4) goods (n) d) the study of society and the way people
live

69
5) standard e) to use your power, influence, etc. in or-
of living der to make smth happen
6) labour (n) f) an amount of money that you can use
to start a business or to make more money
7) social sciences g) all the people who work for a company
or in a country
8) interaction (n) h) everything that is produced in the eco­
nomy
9) exert (v) i) when there is more than enough of smth
10) vary (v) j) a process by which two or more things
affect each other

2. Use the words from the box to complete the sentences.


economise  • well-being • trade-off • proposition
households  • intervened • plotted • incomes
1. Many ______ own more than one television.
2. Average ______ have risen by 4.5% over the past year.
3. You could _______ on food by not eating in restaurants all
the time.
4. We are now concerned for the economic _______ of the
country.
5. The Central Bank _______ in the currency markets today
to try to stabilise the exchange rate.
6. We’ve ______ our projected costs for the coming year, and
they show a big increase.
7. There has to be a ______ between quality and quantity if we
want to keep prices low.
8. The theory is founded on two basic _______.

3. Choose the correct letter (a, b or c).


1. Most people have little contact with mentally or physically
handicapped people and base their attitudes and opinions on
historically ___accurate concepts.
a) un b) in c) ir
2. Education has also helped to confirm the view of many
administrators and policy makers that the problems of ___

70
advantaged areas, both urban and rural, can only be solved
through outside intervention.
a) un b) in c) dis
3. The hierarchy was headed by the imperial family and court
nobility, but these comprised a numerically small and socially
___ significant group, largely detached from the rest of society.
a) un b) in c) ir
4. It does not demand that the government shall avoid promot-
ing ___acceptable ideals.
a) un b) in c) ir
5. The test was standardised on 344 children, aged between
3 years and 7 years 11 months, who were “presumed by their
teachers to have no handicapping conditions which would
contribute to ___typical language development.”
a) un b) in c) a
6. Problems may arise in respect of expatriates working in the
same location on longer-term postings or even local com-
pany employees who are ___satisfied with their rates of pay
in comparison with salaries and/or bonuses earned by fixed-
term contract workers.
a) un b) in c) dis
7. Those who advocate tough policies, particularly those who
do not seriously question the broad political economic con-
text in which they might be implemented, ___estimate these
difficulties and some obvious lessons from history.
a) un b) in c) under
8. The European Commission is trying to ___regulate the
European airline market, but it wants to stop short of Amer-
ica’s “open skies” policy.
a) de b) in c) un
9. Why US carmakers are looking for European partners: Larry
Black explains an ___expected effect of US restrictions on
imports of Japanese cars.
a) un b) in c) ir
10. Archive material is unique and ___replacable, and his-
tory teachers should handle original material carefully and
encourage their pupils to do the same.
a) un b) in c) ir

71
4. Find word partners between the two lists of words (A and B).
A B
social well-being
poverty alternatives
material employed
competing economy
hypothetical income
socially responsibility
real rate
fully desirable
production stricken

5. Use the words below to complete the sentences.


affect (v)  •  effect (v)  •  figure (n)  •  number (n)
1. This in turn is likely _____ the development and use of new
technology, not just at the work-place but throughout the
enterprise as a whole.
2. The graph line will at first rise steeply but then start to level
off, and one can compute the likely final level and hence
_____ of dies.
3. However, in both these instances the commercial pressure of
the campaigning groups has been enough ____ change.
4. _____ show that beer and spirits together constitute the
industry with the greatest publicity in Mexico (Harvey
1983).
5. Education, of course, does not end at the school gates: the
home is one of a complex of factors which combine _____
the child’s chances at school.
6. One cannot ignore the persistent nature of our unemploy-
ment _____ and little imagination is needed to visualise the
hopelessness of the unemployed.
7. What is feminism’s potential _____ on real change in this
country and globally?
8. _____ of free places is limited, so book early to take advan-
tage of this excellent offer.

6. Fill in the gaps using the correct form of the verb to be.
1. Market economics ___ about efficiency, not morality.
2. The only means of communication ___ sign language.

72
3. Mathematics ___ the second of “the two great provinces of
speculative science” to which Berkeley turns his attention.
4. A third series ___ being developed with the same objective.
5. But not all the news ___ bad for small investors.
6. Nearly half the Havant team ___ in Pakistan.
7. The British team ___ led by Geoff Winchcombe from Swin-
don.
8. But government ___ indirectly involved as the provider of
taxpayers’ money; and through its duty to set standards for
publicly and privately provided care.
9. As inflation is low, the prospects for the future are good,
especially if the Government ___ returned to office.
10. The Council ___ proud of the contribution it has made to
business life since 1931 and aims to continue serving its
members for many years to come.
11. The county council ___ negotiating with operators on the
provision of this service.

7. Use the or zero article to fill in the gaps.


1. Here, you’ll get an authentic taste of life as it was in ___
Middle Ages and ___ Renaissance.
2. Nonconformist ministers had become part of ___ Victorian
England as famous preachers, writers, controversialists, poli-
ticians and local leaders.
3. It was agreed at ___ Hague to enlarge the Community to
include ___ Britain and others.
4. As secretary of state, Cardinal Eugenio Pacelli was resident
in ___ Vatican when he was elected Pope.
5. The largest school of mass communication in ___ Soviet
Union, ___ Moscow State University, will start a five-year
course specialising in Religious Communication in Septem-
ber this year.
6. Members of the Department of Social Anthropology and the
Audio-Visual Aids are collaborating to make the first experi-
mental videodisc at ___ Cambridge University.
7. The brains behind the organisation were 52-year-old Roy
Crack from ___ Surrey and 42-year-old Paul Newmann from
___ South London, who both went from “rags to riches” on
the profits from pharmacy.

73
8. Answer the questions.
1. What is economics about? What does economics study?
2. Why are needs and wants the basic concepts of economics?
3. What is scarcity? Does scarcity mean the same as rarity?
4. Why is economics called a science of choice?
5. What is meant by alternative uses?
6. What questions does economics study?
7. Name the four basic types of economic systems. What type
could Russia be referred to?
8. How does a market economy answer the three basic eco-
nomic questions?
9. What is a production possibility frontier? How does the
PPF help to answer the basic economic questions?
10. What is income distribution? When does redistribution of
income take place?
Unit 3
Positive and normative
economics
Learning outcomes
After studying this unit you should be able to:
1) distinguish between positive and normative economic concepts;
2) understand why economists use the ceteris paribus assumption;
3) use the active vocabulary of the unit in speaking and writing;
4) read for different purposes (skimming, scanning);
5) use grammar effectively (quantifiers and prepositions).

Lead-in

1. Read the sentence and decide which meaning (a, b or c) the


word judgement has.
The inspector needs to make a judgment about how the school
is performing.
a) the ability to make good decisions or to be right in your
opinions
b) an opinion about someone or something that you decide
on after thinking carefully
c) an official legal decision, usually made by a judge

2. Match the two types of judgements with their definitions.


A Objective 1) implies a conclusion which is insular or
(scientific) one-sided (synonyms: biased, personalised,
judgements unverifiable)
B Subjective 2) implies a conclusion based upon balance
(personal) value and public evidence (synonyms: disinteres­
judgements ted, impartial, unprejudiced)

75
TOPICS

Text A
Positive and normative economics
1 In studying economics it is important to distinguish two
branches of the subject. The first is known as “positive econom-
ics”, the second as “normative economics”.
2 Positive economics deals with objective or scientific expla-
nations of the working of the economy. The aim of positive eco-
nomics is to explain how society makes decisions about con-
sumption, production, and exchange of goods. The purpose of
this investigation is twofold: to satisfy our curiosity about why
the economy works as it does, and to have some basis for predict-
ing how the economy will respond to changes in circumstances.
Normative economics is very different.
3 Normative economics offers prescriptions or recommenda-
tions based on personal value judgements. In positive econom-
ics, we hope to act as detached scientists. Whatever our politi-
cal persuasion, whatever our view about what we would like to
happen or what we would regard as “a good thing”, in the first
instance we have to be concerned with how the world actually
works. At this stage, there is no scope for personal value judge-
ments. We are concerned with propositions of the form: if this is
changed then that will happen. In this regard, positive econom-
ics is similar to the natural sciences such as physics, geology, or
astronomy.
4 Here are some examples of positive economics in action.
Economists of widely differing political persuasions would agree
that, when the government imposes a tax on a good, the price of
that good will rise. The normative question of whether this price
rise is desirable is entirely distinct. Many propositions in posi-
tive economics would command widespread agreement among
professional economists.
5 Of course, as in any other science, there are unresolved
questions where disagreement remains. These disagreements are
at the frontiers of economics. Research in progress will resolve
some of these issues but new issues will arise and provide scope
for further research.

76
6 Although competent and comprehensive research can in
principle resolve many of the outstanding issues in positive eco-
nomics, no corresponding claim can be made about the resolution
of disagreement in normative econo­mics. Normative economics
is based on sub­jective value judgements, not on the search for
any objective truth. The following state­ment combines positive
and normative econo­mics: “The elderly have very high medi-
cal expenses compared with the rest of the population, and the
government should sub­sidise health bills of the aged.” The first
part of the proposition — the claim that the aged have relatively
high medical bills — is a statement in positive economics. It is
a state­ment about how the world works, and we can imagine a
research programme that could determine whether or not it is
correct. Broadly speaking, this assertion happens to be correct.
The second part of the proposition — the recommendation about
what the government should do — could never be “proved” to be
correct or false by any scientific research investigation. It is sim-
ply a subjective value judgement based on the feelings of the per-
son making the statement. Many people might happen to share
this subjective judgement. But other people might reasonably
disagree. You might believe that it is more important to devote
society’s scarce resources to improving the environment.
7 There is no way that economics can be used to show that
one of these normative judgements is correct and the other is
wrong. It all depends on the preferences or priorities of the indi-
vidual or the society that has to make this choice. But we can
use positive economics to spell out the detailed implications of
making the choice one way or the other. For example, we might
be able to show that failure to subsidise the medical bills of the
elderly leads middle-aged people to seek a lot of unnecessary
medical check-ups in an attempt to detect diseases before their
treatment becomes expensive. Society might have to devote a
great deal of resources to providing check-up facilities, leaving
less resources available than had been supposed to devote to
improving the environ­ment. Positive economics can be used to
clarify the menu of options from which society must eventually
make its normative choice.
8 Most economists have normative views and some econo-
mists are vociferous champions of particular normative recom-
mendations. However, this advocacy role about what society

77
should do must be distinguished from the role of the econo-
mist as an expert about the likely consequences of pursuing any
course of action. In the latter case, the professional economist
is offering expert advice on positive economics. However, in a
democracy economists have no monopoly on pure value judg-
ments merely because they happen to be economists. Scrupu­lous
economists clearly distinguish their role as an expert adviser on
positive economics from their status merely as involved private
citizens in arguing for particular normative choices.
David Begg, Stanley Fisher, Rudige Dornbusch. Economics. — 3 rd ed. —
McGraw-Hill Book. Company Europe. — P. 10—11.

Target vocabulary of text A


advocacy (n) = when someone expresses support for a par-
ticular idea or way of doing things
For social workers advocacy is a skill used to
support a client appealing against a decision
within the welfare system.
assertion (n) = when you say that smth is certainly true
I don’t agree with his assertion that men are
safer drivers than women.
comprehensive including everything
(adj) = a comprehensive study of the subject
consumption (n) = when someone uses, eats or drinks smth
products sold for personal consumption
detached (adj) = not reacting to or becoming involved in
smth in an emotional way
try to take a more detached view
distinguish (v) = to recognize and understand the difference
between two or more things or people
His attorney argued that Cope could not dis-
tinguish between right and wrong.
impose (v) = if someone in authority imposes a rule,
punishment, tax, etc., they force people to
accept it
The court can impose a fine.
persuasion (n) = a particular type of belief, especially a po-
litical or religious one
We need people with talent, whatever their
political persuasions.

78
preference (n) = if you have a preference for smth, you like
it more than another thing and will choose
it if you can
Many elderly people expressed a strong
preference to live in their own homes.
scope (n) = the opportunity to do or develop smth
The scope for successful gardening increases
dramatically with a greenhouse.
scrupu­lous (adj) = doing smth very carefully so that nothing
is left out
scrupulous attention to detail
sub­sidise (v) = if a government or organisation subsidises
a company, activity, etc., it pays part of its
costs
Farming is heavily subsidised by the govern-
ment.
vociferous (adj) = expressing your opinions loudly and
strongly
a vociferous opponent of the plan

1. a) Use your dictionary to check the correct pronunciation


of the words below.
branches, scientific, curiosity, circumstances, persuasion,
physics, issue, assertion, subjective, menu, vociferous, advocacy,
consequences, scrupulous

b) Read text A and do the tasks/answer the questions below.


1. What is the difference between normative and positive state-
ments?
2. Which of the following are positive statements and which
are normative?
a) It is snowing today.
b) It is too cold today.
c) Economics is a social science.
d) Economics should be concerned with how to reduce pov-
erty.
e) Households save too much of their income.

79
3. Should the two branches of economics be considered as sepa-
rate or interconnected?
4. Is there any reason why economists should agree about nor-
mative statements?

2. Decide whether the following statements are True or False


according to text A.
1. Normative economics studies how the economy actually
behaves. ___
2. Positive economics makes prescriptions about what should
be done. ___
3. Given comprehensive research, scientists should agree on
issues in positive economics. ___
4. Normative economics is based on personal value judgements.
___

3. Scan through text A and find the words corresponding to


these definitions.
para 2—3
1) having two important parts (adj) _______________
2) the feeling of wanting to know or learn _______________
about smth (n)
3) a fact or event that makes a situation the _______________
way it is (n)
4) an idea or suggestion about how you _______________
should behave, or how to make a situation,
activity, etc. successful (n)
5) to think about someone or smth in a par- _______________
ticular way (v)
6) an example of a particular type of event, _______________
situation or behaviour (n)
para 4—6 _______________
7) to be different (v)
8) the limits of what is known or what has _______________
been done before in an area of knowledge or
activity (n)
9) to solve or end a problem or difficulty (v) _______________
10) when someone says that smth is true, al- _______________
though it has not been proved (n)

80
11) the amount of money that you spend on _______________
smth (n, pl.)
12) compared to other things (adv) _______________
para 7—8 _______________
13) smth that is very important and that
must be dealt with before other things (n)
14) when you seem to suggest smth without _______________
saying it directly (n)
15) to try to do smth or achieve smth, usu- _______________
ally over a long period of time (v)
16) used to emphasise that smth is not large, _______________
important, or effective when compared to
smth else (adv)

4. Use the words from exercise 3 to fill in the gaps.


1. Although these two savings intermediaries are strong com-
petitors in the personal savings market, their portfolio
choices ______, because the structures of their liabilities
differ.
2. The removal of safety devices to speed up production, for
_____, is often done with the tacit connivance of supervi-
sors.
3. Estimates suggest that the number is ______ small, prob-
ably no more than 3 per cent of the total unemployed.
4. Generations of inventors and investors have kept us on the
technological ______.
5. No analyst would make such a _____ today, and the “nation-
alization” thesis has had to be revised in the light of increased
local variations in voting behaviour.
6. He borrowed £150 000 and used the money for legal ______.
7. The company’s main duty is ______: the exploitation and
the protection of the “work”.
8. The ______ drawn from the trade is that modern corpora-
tions lack an adequate system of accountability.
9. Experiments and observations failed to _____ the contro-
versy.
10. The meeting has been cancelled due to ______ beyond our
control.

81
11. The party’s main ______ for educational problems was to
give schools more money.
12. Our main concern is with those policies and issues we
______ as being the most important in determining the
achievement of national goals through partnership with the
multinationals.
13. Winning the Civil War was just such an overriding ______,
and all other issues were in part subsidiary to this.
14. Other graduates now _____ successful careers in the United
Kingdom, Europe and the USA.
15. They did not find oil and gas, _____ thick sedimentary areas
that could indicate their presence.
16. The reasons are numerous and sometimes complex but
______ about the planet on which we live is a prime moti-
vator.

5. Fill in the gaps using the prepositions from the box below.
from  • at • in • on • by
to  • of • for • with
1. It enables a price system to operate and facilitates the pro-
duction and exchange ___ goods.
2. They are the basis ___ our strategy and the benchmark
against which progress will be judged.
3. Car sales last month failed to respond ___ the budget tax
cuts but Ford has retained its market leadership while falling
short ___ its objective of a 30 p.c. share.
4. Last week’s meeting left the crucial question of burden of
proof open — a fact which may have shifted the odds in
favour ___ the would-be banners.
5. ___ this regard the Director of Social Work, in conjunction
___ the Director of Finance, will give sympathetic consider-
ation to each individual case having regard to all the circum-
stances.
6. ___ this stage, they would have to discuss how they wished
to employ their right to three years in further education.
7. Most of the high technology services firms were working
___ the frontier of computer usage, developing new soft-

82
ware packages or sophisticated interactive training models
for business.
8. The Departments of Environment and Transport could have
agreed that ___ principle it was better not to encourage
more cars onto the roads ___ building better motorways.
9. Most policies pay out a measly amount for expenses ___
delayed departures.
10. The second major effect of the introduction of private prop-
erty occurred, according ___ Engels, as an indirect result of
the change to patriliny, a state which he did not clearly dis-
tinguish ___ patriarchy.

6. Read the sentences from text A and decide which meaning


(a, b or c) the word in italics has.
1. In studying economics it is important to distinguish two
branches of the subject.
a) one of the many parts of a tree that grows out from its
trunk (= main, vertical part)
b) one of several shops, offices, etc. that are part of a com-
pany or organisation
c) a part of a subject
2. We are con­cerned with propositions of the form: if this is
changed then that will happen.
a) an offer or suggestion, usually in business
b) an idea or opinion
c) in the US, a formal plan that people accept or refuse by
voting
3. … no corresponding claim can be made about the resolution
of disagreement in normative econo­mics …
a) an official decision that is made after a group or organisa-
tion have voted
b) a promise to yourself to do something
c) the solution to a problem
4. Most economists have normative views and some economists
are vociferous champions of particular normative recommen-
dations.
a) opinion
b) the things that you can see from a place
c) a position from which something can be seen

83
5. Scrupu­lous economists clearly distinguish their role as an
expert adviser on positive economics from their status merely
as involved private citizens in arguing for particular norma-
tive choices.
a) the legal position of someone or something
b) the position that you have in relation to other people
because of your job or social position
c) possessions a person has

7. Give a definition of the word in bold using the words given


in the list below.
objective purpose to satisfy
decision aim to make
facts intended pleased
beliefs to achieve wants
to predict persuasion research
to happen to persuade to study
future idea subject
result belief facts
expensive to improve expert
to cost to make special
a lot of better skills
money before knowledge

8. Translate the following sentences from Russian into English.


1. Позитивная экономика пытается объяснить, как обще-
ство принимает решения о потреблении, производстве и
обмене благами.
2. Нормативная экономика имеет дело с предписаниями
или рекомендациями, основанными на персональных оце-
ночных суждениях.
3. В позитивной экономике мы пытаемся действовать как
независимые ученые и разобраться с тем, как устроен мир
вокруг нас, независимо от наших политических воззрений и
взглядов. В этом отношении позитивная экономика близка
к естественным наукам — таким, как физика, геология или
астрономия.
4. Нормативная экономика основывается на субъективных
оценочных суждениях, а не на поиске объективной истины.

84
5. Следующий тезис комбинирует положения позитивной
и нормативной экономики: у пожилых людей очень высо-
кие медицинские расходы по сравнению с остальной частью
населения, в связи с чем государство должно субсидировать
оплату медицинских счетов пожилых. Первая часть тезиса —
утверждение, что пожилые имеют относительно большие
медицинские счета, — это утверждение позитивной эконо-
мики, объясняющее реальность окружающего нас мира. Вто-
рая часть тезиса — рекомендация о том, что правительство
должно делать, — не может быть обозначена как верная или
ложная каким угодно научным исследованием. Это субъек-
тивное оценочное суждение, основанное на чувствах чело-
века, делающего его.
Text B
Ceteris paribus
1 When we try to understand the relationship between two
or more variables in the context of economic models, we must
assume that everything else, other than the variables we are
studying, does not change. We do this by use of the ceteris pari-
bus assumption:
Ceteris paribus is a Latin expression that means “other things
equal”. Another way of saying this is that all other things are
assumed to be constant or unchanging.
2 Consider the simple circular flow model, and suppose that
households decide to save (not spend) a portion of the income
they receive from selling their factors of production. What will
happen to household spending on goods and services? We might
think that household spending will fall by an amount equal to
savings. But will this necessarily happen? The answer is no, it
may not, if other things happen at the same time that also affect
household spending. For example, let’s say that at the same time
that households decide to start saving, they also decide to work
longer hours (sell more of their labour in the labour market to
firms) in order to increase their income. If they succeed, their
longer working hours will have the effect of increasing their
income and therefore their spending, at the same time that their
saving will have the effect of lowering their spending. We have
no idea what will happen on balance.

85
3 If we want to study the relationship between household
saving and spending, we can do it by assuming that all other
things that could affect spending are constant and unchanging.
More formally, we could say that we are examining the impact of
the decision to save on household spending, ceteris paribus. This
means simply that we are studying the relationship between sav-
ing and spending on the assumption that nothing else happens
that can influence this relationship. By eliminating all other pos-
sible interferences, we isolate the impact of saving on spending,
so we can study it alone.
4 In the real world all the variables that can affect household
spending are likely to be changing at the same time. The ceteris
paribus assumption does not say anything about what happens
in the real world. It is simply a tool used by economists to con-
struct models and theories.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 7—8.

Target vocabulary of text B


assume (v) = to think that smth is likely to be true, al-
though you have no proof
Everything was quiet when I got home so I as-
sumed that you had gone out.
constant (adj) = staying at the same level
The temperature remained constant.
eliminate (v) = to remove smth from smth, or get rid of smth
The doctor advised me to eliminate salt from
my diet.
impact (n) = the effect that a person, event, or situation
has on someone or smth
Latino singers have had a major impact on pop
music this year.
interference (n) when someone tries to interfere in a situation
= There have been claims of too much political
interference in education.
isolate (v) = to separate someone or smth from other peo-
ple or things
Scientists have been able to isolate the gene re-
sponsible for causing the illness.

86
portion (n) = a part of smth
A large portion of their profits goes straight
back into new projects.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
variable, variety, to vary, ceteris paribus, circular, receive,
therefore, interference, to isolate

b) Read text B and answer the questions/do the tasks below.


1. What does the expression ceteris paribus mean?
2. Consider the statement “If we increase our consumption of
calories, we will put on weight.”
a) Do you think this statement is necessarily true? Why?
Why not?
b) How to rephrase this statement to make it more accurate?

2. Scan through text B and find the words corresponding to


these definitions.
para 1
1) a connection between two or more things ____________
(n)
2) a smaller copy of a real object, often used to ____________
show how smth works or what it looks like (n)
3) a phrase that has a special meaning (n) ____________
para 2
4) used to say you think smth is true, although ____________
you are uncertain about it (v)
5) the same in size, number, amount, value, ____________
etc. as smth else (adj)
6) to do smth that produces an effect or ____________
change in smth or in someone’s situation (v)
7) you think smth is true after considering all ____________
the facts (v)
para 3, 4
8) officially (adv) ____________
9) to look at something carefully and thor- ____________
oughly because you want to find out more
about it (v)
10) the amount of money spent, especially by ____________
a government or organisation (n)

87
3. Look through the sets of sentences and try to guess which
word is missing in every sentence. The words were taken from
exercise 2.
(1) _____________
1. In general, they suggest that … provided reasonable and reli-
able evacuation times.
2. The … constructed from this definition is shown in Fig. 12.7.
3. This … not only represents the simplest type of search but it
would appear to have become the basis for subject searches
as well, over-simplifying what is in fact a very complex pro-
cess.
(2) _____________
1. A great advantage of these tests is that sets of tasks can be
made of … difficulty.
2. Two quantities can only be … if they contain the same powers
of space, time and mass.
3. The author explores, in this paper, some philosophical argu-
ments for … distribution of scarce goods between people of
different age groups living in the same society.
(3) _____________
1. The right to national self-determination was … included
in the first programme of the Russian Social Democratic
Labour Party (RSDLP), but was accorded a relatively low
priority.
2. The new stand was completed in November 1932 at a cost of
£45 000 and … opened the following month by the Prince of
Wales.
3. Subsequently, we shall ask you to … approve a list of parties
to whom details of the opportunity will be circulated.
(4) _____________
1. This is the meaning of the proposition that “another way to
curb prices would be to establish a body (probably a prices
commission) … particular prices and report upon them pub-
licly.”
2. When I had started … pensions, many in the industry were
opposed to any change in payments and almost everyone was
opposed to personal pensions.
3. When you get the results, … them thoroughly and dispas-
sionately and ask the question: What are people really con-
cerned about?
(5) _____________
1. A plan to increase military … has been successfully intro-
duced.

88
2. There are some factors of the real world that can change the
level of consumer … .
3. Government … on public welfare has increased by 15%.

4. Fill in the gaps with the words from the box.


circumstances  • assumptions • isolated • complex
fundamental  • laws • prove • experiments
interfere  • controls • relevant
A ceteris paribus assumption is often (1) ______________ to
the predictive purpose of scientific inquiry. In order to formulate
scientific (2) ______________, it is usually necessary to rule
out factors which (3) ______________ with examining a spe-
cific causal relationship. Under scientific (4) ______________,
the ceteris paribus assumption is realised when a scientist
(5) ______________ for all of the independent variables other
than the one under study, so that the effect of a single independent
variable on the dependent variable can be (6) ______________.
By holding all the other (7) ______________ factors constant,
a scientist is able to focus on the unique effects of a given factor
in a (8) ______________ causal situation.
Such assumptions are also relevant to the descriptive purpose
of modelling a theory. In such (9) _______________, analysts
such as physicists, economists, and behavioural psychologists
apply simplifying (10) ________________ in order to devise
or explain an analytical framework that does not necessarily
(11) ______________ cause and effect but is still useful for
describing fundamental concepts within a realm of inquiry.

5. Fill in the gaps using the prepositions (or particles) from the
box below if necessary.
by  • from • on • with • at
of  • between • to • in
1. Some income is ignored, such as Attendance Allowance,
Mobility Allowance, payments ___ the Social Fund, or any
actual income you receive ___ your savings.
2. The average spending ___ new equipment was generally
very modest.
3. The number of teenagers there is expected to fall ___ 45 per
cent ___ 1980 and 2000.

89
4. Girls were equal ___, or in advance of boys in topics con-
cerned ___ money and on calendar questions.
5. Selling a house even provides an opportunity to practise sur-
vey techniques and ___ the same time improve the chances
___ selling quickly.
6. Another salesman may communicate imperfectly but suc-
ceed ___ making a sale because one of the triggers used was
sufficient to motivate the purchase.
7. ___ balance, it was a package strongly ___ favour of the gov-
ernment.
8. How abnormal weather conditions can affect ___ tidal pre-
dictions?
9. Tax revenues increase and the impact ___ personal spending
power is less.
10. Whatever the source of the differing outcomes ___ these two
experiments, it remains the case that the specific procedures
used ___ Kaye et al.

6. Read the text below. Use the words to the right of the text
to form a word that fits the context.
What is economics about?
The (0) social sciences seek to describe (0) society
how people will act. What makes eco­nomics
(1) _____________ from the other social sci- (1) differ
ences is the models economists use. Economic
models (2) __________ people are ratio- (2) assumption
nal (with well-ordered pref­erences), want
to maximize something (such as profits or
(3) __________), and then do the best they (3) satisfy
can given their (4) __________ resources. (4) scarcity
Consider a simple economic model. We
are at a grocery store that has several check-
out lanes open. It is a crowded day, and
peo­­ple are in every line. We want a model
(5)  ____________ how many people will be (5) prediction
in each line. An economist would likely assume
that people know how fast each line is moving
and that people seek to spend the least time
in line. If the waiting time in one line is less,
people will change lines. This will continue

90
until all lines have the same (6) __________ (6) expectation
wait time. This is the key prediction of the
model. It also predicts that slower clerks will
have shorter lines.
The prediction of equal waiting time is
a positive statement. A positive statement is
a claim about what really is. A positive state-
ment can be tested. We could, for example,
find the wait time in a grocery store. Most
(7) __________, we would find only an aver- (7) like
age wait time. However, the results could be
wrong because the assumptions may be wrong
(people may not have (8) __________ infor- (8) suffice
mation or they may care about more things
than just the wait time). Thus, a positive
statement is a statement that can be demon-
strated to be (9) __________ or false. (9) truth
Another type of statement is a norma-
tive statement. A normative state­ment makes
a moral claim about what should be. For
example, some cus­tomers might say, “Some
customers have to wait longer than others,
and that is not fair.” Without making a moral
(10) __________, no way exists to say that (10) judge
such a statement is right.

VOCABULARY
1. Look at the following pair of words, spot the difference and
do the task.
EFFECTIVE ≠ EFFICIENT

effective — successful or efficient  — working or opera­


achieving the results that you ting quickly and producing
want good results by using the avail-
able time, money, etc. in the
most effective way

91
Insert the proper word effective or efficient in these sentences.
1. It’s an extremely _________________ cure for a headache.
2. The most _________________ way to plan is to put your
tasks in order of priority.
3. The lighting for the production made a very ____________
use of shadow.
4. She’s a very _____________ teacher.
5. The new machine is far more _______________ than the
old one.
6. You need __________________ communication in your
orga­­nisation.
7. The troops should be deployed where they will be most
__________________.
8. Humour is often far more _______________ than shouting.
9. The city’s transport system is one of the most ___________
in Europe.
10. We need someone really ______________ who can organise
the office and make it run smoothly.

2. Look through the two sets of sentences and decide which


word effective or efficient should be inserted to make these
sentences complete.
1. Industrial output is concentrated in the most ________
plants using the cheapest labour.
2. The emphasis for the future is heavily on decentralisation
in the hopes that a devolved management can be more
_________ and responsive to local needs.
3. The lack of an ________ railway system was a major con-
tributing factor to the stagnant economy.
The missing word is _______________
1. I have cautioned a lot of people, and the caution always
seems to be __________.
2. Scientific analysis of society was considered an essential pre-
liminary to the __________ reform of social and political
arrangements.
3. A very simple and _________ thing for the teacher to do is
to comment on errors, not as a complaint but as praise for
the attempt.
The missing word is _______________
92
3. Match the words of Latin origin (1—14) with their definitions
(a—n).
1) ad hoc a) used in writing to introduce smth else that
should be compared or considered
2) ad valorem b) written after a list of names to mean that
other people are also involved in smth
3) a priori c) used to say that smth is being considered
alone, not with other connected things
4) cf. = confer d) not planned, but arranged or done only
when necessary
5) ceteris e) used in writing after a list to show that
paribus there are many other similar things or people
that you could have added
6) et al. = f) used when comparing the advantages of two
et alii different things, ideas, etc.
7) etc. = g) in proportion to the estimated value of the
et cetera goods taxed
8) e.g. = h) using previous experiences or facts to decide
exempli gratia what the likely result or effect of smth will be
9) ibid. = i) with other things equal
ibidem
10) i.e. = id est j) written before a word or phrase that gives
the exact meaning of smth you have just writ-
ten or said
11) per capita k) used to say that the opposite of a situation
you have just described is also true
12) per se l) for example
13) vice versa m) used in formal writing to mean from the
same book, writer, or article as the one that
has just been mentioned
14) vs. = n) used to describe the average amount of
versus smth in a particular place, calculated accord-
ing to the number of people who live there

4. Use the lexical units from exercise 3 to fill in the gaps.


1. The film is only open to adults, __________ people over 18.
2. Governments operate in the world of real time during which
many elements can change, as against the economist’s world
of rational time and __________.
93
3. The industrial market economies with a population of about
730 m enjoy an average GNP __________ of $11 060 per
annum.
4. Crime writers, __________ Agatha Christie and Ruth Ren-
dell, are very popular among Russian reading audience.
5. In the North-West, for example, those employed by the Civil
Service constitute 1.7 per cent of the civilian workforce
(__________).
6. But there is no __________ reason to expect that any one
paradigm is perfect or even the best available.
7. People may also trade good relations with their boss for bet-
ter relations with their colleagues, or __________.
8. The finance minister must weigh up the benefits of a tax cut
__________ those of increased public spending.
9. Customs duties were of two kinds, specific and __________.
10. Decisions affecting fixed assets are, by their nature,
__________ and occasional.
11. While cars are required by law to stop at all stop signs (Vehi-
cle Code section 1234), pedestrians are not (__________
Vehicle Code section 4321).
12. The data reported by Smith __________ is not accurate
enough to build any model on its base.
13. Using the interview analysis technique where there is a need
to draw conclusions about issues from a large number of
interviews notes, discussion papers __________.
14. There are numerous questions to be raised later about those
women who would prefer to continue working, but this
example illustrates clearly why it is important to distinguish
between age __________ and continuous tenure when con-
sidering wage profiles.

5. Match the words in the box on the left with the words that
they collocate with on the right.
1) household a) market
2) circular flow b) world
3) labour c) interferences
4) possible d) model
5) real e) spending

94
6. Use the collocations from exercise 5 to complete the
sentences.
1. Realistic generalization is only possible, however, when
there are good theories of the phenomena that occur in the
___________.
2. It follows that, because our young men cannot earn good
money, they cannot afford to marry and take their wives out
of the ___________.
3. Since leakages are assumed to be related to income, and
injections are assumed exogenous, then variations in
income equate total income and expenditure flows in the
___________.
4. ___________ on consumption (C) and household saving
(S) are both directly related to household after-tax income.
5. Industrial relations should be free from state ___________.

GRAMMAR
1. Read the 4 sentences and decide which meaning (a or b) the
underlined word has.
1. We have had very few opportuni- a) some, a small number
ties to practise English. b) hardly any at all
2. The police would like to ask him a
few questions.
3. He has very little hope of winning
this race.
4. I’d like a little time to think about
it please.

2. Fill in the gaps using few, a few, little, a little.


1. ___ times, the show has been the catalyst in bringing fans
together.
2. There is ___ point in publishing this data.
3. Many lengthy evocations of individual works will be incom-
prehensible to readers as ___ of the sculptures and drawings
are illustrated.
4. What’s needed is ___ thought — and ___ heart.
5. Monarchy was almost the rule in Europe, which had many
republicans, but ___ republics.

95
6. Some of them are pretty useless, but you do pick up ___
information from each one.
7. I should, however, add ___ words for the benefit of any stu-
dent who wishes to research more deeply.
8. They will need to speak fluent English and French and ___
Flemish.
3. Match the halves of the sentences.
1. The system admits variations, a) fewer transnational cor-
but usually requires the exclu- porations, national law vio-
sion of the candidate having... lation may well become old-
fashioned.
2. With the internationalization b) the fewest reserves and re-
of capital and the concentration sources.
of power in the hands of...
3. Caribbean women have... c) less gas and/or electricity
at home during the next year.
4. Some non-OPEC producers d) the fewest votes in each
also are cutting back: seven (in- successive count.
cluding Russia and China) have
offered to pump 5%...
5. I pledge to use 10 per cent... e) the least viewers.
6. Political programmes on TV f) less oil during the second
attract... quarter of 1989.
7. There was too much poverty, g) the fewest children, and in
and hardship fell on those with... Cuba the average is 1.7.

SKILLS FOCUS
Reading
1. Read the text Positive and normative concepts, choose the
best sentence from the list below to fill in the gaps.
Positive and normative concepts
Economists think about the economic world in two different
ways: one way tries to describe and explain how things in the
economy actually work, (1) ___.
The first of these is based on positive statements, which are
about something that is, was or will be. Positive statements are
used in several ways:
96
• They may describe something (e.g. the unemployment
rate is 5%; industrial output grew by 3%).
• They may be statements in a theory (e.g. an increase in
price leads to a decrease in quantity bought).
The second way of thinking about the economic world, deal-
ing with how things ought to work, is based on normative state-
ments, (2) ___. These are subjective statements about what
should happen. Examples include the following: the unemploy-
ment rate should be lower; health care should be available free
of charge; extreme poverty should be eradicated.
Positive statements may be true or they may be false. For
example, we may say that the unemployment rate is 5%; if in fact
the unemployment rate is 5% this statement is true; but if the
unemployment rate is actually 7%, the statement is false. Norma-
tive statements, by contrast, cannot be true or false. They can
only be assessed relative to beliefs and value judgements. Con-
sider the normative statement “the unemployment rate should
be lower”. We cannot say whether this statement is true or false,
though we may agree or disagree with it, (3) ___. If we believe
that the present unemployment rate is too high, then we will
agree; but if we believe that the present unemployment rate is
not too high, (4) ___.
Positive statements play an important role in economics
because they are used to describe economic events and to con-
struct theories and models (5) ___. Normative statements are
important because they form the basis of economic policy-mak-
ing. Economic policies are government actions (6) ___. When
a government formulates a policy to lower the unemployment
rate, this is based on a belief that the unemployment rate is too
high, and the value judgement (7) ___. If a government pur-
sues a policy to make health care available free of charge, this is
based on a belief that people should not have to pay for receiving
health care services.
Positive and normative statements, while distinct, often work
together in economics. To be successful, an economic policy
aimed at lowering unemployment (the normative dimension)
must be based on a body of economic knowledge (8) ___. The
positive dimension provides guidance to policy-makers on how
to achieve their economic goals.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 8.

97
A which are about what ought to be.
B that try to solve economic problems.
C depending on our beliefs about unemployment.
D that high unemployment is not a good thing.
E and the other deals with how things ought to work.
F that try to explain these events.
G then we will disagree.
H about what causes unemployment.

2. Read more about positive and normative analysis in


economics in Reading file: Unit 3.

Speaking
A
The cost of higher education
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the two
economists: Alison Wolf and Anders Flodström. They are dis-
cussing the question “Who should pay for higher education:
individuals or state?” The brief description of the problem is
given below:
Where does the lion’s share of value rest when it comes to
higher education? Is it with the individuals who reap the rewards
of interesting work and higher salaries? Or is it the state, which
will benefit from an educated society and competitive workers?
In a globalised world where talent shortages are growing and
highly educated individuals move freely between jobs and coun-
tries, has the balance of the benefit of higher education shifted
from the state to the individual? If so, who bears the responsibil-
ity for paying for higher education?
Your task is to visit http://www.economist.com/debate/days/
view/232 and do the following:
1. Summarise the view points of the debate participants.
Use the speech patterns given below.
a) Alison Wolf is a … He is defending the idea of … His argu-
ments in favour of the statement are…
b) Anders Flodström is a … He is against the idea of … be­­
cause … His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.

98
B
1. What do the following quotations tell us about the advan-
tages of education?
a) Education’s purpose is to replace an empty mind with an
open one. (Malcolm Forbes (1919—1990))
b) Next in importance to freedom and justice is popular educa-
tion, without which neither freedom nor justice can be permanently
maintained. (James A. Garfield (1831—1881))
c) The great aim of education is not knowledge but action.
(Herbert Spencer (1820—1903))
d) There is only one thing that can kill the Movies, and that is
education. (Will Rogers (1879—1935))
e) Education is the best provision for old age. (Aristotle
(384 BC-322 BC))
2. What problems of education do the following quotations
highlight?
a) I have never let my schooling interfere with my education.
(Mark Twain (1835—1910))
b) America believes in education: the average professor earns
more money in a year than a professional athlete earns in a whole
week. (Evan Esar (1899—1995))
c) Education has produced a vast population able to read but
unable to distinguish what is worth reading. (G. M. Trevelyan
(1876—1962))
C Discuss the following questions with the partner.
1. How important do you think education is?
2. Do you think you have had a good education?
3. Do you think the quality of education is slipping?
4. Does your government really care about education?
5. What would you like to change about the education sys-
tem of your country/university?

Writing
Render the following text using the plan:
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.

99
Позитивная и нормативная экономическая теория
Многие экономисты проводят четкую грань между вопро-
сами эффективности и справедливости. Дискуссии об эффек-
тивности рассматриваются как часть позитивной экономи-
ческой теории, которая имеет дело с фактами и реальными
зависимостями. Дискуссии же о справедливости — это часть
нормативной экономической теории, то есть той отрасли
науки, которая выносит суждения о том, хороши или плохи
конкретные экономические условия и политика.
Нормативная экономическая теория имеет отношение
не только к проблеме справедливости в распределении про-
дукта. Оценочные суждения также возможны по поводу
оставшихся трех основных видов выбора, совершаемого каж-
дой экономической системой: при принятии решения о том,
что производить, будет ли справедливым разрешить про-
изводство табака и алкогольных напитков и в то же время
запретить производство марихуаны и кокаина? При совер-
шении выбора «как производить» возможно ли позволить
людям работать в опасных или вредных условиях или труд
в этих условиях должен быть запрещен? Решая, кто и какую
работу будет выполнять, справедливо ли ограничивать
доступ к различным видам работы на основе возраста, пола
или расы? Нормативные проблемы охватывают все стороны
экономики.
Позитивная теория, не предлагая никаких оценоч-
ных суждений, фокусирует свое внимание на процессах,
в результате действия которых люди получают ответы на
четыре основных экономических вопроса. Эта теория анали-
зирует действие экономики, влияние определенных инсти-
тутов и политических действий на экономическую систему.
Позитивная наука прослеживает связи между фактами, ищет
измеримые закономерности в происходящих процессах.
Предназначение экономической теории заключается
в том, чтобы, во-первых, описать и объяснить процессы про-
изводства и обращения; во-вторых, обеспечить должное эко-
номическое поведение хозяйственных субъектов. В обоих
случаях мы сначала имеем дело с позитивной экономикой,
а затем — с нормативной. Позитивная экономика описывает

100
факты, условия, отношения в сфере экономики, взаимосвязи
между ними, наиболее существенные процессы хозяйствен-
ной деятельности и их взаимодействие с другими экономи-
ческими и социальными процессами. Одним словом, пози-
тивная экономика занимается раскрытием содержательной
стороны явлений и процессов хозяйственной жизни обще-
ства, т.е. раскрытием экономических законов и закономер-
ностей.
Нормативная экономика охватывает моральные и стои-
мостные оценки экономических явлений и процессов, руко-
водствуясь знанием позитивной экономики. Скажем, каков
допустимый уровень инфляции или нормы процента? Сле-
дует ли через системы налогообложения перераспределять
доходы в пользу бедных слоев общества? Какими темпами
должны расти или сокращаться расходы на оборону? Ответы
на эти вопросы диктуются политическим выбором. В заклю-
чение можно сказать, что позитивная экономика занимается
познанием и действием экономических законов, тогда как
нормативная экономика — их использованием.
http://ua.coolreferat.com/

2. Use the following link http://www.investopedia.com/video/


play/ceteris-paribus/#axzz2Hgwodcow to learn more about
ceteris paribus assertion. Watch the video and write a sum-
mary of what you listen to.
Use the following plan:
1 Application of the term ceteris paribus in economics and
finance.
2 The way markets respond to chicken price increases given
the ceteris paribus condition.
3 How price increases change Liz’s market behaviour.
Unit 4
Free and economic good
Learning outcomes
After studying this unit you should be able to:
1) explain the concept of opportunity cost in relation to scarcity and
choice;
2) distinguish between free and economic goods;
3) explain how businesses use the basic factors of production;
4) use the active vocabulary of the unit in speaking and writing;
5) read for different purposes (skimming, scanning);
6) use grammar effectively (adjectives with a change in meaning).

Lead-in
1. Look through the two lists of characteristics and decide which
goods are described free or economic.
_________________ goods _________________ goods
1. They are characterised 1. The supply far exceeds the
by scarcity. demand.
2. Their market price can be 2. They are readily available.
high. 3. The market price is zero.
3. Their available quantity 4. They may or may not have
does not meet requirements value for people.
completely.
4. Humans cannot obtain
them in quantities sufficient
to satisfy their wants at a zero
price.

2. Are any of the following goods “free goods”?


a) public parks
b) sand in the Sahara Desert

102
c) garbage collection
d) free health care service
e) wildlife

TOPICS
Text A
Free and economic good
1 There is one economic concept which helps us make a dis-
tinction between free and economic goods; it is the concept of
opportunity cost. Opportunity cost is defined as the value of the
next best alternative that must be given up or sacrificed in order
to obtain something else. Every time we choose to do something,
we give up something else that we could have done instead.
Opportunity cost arises from the fact that time or resources are
limited (scarce); if they were endless, you would never have to
sacrifice any good in favour of another.
The concept of opportunity cost, or the value of the next best
alternative that must be sacrificed to obtain something else, is cen-
tral to the economic perspective of the world, and results from the
condition of scarcity that forces a choice between competing alter-
natives.
2 When a consumer chooses to use her $100 to buy a pair of
shoes, she is also choosing not to use this money to buy books,
or CDs, or anything else; if CDs are her favourite alternative to
shoes, the CDs she sacrificed (did not buy) are the opportunity
cost of the shoes. When a business chooses to use the resources
at its disposal to produce hamburgers, it is also choosing not to
produce hotdogs or pizzas, or anything else; if hotdogs are the
preferred alternative, the hotdogs sacrificed (not produced) are
the opportunity cost of the hamburgers. Note that if the con-
sumer had endless amounts of money, she could buy everything
she wanted and the shoes would have no opportunity cost. Simi-
larly, if the business had endless resources at its disposal, it could
produce hotdogs, pizzas and a lot of other things in addition to
hamburgers, and the hamburgers would have no opportunity
cost.

103
3 Based on the concept of opportunity cost, now we can
understand the difference between free and economic good (note
that the term “good” is used here in a general sense to include
goods, services and resources):
A free good is any good that is not scarce, and therefore has
a zero opportunity cost. Since it is not limited by scarcity, it
includes anything that can be obtained without sacrificing some-
thing else.
An economic good is any good that is scarce, either because it
is a naturally occurring scarce resource (such as oil, gold, coal,
forests, lakes), or because it is produced by scarce resources. All
economic goods have an opportunity cost greater than zero.
4 Free goods are rare. Sometimes a good can be a free good
in certain situations and an economic good in others. For exam-
ple, arable land in America before European colonizers arrived
was a free good because it was so abundant; as the colonizers
grew in numbers it became increasingly scarce and therefore an
economic good. Salt used to be a free good and has become an
economic good. Oxygen in the open unpolluted countryside can
be a free good; in a room with no windows that is crowded with
people it becomes an economic good. Unobstructed sunshine is
also a free good in many situations.
5 It is important to distinguish free goods from goods or
resources that are available free of charge to their users. There
are two categories of goods that are available free of charge, but
which do have opportunity costs and are therefore economic
goods:
• goods provided by the government, such as the road sys-
tem, public parks and playgrounds, free education, free health
care services; all these are economic goods produced by scarce
resources, and are paid for out of tax revenues;
• certain natural resources, such as clean air, forests, rivers,
lakes and wildlife, that are not owned by anyone (they are called
“open access resources”); these are also economic goods because
they are scarce (they are not unlimited), and are becoming
increasingly scarce due to overuse and depletion.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 5.

104
Target vocabulary of text A
access (n) = when you have the right or opportunity to
use or see smth
I don’t have access to that kind of informa-
tion.
arable (adj) = suitable for or used for growing crops
arable land/farming
category (n) = a group of people or things of a similar type
Our customers fall into two main categories:
retired people and housewives.
depletion (n) = reduction of the amount of smth, especially
a natural supply
the depletion of the ozone layer
give up (phr v) = to stop doing a regular activity or job
Are you going to give up work when you have
your baby?
health care = the set of services provided by a country or
an organisation for treating people who are ill
health care services
own (v) = to have smth that legally belongs to you
The University owns a lot of the land around
here.
revenue (n) = large amounts of money received by a gov-
ernment as tax, or by a company
company’s revenue

1. a) Use your dictionary to check the correct pronunciation


of the words below.
to sacrifice, perspective, pizza, occurring, zero, colonizers,
unobstructed, revenue, depletion

b) Read text A and do the tasks/answer the questions below.


1. Explain the difference between a free and economic good.
2. Can the same good be considered as economic or free in cer-
tain situations?
3. Does any difference exist between the free goods and goods
free of charge?
4. Why do you think free goods are rare?

105
5. Divide the following goods into the two columns: free and
economic.
a) playgrounds
b) water in a river
c) free education
d) mushrooms in a forest
e) transport system
6. How are opportunity costs connected with scarcity and
choice?

2. Decide whether the following statements are True or False


according to text A.
1. If resources are unlimited, there is no need in opportunity
costs. ____
2. Economic goods have a zero opportunity cost. ____
3. The road system is an example of a free good. ____
4. Local forests which are not owned by anyone are open access
resources. ____

3. Scan through text A and find the words corresponding to


these definitions.
para 1
1) a difference between two similar things _______________
(n)
2) to get smth (v) _______________
3) continuing for a long time and never _______________
finishing (adj)
4) to make someone do smth that they do _______________
not want to do (v)
para 2
5) one of two or more things that you can _______________
choose between (n)
6) available for someone to use (n) _______________
7) in a similar way (adv) _______________
para 3
8) the meaning of a word, phrase, or sen- _______________
tence (n)
9) for that reason (adv) _______________

106
para 4 and 5
10) more and more (adv) _______________
11) the group of people who officially con- _______________
trol a country (n)
12) money that you have to pay to the _______________
government from what you earn or when
you buy things (n)
13) used to refer to a particular person or _______________
thing without naming or describing them
exactly (adj)
14) because of smth (prep) _______________

4. Use the words from exercise 3 to fill in the gaps.


1. While Germany spends 40% of its ___________ revenue
on social security, Germans have been dismayed to observe
a significant increase in homelessness and destitution on the
streets of its cities, especially the rich western cities like
Stuttgart and Munich.
2. They place much stress on ___________ between “intan-
gible” advantages and those from large scale in production.
3. The “traditional working class” is Britain’s newest minority
and it is far too small by itself to elect a Labour ___________.
4. Up to the mid-1960s, inflation rates had been low in the
international economy ___________ two major factors.
5. Due to constraints on the availability of data pads it was
not always possible ___________ test data from the original
source.
6. ___________, sustained government rhetoric about getting
value for money from programmes and protecting the inter-
est of taxpayers will probably leave a mark.
7. The term “bureaucratic bourgeoisie” to describe this state
elite has ___________ problems, and used strictly should
refer to managers of state-owned enterprises.
8. We spent twenty-six hours a week watching TV: news, soap
operas, films, the House of Commons, ___________ studio
discussion among politicians.
9. It does not make ___________ to charge all users the same
rate, for users at different times impose very different mar-
ginal costs on society.

107
10. In the foreign exchange market all currencies are quoted
against the dollar, ___________ the number of individual
rates are reduced, as market operators can quickly ascertain
cross rates between various currencies.
11. The Bank of Japan is trying ___________ inefficient firms
to go out of business.
12. Their financial constraints are more severe and the credit
facilities at their ___________ are less diverse and less
sophisticated.
13. The paper will be in two sections: the first will look at the
effort to raise popular awareness of the root cause of ill health
and to work towards an ___________ health system.
14. If the new government — whoever heads it — wants to avoid
an embarrassing, inflationary and recession-reinforcing rise in
mortgage rates, it must allow societies to turn ___________
to the international money markets.

5. Fill in the gaps using the prepositions/particles from the box


below.
to  • in • from • of • by • for •  at
1. But the more important reasons are “economic”, and arise
___ the nature of the economic system.
2. We believe that there are strong arguments in favour ___
unitary authorities.
3. The major industrial nations have been lowering the energy
intensity of their economies since the 1970s; the degree ___
which this will continue is central ___ any energy consump-
tion projection.
4. It is estimated that about a third of these accidents result
___ damaged pavements.
5. Twenty years old, the Range Rover is still the only serious
off-roader that makes a convincing alternative ___ a luxury
saloon.
6. A £500 000 budget has been set aside to create a press office
to represent him in Brussels, in addition ___ Dublin’s exist-
ing one.
7. ___ a general sense that is what many of the strategies which
we have already discussed are aiming to do.

108
8. Graduate lecture courses are few ___ present but may be
expected to grow ___ number in the near future.
9. The table shows a surplus provided ___ local authorities to
allow ___ contingencies such as salary and wage increases.

6. Find word partners between the two lists of words (A and B).
A B
general cost
tax choice
opportunity resources
economic revenue
consumer sense
road perspective
natural system

7. Match the halves of the sentence.


1. Attractively presented prod- a) opted for something else.
uct information is also a good
public relations vehicle, …
2. Yet top rate taxpayers today b) designed to guide users
provide … safely round the road system.
3. Each decision involves a cal- c) enhancing the image of the
culable opportunity cost of not store in a general sense.
having …
4. Various writers in the late d) and consumer choice, and
1950s and 1960s began to she has also said much about
move understanding of the in- freedom and democracy.
vestment process in companies

5. Enforcement requires the e) creating a homogeneous ag-
application of traffic laws … ricultural proletariat, all doing
the same labouring job.
6. Imperialism focused on one f) away from the strict neo-
or two natural resources, thus … classical economic perspective.
7. Mrs. Thatcher has talked at g) a bigger share of our tax
length and often about popular revenues than they did before.
capitalism …

109
8. Read the text below. Use the words to the right of the text
to form a word that fits the context.
Characteristics of free goods
The Supply Far Exceeds the Demand
Free goods exist in large quantities
that (1) ___________ the needs of every­ (1) satisfaction
one for them. Thus, there is no scarcity of
these goods and, (2) ___________, no (2) subsequent
need to ration them out among the people.
(3) ___________ air is a very important (3) breathe
resource for our survival. The quality may
differ according to location, but it exists
every­­where and is available for people to
consume.
They Are Readily Available
An oversupply of goods is not enough to
qualify them as free goods. The goods must al-
ways be readily available as well. Fresh water
is drinkable and used for (4) ___________ (4) act
such as cleaning, making it (5) ___________ (5) value
for our survival. People living beside a lake
wouldn’t have to worry too much about its
(6) ___________. They always have access (6) available
to it whenever they need it, thus making
fresh water a free good. But for people living
in harsh deserts, the only time they’ll have
access to water is when they reach an oasis or
during those rare moments of rainfall. Fresh
water is something that they would prize and
pay a good amount of money for. In this in-
stance, fresh water ceases to be a free good.
The Market Price Is Zero
(7) ___________ of the first two charac­ (7) consequently
teristics: because free goods are in abun-
dance and readily available, people are able
to obtain them for free. There is no price to
pay for breathing air and no one can make
you pay for breathing it in. Because peo-
ple are able to get these goods for no cost,
there is no value in trading these goods. As
a result, their price in the market would be
equal to zero.

110
They May Or May Not Have Value for People
Just because a good is free does not mean
it is of no value or (8) ___________ to peo- (8) utilise
ple. Breathable air is still a critical resource
for our (9) ___________ and it is fortu- (9) survive
nate for us that it is abundant, available
and free. The same may not be said of sea-
water. Though there are (10) ___________ (10) study
that examine the possible use of seawater
in (11) ___________ like agriculture and (11) industrial
aquaculture, its undrinkability makes this
resource of no value to many people.
http://www.ehow.com/info_8041189_characteristics-goods-economics.html

Text B
The factors of production
Resources, or all inputs used to produce goods and services,
are alternatively known as factors of production. Factors of pro-
duction are grouped under four broad categories:
• Land includes all natural resources, including all agri-
cultural and non-agricultural land, as well as everything that is
under or above the land, such as minerals, oil reserves, under-
ground water, forests, rivers and lakes. Natural resources are also
called “gifts of nature”.
• Labour includes the physical and mental effort that
people contribute to the production of goods and services. The
efforts of a teacher, a construction worker, an economist, a doc-
tor, a taxi driver or a plumber all contribute to producing goods
and services, and are all examples of labour.
• Capital, also known as physical capital, is a man-made
factor of production that is used in the production process to
produce goods and services. Examples of physical capital include
machinery, tools, factories, buildings, road systems, airports, har-
bours, electricity generators and telephone supply lines. Physical
capital is also referred to as a capital good or investment good.
• Entrepreneurship/management is a special human skill
possessed by some people, involving the ability to innovate by
developing new ways of doing things, to take business risks and
to seek new opportunities for opening and running a business.
Entrepreneurship organises the other three factors of production
and takes on the risks of success or failure of a business.
111
Owners of factors of production receive a payment for pro-
viding their resources to the production process:
1. Rent is payment to owners of land resources who supply
their land to the production process.
2. Wage is a payment to those who provide labour; this
includes all wages and salaries, as well as supplements (such
as bonuses and commissions).
3. Interest is a payment to owners of capital resources.
4. Profit is a payment to owners of entrepreneurship.
The payments to the factors of production are usually
expressed as payment for the amount of time they are used. For
example, they can be expressed as rent per month; wage per hour
or salary per month; interest per year; profit per year, and so on.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 5.

Target vocabulary of text B


capital (n) = refers to a factor of production (or input
into the process of production), such as
machinery, buildings or computers
physical capital
commission (n) = a (system of) payment to someone who
sells goods which is directly related to the
amount of goods sold
She gets a 15% commission on every ma-
chine she sells.
construction a professional building or making some-
worker = thing, especially buildings, bridges, etc.
effort (n) = an attempt to do smth
He was making an effort to be sociable.
entrepreneur (n) = someone who starts his own business, es-
pecially when this involves seeing a new
opportunity
He was one of the entrepreneurs of the
eighties who made their money in property.
innovate (v) = to introduce changes and new ideas
The fashion industry is always desperate to
innovate.
labour (n) = people who work
cheap/skilled labour

112
land (n) = an area of ground
agricultural land
machinery (n) = machines, often large machines
industrial/farm machinery
payment (n) = the amount of money that is paid
monthly payments
profit (n) = money that you get from selling goods or
services for more than they cost to produce
or provide
It’s very hard for a new business to make
a profit in its first year.
rent (n) = the amount of money that you pay to live
in a building that someone else owns
They couldn’t afford the rent.
wage (n) = the amount of money a person regularly
receives for his job
weekly wages / the minimum wage

1. a) Use your dictionary to check the correct pronunciation


of the words below.
physical, harbour, electricity, entrepreneurship, failure, bonuses

b) Read text B and answer the questions below.


1. Why do you think resources are also called “factors of pro-
duction”?
2. What are the factors of production? What kind of payments
do their owners receive for supplying them in the economy?
3. How does physical capital differ from the other three factors
of production?
4. Why is entrepreneurship considered to be a factor of produc-
tion separate from labour?

2. Decide whether the following statements are True or False


according to text B.
1. Land as a factor of production includes resources above the
surface of the Earth. ____
2. Teachers don’t contribute to labour pool because they are
making only mental efforts. ____
3. Capital includes money, securities and other financial instru-
ments. ____
113
4. The payment for capital used in a production process is
interest. ____
5. Profit is a payment for entrepreneurial efforts. ____

3. a) Find word partners between the two lists of words (A


and B).
A B
agricultural capital
mental good
physical per month
investment land
business reserves
rent effort
oil risk

b) Use these collocations to complete the sentences.


1. In April 1983 the Dutch government estimated ___________
at 41.5 million tonnes of which 18.5 million tonnes was
proven and 23 million tonnes probable.
2. It is high country, with some moderately good ___________
and substantial deposits of lignite and nonferrous metals.
3. Wage costs are not the only determinant of competitive-
ness but must be considered within the context of relative
productivity, with human and ___________ allowing high
wage sectors to maintain their comparative advantage.
4. The ___________ paid by the retailer is much less than the
cost of overheads in an equivalent central location.
5. Moreover, part of a nation’s wealth is spent on ___________,
and not on consumption goods; these are therefore also
included in the calculation.
6. Companies are classified by returns, and all companies with
an equivalent return have the same ___________.
7. According to Theory Y, however, the expenditure of physical
and ___________ in work is as natural as play or rest.

4. Fill in the gaps using the prepositions from the box below.
for  • from • with •  to
on  • in • above • of • by

114
In economics, factors of production are the inputs (1) ___ the
production process. Finished goods are the output.
Input determines the quantity of output, i.e. output depends
(2) ___ input. Input is the starting point and output is the end
point of production process and such input-output relation-
ship is called a production function. All factors of production
like land, labour, capital and technology are required (3) ___
combination at a time to produce a commodity. In economics,
production means creation or an addition (4) ___ utility. Fac-
tors of production (or productive “inputs” or “resources”) are
any commodities or services used to produce goods and services.
“Factors of production” may also refer specifically (5) ___ the
“primary factors”, which are stocks including land, labour (the
ability to work), and capital goods applied (6) ___ production.
Materials and energy are considered secondary factors in clas-
sical economics because they are obtained (7) ___ land, labour
and capital. The primary factors facilitate production but neither
become part of the product (as with raw materials) nor become
significantly transformed (8) ___ the production process (as
with fuel used to power machinery). “Land” includes not only
the site of production but natural resources (9) ___ or below
the soil. The factor land may, however, (10) ___ simplification
purposes be merged (11) ___ capital in some cases (due to land
being of little importance in the service sector and manufactur-
ing). Recent usage has distinguished human capital (the stock
of knowledge in the labour force) (12) ___ labour. Entrepre-
neurship is also sometimes considered as a factor of production.
Sometimes the overall state of technology is described as a fac-
tor of production. The number and definition of factors varies,
depending (13) ___ theoretical purpose, empirical emphasis, or
school of economics.

5. The verbs in the middle column have been jumbled. Put them
in the right sentences.
Example:
0. Does it not mean that … the market’s reason-
preparers of accounts and satisfy able expectations?
auditors can never satisfy

115
1. Fiscal incentives are … to the growth of the
directed at any company economy.
that can ______________
2. It is a persistent … with new models,
complaint of runners manufacturers fre-
that in the drive to quently discontinue
__________________ their favourite shoes.
3. He has thus learnt what … a business both un-
qualities are necessary to receive der the bureaucratic
__________________ yoke of government
run red tape and in the
cut and thrust of the
make world of international
competition.
4. Those employees that contribute … payments in addi-
choose to leave will tion to the compensa-
_____________ innovate tions required by the
French government
for laid-off employees
for a maximum total
of 18 months of salary
for managers.
5. You can’t stop a lot of … efforts to reduce it
the environmental damage by acting “green”.
being done but you can
_______________

6. Give a definition of the word in bold using the words given


in the list below.
natural oil labour
thing black physical
to exist liquid work
nature car people
tool risk failure
to hold bad lack
hand possibility success
equipment unpleasant to achieve
salary owner bonus
money to own money
to receive boss added
work to control wages

116
VOCABULARY
1. Look at the following pair of words, spot the difference and
do the task.
SENSIBLE ≠ SENSITIVE

Someone who has “common sense”, and does not make stupid
decisions is called __________.
Someone who feels things easily or deeply, and may be easy
hurt is called ______________.

Choose a word which fits the context.


1. Yesterday it was a sensible / sensitive increase of temperature.
2. Do not shout at her — she is very sensitive / sensible.
3. This is such a sensitive / sensible issue that perhaps the press
should not be told.
4. It was very sensitive / sensible of you to bring your umbrella.
5. “I want to buy this dress.” — “Be sensible / sensitive, dear.
You have not got much money.”
6. Have you got a sun cream for sensitive / sensible skin?
7. Do not be so sensitive / sensible — I am not criticizing you.
8. She is very sensitive / sensible about money.
9. We will be doing a lot of walking, so you’d better bring some
sensible / sensitive shoes with you.

2. Look through the two sets of sentences and decide which


word sensible or sensitive should be inserted to make these
sentences complete.
1. The market egalitarianism argument fails to draw a distinc-
tion between the legitimate and illegitimate use of non-pub-
lic price ________ information.
2. Japan’s financial markets had been substantially deregulated
in the previous three years, making them more __________
to changes in the price of money.
3. We will create new incentives to follow environmentally
_________ strategies and behaviour.
The missing word is _______________

117
1. In the business world it is __________ to enquire if the per-
son you are dealing with does in fact have the authority to
make a contract on behalf of his firm.
2. You need to be __________ about buying components for
stock though, or you will probably just waste a lot of money.
3. But, after a management reshuffle, it has done the
__________ thing and cut the dividend.
The missing word is _______________

3. A common metaphor in economics is that of growth — seeds


are planted, grow and flower.
a) Match a growth metaphor with its definition.
1) to flourish a) to start to do smth different from
what you usually do, especially in
your job (business)
2) to branch out b) to create the ground for future suc-
cess
3) to reap c) to get rid of activities or things that
you do not want from a group
4) to sow d) to spend the money that a business
has earned on improving that business
5) to plough (back) e) to grow or develop well
6) to weed out f) to get smth good by working hard
for it

b) Use the metaphors listed above to fill in the gaps.


1. They believe that the company is _________ the seeds of
profitable activities in the nearest future.
2. The company soon began to _________ under his expert
management.
3. The company doesn’t neglect its core business, it is just
_________ into some other profitable activities.
4. We are making two major changes designed to offer improved
service to our clients and simultaneously to offer the chance
for both the business, and the people in it, to _________
substantial rewards.

118
5. The government plans to _________ some ineffective offi-
cials from the Ministry of Defense.
6. All profits are _________ into the company to make it more
stable during the crisis period.

GRAMMAR

1. A few adjectives change in meaning depending on whether


they are used before or after a noun.
Read the sentences and decide which meaning (a or b) the
underlined adjective has.

1. A number of concerned people a) responsible


have contacted me over the past b) worried
few weeks.
2. The question is still at the con-
sultation stage and the people con-
cerned should be quick to settle the
problem.

1. The elect committee meets once a) specially chosen


a year. b) who has been elected
2. The president elect takes over in
June.

1. It was a very involved explana- a) connected with this


tion of the rule. b) complicated
2. The participants involved have
left.

1. Present students number 2000. a) those currently study-


2. Students present should vote on ing
the issue. b) those here now

1. It was a proper question. a) correct


2. The question proper wasn’t an- b) itself
swered.

1. The deputy is a responsible man. a) who can be blamed


2. The deputy responsible was fired. b) with a sense of duty

119
2. Choose a proper place for the adjectives from exercise 1.
1. Throughout the West Country, _________ people ________
called meetings in their area to debate the nuclear issue.
(concerned)
2. _________ people ______ need opportunities to develop
the necessary competencies to ensure effective intra- and
interagency communication. (concerned)
3. _________ body _________ is responsible for strategic
decisions of the company. (elect)
4. _________ candidate _________ will be officially empow-
ered in January. (elect)
5. Some businessmen and famous politicians were a part of
_________ discussion _________. (involved)
6. The description is divided into the specific procedures to
be followed by each _________ person _________ in the
problem. (involved)
7. 20 000 _________ employees ___________ of the Harwell
laboratory are being asked to take part in the new survey.
(present)
8. __________ employees ___________ at the meeting were
discouraged to vote for the chief executive. (present)
9. Many of the house officers were working long hours without
_________ medical supervision _________. (proper)
10. _________ problem _________ hasn’t been addressed cor-
rectly. (proper)
11. Some people were beginning to talk about retaliation or
revenge against _________ authorities _________. (respon-
sible)
12. The legislation relies on the common sense and compassion
of _________ people _________, along with the power to
enforce it and prosecute offenders. (responsible)

3. Underline the correct word.


1. For the client, the advantage was that he could go directly /
direct to those various tradesmen who provided quality ser-
vices.
2. Nowadays the committee reports directly / direct to the pres-
ident, not his assistants.

120
3. His business partner looked him fully / full in the face as he
spoke.
4. This concept is discussed more fully / full in Chapter 9.
5. I couldn’t convince the committee no matter how hardly /
hard I tried.
6. The reporter was so excited he could hardly / hard speak.
7. My supervisors always encouraged me to aim highly / high.
8. It’s highly / high unlikely that the project will be finished on
time.
9. When I lastly / last saw her, she was working in New York.
10. Lastly / last, could I ask all of you to keep this information
secret?
11. Capital punishment was still used in Britain as lately / late
as the 1950s.
12. Lately / late, I’ve been writing a financial report to my exec-
utive.
13. The Republicans increased their share of the vote, but still
fell shortly / short of a majority.
14. Ms. Jones will be back shortly / short.

SKILLS FOCUS

Reading

1. Read the text and write one word (or a number) which is
missing.

The basis for economics


Economics is the study of how people choose to allocate
(0)     their    scarce re­sources. Economists study these choices
with models (1) _________ the one above. Most economic
models have three common elements: scarcity, cost, and marginal
analysis. Typically, something is scarce ((2) _________, time or
money). This results in costs (doing one thing means giving up
doing (3) _________ else). Therefore, the best way of finding
out how to get the most of what one wants is by marginal analy-
sis. (4) _________ three concepts — scarcity, cost, and marginal
analysis — form the base upon which economics is built.

121
SCARCITY
Most people want far more (5) _________ their current
resources allow them to have. This is scarcity: people wanting
more than can be satisfied with avail­able resources.
Don’t confuse scarcity with poverty: (6) _________ the rich
want more! And remember, the fact that there is only a small
quantity of a good (such as castor oil cola) does not make
(7) _________ scarce: It must also be desirable.
CHOICE
Scarcity forces people to make choices. (8) _________
a good is scarce, people are forced to choose between which uses
will be fulfilled and which will not be fulfilled. (9) _________ a
consequence, people face a trade-off: to satisfy more of one need
means satisfying less of another. For example, when people save
(10) _________ money by putting it into a savings account,
they are trading off spending that money today in order to have
more to spend in the future.
OPPORTUNITY COST
When a good is scarce, choosing to use the good in (11) _____
way means giving up some other use. The value of the use people
give up is the opportunity cost of this choice. Opportunity costs
(12) _________ also be defined as the “value of the best for-
gone alternative use.” This emphasises that had people not made
the choice they did, they would have then chosen the next best
alternative.

2. Read the text Natural resources, choose the best sentence


from the list below to fill in the gaps.

Natural resources
Natural resources occur naturally within environments (1) ___,
in a natural form. A natural resource is often characterised by
amounts of biodiversity and geodiversity existent in various eco-
systems.
Natural resources are derived from the environment. Some
of them are essential for our survival while most are used for
satisfying our wants. Natural resources may be further classified
in different ways.
Natural resources are materials and components (something
that can be used) (2) ___. Every man-made product is com-
122
posed of natural resources (at its fundamental level). A natural
resource may exist as a separate entity such as fresh water, and
air, as well as a living organism such as a fish, or it may exist in
an alternate form (3) ___ such as metal ores, oil, and most forms
of energy.
There is much debate worldwide over natural resource allo-
cations, this is partly due to increasing scarcity (depletion of
resources) but also because the exportation of natural resources
is the basis for many economies ((4) ___).
Some natural resources can be found everywhere such as sun-
light and air, when this is so the resource is known as an ubiqui-
tous ((5) ___) resource. However most resources are not ubiqui-
tous. They only occur in small sporadic areas; these resources are
referred to as localized resources. There are very few resources
(6) ___ (will not run out in foreseeable future) — these are solar
radiation, geothermal energy, and air ((7) ___). The vast major-
ity of resources are however exhaustible, (8) ___, and can be
depleted if managed improperly. The natural resources are mate-
rials, which living organisms can take from nature for sustaining
their life or any components of the natural environment that can
be utilized by man to promote his welfare is considered as natu-
ral resources.

A particularly for developed nations such as Australia


B which must be processed to obtain the resource
C existing or being everywhere
D that exist relatively undisturbed by mankind
E which means they have a finite quantity
F that can be found within the environment
G though access to clean air may not be
H that are considered inexhaustible

3. Read more about scarity and choice in Reading file: Unit 4.

Speaking
A
Manufacturing
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the two
123
economists: Ha-Joon Chang and Jagdish Bhagwati. They are
debating the statement “An economy cannot succeed without
a big manufacturing base.” The brief description of the prob-
lem is given below:
Since the Industrial Revolution, economic advance has been
associated with manufacturing prowess. Even in today’s digi-
tised world, humanity advances by making more and better
things. Our horseless carriages are packed with computers; our
phonographs turn bits into music.
Yet do national economies require big manufacturing bases
in order to thrive? You might argue that manufacturing made
the world’s big, rich economies big and rich in the first place
and is enriching China now. You might argue too that some are
now paying the price for placing too much faith in the financial
world and too little in the physical. You may, though, take a dif-
ferent view: that today’s big, rich economies have derived most
of their income and employment from services for decades, and
thrived on it. You may even wonder — perhaps in your car, per-
haps listening to a podcast — where manufacturing begins and
ends. Can it be sensibly defined?
Your task is to visit http://www.economist.com/debate/over-
view/207 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.
a) Ha-Joon Chang is a … He is defending the idea of … His
arguments in favour of the statement are …
b) Jagdish Bhagwati is a … He is against the idea of … be­­
cause … His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.
4. Is the problem acute for Russia today?
B Discuss the following questions with the partner.
1. What are the biggest economic problems in your country?
2. Which people in this world care most about economics?
3. How is economics different under socialist and capitalist
systems?

124
4. What was the last interesting thing you read about eco-
nomics?
5. Do you think economics is the most important thing peo-
ple think about in an election?

Writing
Render the following text using the plan:
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.

Понятие «благо» в экономической теории


Под благом можно понимать все то, что приносит чело-
веку пользу. С этих позиций благом для человека признаются
счастье и рассудительность, наслаждение и удовольствие.
Под благом можно понимать все то, что для человека заклю-
чает в себе определенный положительный смысл. Но кто и
как определит этот «положительный смысл»? Не случайно
австрийский экономист К. Менгер, один из основоположни-
ков теории предельной полезности, отмечал, что приговор,
произносимый нашим суждением насчет полезности предме-
тов, делает их благами. Благо выступает как предмет, явле-
ние, продукт труда, свойство вещи удовлетворять определен-
ную человеческую потребность. Принципиальное значение
имеет выделение свободных благ и экономических благ.
Свободные блага
Человек вышел из природы и продолжает оставаться ее
составной частью. Одновременно человек пользуется бла-
гами природы. Свободное благо есть то, что создает сама
природа с пользой для человека и что имеется в достаточ-
ном объеме. В соответствии с теорией ассимиляции при-
роды считается, что человек, расширяя собственную «нишу
жизни», одновременно увеличивает и перечень свободных
благ. Поэтому каждое свободное благо выступает как кон-
кретная форма использования человеком природы.
Выдвигая теорию ассимиляции природы, немецкий фило-
соф Гегель подчеркивал, что свободные блага ничейны и не

125
ограничены. Свободные блага выступают для человека как
исходные факторы жизни (воздух, свет, тепло солнца, вода,
ветер). Они не являются результатом человеческой дея-
тельности. Свободные блага всегда имеются в достаточном
количестве для полного удовлетворения соответствующей
потребности.
Экономические блага
Такие блага отличаются от свободных благ тем, что соз-
даются в процессе труда человеком искусственно. Экономи-
ческое благо есть то, что создается человеком искусственно
в процессе преобразования вещества природы.
Для того чтобы возникло экономическое благо, необхо-
димы:
а) существование потребности и закрепление в сознании
человека прямой связи между потребностью и свойствами
конкретного блага;
б) наличие возможности организовать производство соот-
ветствующего блага;
в) наличие возможности использовать произведенное
благо для удовлетворения потребности;
г) наличие у блага редкости по сравнению с объемом
потребностей человека.
Классификация экономических благ
При систематизации экономических благ есть смысл
различать: а) вещи и услуги; б) блага, создаваемые в реаль-
ном секторе и в других секторах национальной экономики;
в) прямые и косвенные блага; г) средства производства
и предметы потребления; д) краткосрочные и долгосрочные
блага; е) настоящие и будущие блага; ж) частные и обще-
ственные блага; з) блага высшего порядка и блага низшего
порядка.
Под прямыми благами понимаются те вещи и услуги,
которые люди используют для удовлетворения своих потреб-
ностей в домашних хозяйствах (или на производстве — как
инвестиционные блага). Здесь четко обозначается конечное
потребление (конечный продукт).
Косвенные блага (промежуточный продукт) использу-
ются в процессе производства в виде сырья, материалов
и т.д. Они применяются и тут же физически сами как объ-
126
екты исчезают, но при этом создаются другие виды благ.
Такое использование косвенных благ получило название
промежуточного потребления.
http://www.bgtu-ief.com/index.php?option=com_content&view

Check your progress (2)

1. Match the word with its definition.


1) assertion (n) = a) not reacting to or becoming involved
in smth in an emotional way
2) comprehensive b) the effect that a person, event or situ-
(adj) = ation has on someone or smth
3) detached (adj) = c) someone who starts their own busi-
ness, especially when this involves see-
ing a new opportunity
4) eliminate (v) = d) suitable for or used for growing crops
5) impact (n) = e) large amounts of money received by
a government as tax, or by a company
6) revenue (n) = f) when you say that smth is certainly
true
7) entrepreneur (n) = g) to introduce changes and new ideas
8) innovate (v) = h) to remove smth from smth, or get rid
of smth
9) depletion (n) = i) including everything
10) arable (adj) = j) reduction of the amount of smth, es-
pecially a natural supply

2. Use the words from the box to complete the sentences.

advocacy  • distinguish •  to impose


scrupulous  • vociferous •  the effort
machinery  •  to innovate

1. The legislator, for example, has reason ___________ a cer-


tain tax.

127
2. The ___________ of a plausible explanation in science is
open-ended and self-correcting.
3. The survey also pointed to two weaknesses: marketing (where
it failed to make the top ten) and capacity ___________
(where it came seventh).
4. Our ignorance of the methods makes if difficult to establish
accurate estimates of ___________ involved in carrying out
the various tasks; we may at least gain some idea of the order
of magnitude of the work.
5. As we shall see in Chapter 2, we can ___________ diffe­
rent types of social structure which systematically generate
unequal distributions of power and reward.
6. This development can only be welcomed when it inspires
more ___________, subtle and sensitive scholarship in our
description and analysis of other cultures.
7. Anybody who has been involved in community organising
will have experience of situations where the (actual or per-
ceived) formality of the meeting has restricted participation
by people who may be active and ___________ before and/
or after the meeting.
8. Farm ___________ is used better on larger farms and needs
fewer workers.

3. Fill in the gaps using the correct preposition.


1. That is a direct result of the sudden increase in competition
and the consequent expansion of the range of services and
the size of firms in order to respond ___ it.
2. Whatever criticisms one may want to make of the quality
of the evidence and analysis of the debate, it is hard to deny
its effectiveness in changing the climate ___ regard to the
control of the curriculum.
3. The task ___ this stage will be to ascertain the feelings and
problems which exist on an individual level, and to discuss
them.
4. Eventually, all 16-year-olds will be given a voucher to spend
___ a programme of their choice.
5. Let us suppose that the survey is concerned ___ leisure
activities and is a comparison between social classes.

128
6. We can advance development with the bonus of decreasing
our impact ___ climate if we have the proper energy stra­
tegy.
7. We are required ___ the Copyright Act to have a written
request before we can supply the copy, for which the law
demands that we make a charge.
8. The Labour manifesto did not refer ___ the issue, but that
did not mean that a Labour government would not legislate
on it.
9. But in the meantime, some relatively easy questions arise
___ Muschel’s discovery.
10. Significantly the policies stressed the importance of local ini-
tiatives, and were offered as a decentralized alternative ___
the centralized bureaucratic planning of national govern-
ment.

4. Find word partners between the two lists of words (A and B).
A B
circular flow cost
household reserves
tax revenue
opportunity risk
consumer model
mental effort
oil spending
business choice

5. Choose the correct word.


effective (adj)  •  efficient (adj)
sensible (adj)  •  sensitive (adj)
1. Efficient / Effective rule of any kingdom necessarily depends
on an understanding of its particular characteristics.
2. The systems would only be efficient / effective if they were
planned to converge towards an integrated system.
3. The electric engine is extremely efficient / effective at con-
verting electrical energy into movement, far more efficient
than petrol, diesel or steam engines.

129
4. And it is now one of the most efficient / effective and profit-
able steel producers in the world — having been in the Guin-
ness Book of Records as the world’s worst loss-maker.
5. Many decisions about how to display the data have to be
standardized within a package, and they do not always lead
to sensible / sensitive or pretty results.
6. Sensible / Sensitive and controversial topics often occur
naturally in the conversation, or can be introduced in what
appears a casual manner, because the social context encour-
ages this.
7. Would it be more sensible / sensitive in the long run to buy a
second-hand television rather than to keep renting one?
8. But irrespective of these year-to-year changes the size of the
bonus is very sensible / sensitive to firm size.

6. Choose few, a few, little, a little to make the sentences


complete.
1. There were ___ people sitting at the back of the hall.
2. Many people expressed concern, but ___ were willing to
help.
3. Changes in the law have done ___ to improve the situation.
4. The city is regaining ___ of its former splendour.

7. Choose the proper meaning of the underlined adjective.


1. The drug came under strong attack from concerned profes-
sional observers. (involved / worried)
2. Some of the farmers concerned suffer particularly from the
low prices. (involved / worried)
3. More than 30 software firms were involved in the project.
(complicated / connected)
4. The plot was so involved that very few people knew what
was going on. (complicated / connected)
5. The proper name for Matthew’s condition is hyperkinetic
syndrome. (itself / correct)
6. The friendly chat which comes before the interview proper is
intended to relax the candidate. (itself / correct)
7. We are determined to bring the people responsible to justice.
(guilty / in charge of)
8. Mills is responsible for a budget of over $5 million. (guilty /
in charge of)

130
8. Answer the questions.
1. What is the difference between positive and normative state-
ments?
2. What does positive/normative economics study?
3. What does the ceteris paribus assumption mean?
4. Do the ceteris paribus assumptions tell us anything about the
real world?
5. How are opportunity cost, scarcity and choice connected?
Illustrate the connection with an example.
6. What are the main characteristics of free goods?
7. Which goods are free for their users but still have opportu-
nity cost?
8. Under which categories are all factors of production
grouped? Give some examples of the factors of production.
9. Do owners of factors of production receive payments for
their resources? What are those payments?
Unit 5
The role of the market
Learning outcomes
After studying this unit you should be able to:
1) explain how the market mechanism works;
2) explain how markets answer the three basic economic questions;
3) use the active vocabulary of the unit in speaking and writing;
4) read for different purposes (skimming, scanning);
5) use grammar effectively (conditional clauses of type I and II).

Lead-in
In American Heritage Dictionary the word market is defined
in different ways:
1. A public gathering held for buying and selling merchandise.
2. A place where goods are offered for sale.
3. A store or shop that sells a particular type of merchandise: a
vegetable market.
4. a) The business of buying and selling a specified commodity:
the soybean market.
b) A geographic region considered as a place for sales: grain
for the foreign market; the West Coast market.
c) A subdivision of a population considered as buyers: cos-
metics for the upscale market.
d) The opportunity to buy or sell; extent of demand for mer-
chandise: a big market for gourmet foods.
5. a) An exchange for buying and selling stocks or commodi­
ties: securities sold on the New York market.
b) The entire enterprise of buying and selling commodities
and securities: The market has been slow recently.

132
Read the sentences below and decide which definition of mar-
ket (1—5) matches with the context.
1. Pocklington is a small market with all the characteristics of
a village.
2. But property analysts believe such a move will have little
impact until up to 50 000 empty homes are taken off the
market.
3. In traditional trade theory, rules set a framework within
which the market, and not governments, determines what
amounts of goods and services are sold in any territory.
4. All the same, Reader’s Digest is a successful publishing house
and it seems to me that the company would not be producing
the book if it were not convinced that there is a big market
for such works.
5. Though the London market was slow to recover from the
great crash in October 1987, it has enjoyed a bumper run in
1989.
6. “We are concerned about the claim that 44% of the primary
meat market is accounted for by poultry meat,” a spokesman
said.
7. The European Commission was yesterday given a mandate
to negotiate with the United States over renewing access to
its steel market, French diplomats said.

TOPICS

Text A
The role of the market
1 Markets bring together buyers and sellers of goods and ser-
vices. In some cases, such as a local fruit stall, buyers and sellers
meet physically. In other cases, such as the stock market, busi-
ness can be transacted over the telephone, almost by remote con-
trol. We need not go into these details. Instead, we use a general
definition of markets.
2 A market is a shorthand expression for the process by which
households’ decisions about consumption of alternative goods,
firms’ decisions about what and how to produce, and workers’

133
decisions about how much and for whom to work are all recon-
ciled by adjustment of prices.
Prices of goods, and of resources, such as labour, machinery
and land, adjust to ensure that scarce resources are used to pro-
duce these goods and services that society demands.
3 Much of economics is devoted to the study of how markets
and prices enable society to solve the problems of what, how, and
for whom to produce. Suppose you buy a hamburger for your
lunch. What does this have to do with markets and prices? You
chose the café because it was fast, convenient and cheap. Given
your desire to eat, and your limited resources, the low hamburger
price told you that this was a good way to satisfy your appetite.
You probably prefer steak but that is more expen­sive. The price
of steak is high enough to ensure that society answers the “for
whom” question about lunchtime steaks in favour of someone
else.
4 Now think about the seller’s viewpoint. The café owner is
in the business because, given the price of hamburger meat, the
rent and the wages that must be paid, it is still possible to sell
hamburgers at a profit. If rents were higher, it might be more
profitable to sell hamburgers in a cheaper area or to switch to
luxury lunches for rich executives on expense accounts. The stu-
dent behind the counter is working there because it is a suitable
part-time job which pays a bit of money. If the wage were much
lower it would hardly be worth working at all. Conversely, the
job is unskilled and there are plenty of students looking for such
work, so owners of cafés do not have to offer very high wages.
5 Prices are guiding your decision to buy a hamburger, the
owner’s decision to sell ham­burgers, and the student’s decision
to take the job. Society is allocating resources — meat, buildings,
and labour — into hamburger pro­duction through the price sys-
tem. If nobody liked hamburgers, the owner could not sell enough
at a price that covered the cost of running the café and society
would devote no resources to hamburger production. People’s
desire to eat hamburgers guides resources into hamburger pro-
duction. However, if cattle contracted a disease, thereby reduc-
ing the economy’s ability to produce meat products, competition
to purchase more scarce supplies of beef would bid up the price
of beef, hamburger producers would be forced to raise prices, and

134
consumers would buy more cheese sandwiches for lunch. Adjust-
ments in prices would encourage society to reallocate resources
to reflect the increased scarcity of cattle.
David Begg. Economics. — 3rd ed. — McGraw-Hill Book Company. — P. 8.

Target vocabulary of text A


contract (v) = to become smaller or shorter, or to make
smth do this
The wood contracts in dry weather.
conversely (adv) = used to introduce smth that is different to
smth you have just said
Dark lipsticks make your mouth look smaller.
Conversely, light shades make it larger.
devote (v) = to use time, energy, etc. for a particular
purpose
She devotes most of her free time to charity
work.
ensure (v) = to make certain that smth is done or hap-
pens
Please ensure that all examination papers
have your name at the top.
expense account = an arrangement in which your employer
will pay for the things you need to buy
while doing your job
I can put this lunch on my expense account.
reconcile (v) = to make two different ideas, beliefs, or situ-
ations agree or able to exist together
It is sometimes difficult to reconcile science
and religion.
stall (n) = a small shop with an open front or a table
from which goods are sold
a market stall
stock market = the place where stocks and shares in com-
panies are bought and sold
The stock market was a depressed area again
yesterday.
transact (v) = to do and complete a business activity
The sale was transacted in conditions of the
greatest secrecy.

135
1. a) Use your dictionary to check the correct pronunciation
of the words below.
stall, transacted, ensure, in favour, luxury, purchase, disease,
society, encourage, through

b) Read text A and do the tasks/answer the questions below.


1. What is a market? How do you understand the main func-
tion of markets?
2. What is the meaning of “competition” in economics?
3. What guides customers’ decision to buy goods?
4. What is meant by “adjustment of prices”? How does this
mechanism regulate the market relationships?

2. Decide whether the following statements are True or False


according to text A.
1. Market is a place where sellers and buyers meet physically.
___
2. Prices ensure that scarce resources are allocated in accor-
dance with the society’s needs. ___
3. In the market system the government regulates prices. ___
4. Prices are independent of the amount of demand and supply.
___
5. People’s desire to buy goods makes markets work. ___

3. Scan through text A and find the words corresponding to


these definitions.
para 1 and 2
1) relating to an area near you (adj) _____________
2) a fast way of writing using abbreviations _____________
and symbols (n)
3) a slight change that you make to smth so _____________
that it works better, fits better, or is more
suitable (n)
4) a need for smth to be sold or supplied (n) _____________
para 3
5) to find the answer to smth (v) _____________
6) easy to use or suiting your plans well (adj) _____________

136
para 4
7) someone who legally owns smth (n) _____________
8) making or likely to make a profit (adj) _____________
9) working or studying only for part of the _____________
day or the week (adj)
10) to give or provide smth (v) _____________
11) without special skills or qualifications _____________
(adj)
para 5
12) to tell someone what they should do (v) _____________
13) a strong feeling that you want smth (n) _____________
14) the food, equipment, etc. that is needed _____________
for a particular activity, holiday, etc. (n, pl.)
15) to buy smth (v) _____________

4. Match the term with its definition.


1) stock market a) an employee for periods that take less
time than a full, regular schedule
2) expense account b) a person or group having administra-
tive or managerial authority in an organ-
isation
3) executive c) a segment of the work force associated
with a low skill level or a limited eco-
nomic value for the work performed
4) part-time worker d) changes in price
5) unskilled labour e) a place where stocks, bonds, or other
securities are bought and sold
6) price adjustment f) money deposited for paying employees’
expenses

5. Use the terms from exercise 4 to fill in the gaps.


1. Ford is testing a sophisticated electronic security system on
cars used by its own _________ before deciding whether to
standardise it on all high performance models.
2. These figures do not take into account irregular employment,
and so those for _________ in particular have to be treated
with caution.

137
3. The _________ reflected the more optimistic mood, with
the FTSE-100 index closing up 18.2 at 2400.9.
4. ICI currently has 850 _________, who are mostly women
and mainly working in job share schemes.
5. The benefits considered least important were the amount of
holiday and _________.
6. A major _________ was needed to encourage both energy-
saving and exploration.

6. Fill in the gaps using the prepositions from the box below.
to  • by • at • of • into • for • with
1. As property prices in London were moving upwards, our
plan was to decorate the flat as we had the last house, sell
___ a profit, and move on.
2. Within the space available, we can’t go ___ details of what
an operating system is, how programs run, etc.
3. It is suggested that these observations can be reconciled
___ appeal to contestable markets theory — where poten-
tial competition restrains the profitability of intermediaries,
together ___ shifts in bargaining power towards end users of
funds.
4. Employers who do not offer career breaks and childcare facil-
ities may find themselves passed over in favour ___ employ-
ers who do.
5. If you do not already have a Multi Service Account you may
find it useful to switch ___ Orchard, Vector or Meridian.
6. A contract is therefore concluded to sell ___ a price P for a
set period (the exact length of this period is of no immediate
concern).
7. When they do use credit, the installment payments tend to
be a heavier burden ___ poorer people, in terms of the pro-
portion of their income which they have to devote ___ them.

7. Choose the correct letter (a, b or c).


1. The content of informal discussions will be ___predictable
and cover a wide variety of material.
a) a b) un c) non
2. The future date specified is in an ___valid format.
a) un b) dis c) in

138
3. Some may find it ___convenient to take the time off work to
be screened.
a) in b) un c) dis
4. Others have less choice, they work as the skilled, the semi-
skilled and ___skilled.
a) in b) non c) un
5. In most contemporary societies the law is the only human
institution claiming ___limited authority.
a) in b) un c) dis
6. Capital allowances are ___relevant since the company is a
non-taxpaying entity.
a) in b) ir c) un
7. Suppose it is recognised that economies of scale may lead to
monopoly or other forms of imperfect competition that tend
to ___allocate resources.
a) un b) non c) mis
8. It is nearly always ___possible to raise the first quote.
a) in b) im c) un
9. Growth may ___courage competitors and may ___courage
others from entering the field.
a) in b) un c) dis
10. Until now firms have had to pay the tax on all their sales,
even when customers have left bills ___paid.
a) un b) dis c) under
Text B
The invisible hand
1 Markets in which governments do not intervene are called
free markets.
Individuals in free markets pursue their own interests, try-
ing to do as well for themselves as they can without any gov-
ernment assistance or interference. The idea that such a system
could solve the what, how, and for whom problems is one of the
oldest themes in economics, dating back to Adam Smith, the
famous Scottish philosopher-economist whose book The Wealth
of Nations (1776) remains a classic.
2 The recorded history of Smith’s life begins on June 16, 1723,
at his baptism in Scotland. His birthday is undocumented. Smith
attended the University of Glasgow at age 14, later transferring

139
to Balliol College in Oxford, England. He spent years teaching
and tutoring, publishing some of his lectures in The Theory of
Moral Sentiments in 1759. The material was well received and
laid the foundation for the publication of An Inquiry into the
Nature and Causes of the Wealth of Nations, which would cement
his place in history.
3 Smith argued that individuals pursuing their self-interest
would be led “as by an invisible hand” to do things that are in
the interests of society as a whole. In his book he states:
“Every individual necessarily labours to render the annual rev-
enue of the society as great as he can. He generally neither intends
to promote the public interest, nor knows how much he is promot-
ing it ... He intends only his own gain, and he is in this, as in many
other cases, led by an invisible hand to promote an end which was
no part of his intention. Nor is it always the worse for society that
it was no part of his intention. By pursuing his own interest he fre-
quently promotes that of the society more effectually than when he
really intends to promote it. I have never known much good done
by those who affected to trade for the public good.”
4 Suppose you wish to become a millionaire. You play around
with new ideas and invent a new good, perhaps the television,
the motor car or the hand calculator. Although motivated by our
own self-interest, you make society better off by creating new
jobs and opportunities. You have moved society’s production
possibility frontier outwards — the same resources now make
more or better goods — and become a millionaire in the process.
Smith argued that the pursuit of self-interest, without any cen-
tral direction, could produce a coherent society making sensible
allocative decisions.
5 The ideas that became associated with Smith not only
became the foundation of the classical school of economics, but
also gained him a place in history as the father of economics. His
work served as the basis for other lines of inquiry into the field of
economics, including ideas that built on his work and those that
differed. Smith died on July 19, 1790, but the ideas he promoted
live on. In 2007, the Bank of England even placed his image on
the £20 note.

140
Target vocabulary of text B
better off (adj) = richer or in a better situation
We’re a lot better off now that Jane’s started
work again.
coherent (adj) = if an argument, set of ideas or a plan is co-
herent, it is clear and carefully considered,
and each part of it connects or follows in a
natural or sensible way
differ (v) = to be different
These computers differ quite a lot in price.
direction (n) = control or instructions
Under his direction the company has doubled
its profits.
inquiry (n) = a process of discovering the facts
There will be an official inquiry into the train
crash.
outwards (adv) = going or pointing away from a particular
place or towards the outside
It’s much healthier to direct your emotions
outwards than to bottle them up inside you.
promote (v) = to encourage smth to happen or develop
to promote good health/peace
public good = products the government is best positioned
to utilise as compared to the private mar-
ketplace
pursue (v) = if you pursue a plan, activity, or situation,
you try to do it or achieve it, usually over a
long period of time
She decided to pursue a career in television.
self-interest (n) = interest in what will help you and not what
will help other people
wealth (n) = when someone has a lot of money or valu-
able possessions
He enjoyed his new wealth and status.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
intervene, to pursue, interference, theme, inquiry, associated,
foundation, revenue, wealth

141
b) Read text B and answer the questions below.
1. What is a free market? What are the main characteristics of
free markets?
2. What does invisible hand mean? Who coined this term in
economics?
3. What is Adam Smith famous for? What are his basic works
on economics?
4. Do modern economists rely on Smith’s theories?
5. What is meant by government’s central direction?

2. Decide whether the following statements are True or False


according to text B.
1. In free markets individuals follow the interests of the gov-
ernment to promote the public good. ___
2. Invisible hand guides individuals’ economic decisions. ___
3. Government plays a central role in the market economy. ___
4. Pursuing personal interests individuals promote public well-
being. ___

3. Scan through text B and find the words corresponding to


these definitions.
para 1 and 2
1) to become involved in a situation in order ______________
to try to stop (v)
2) to find the answer to smth (v) ______________
3) to have existed a particular length of time ______________
or since a particular time (phr v)
4) not having any documents to prove that ______________
someone or smth is legal (adj)
5) to change to a different job, team, place of ______________
study (v)
6) an opinion that you have because of the ______________
way you feel about smth (n)
para 3
7) to give reasons to support or oppose an ______________
idea, action, etc. (v)
8) to want and plan to do smth (v) ______________
9) to buy and sell goods or services, especial- ______________
ly between countries (v)

142
para 4 and 5
10) having a practical purpose (adj) ______________
11) the idea or principle that smth is based ______________
on (n)
12) to ensure (v) ______________

4. a) Find word partners between the two lists of words (A


and B).
A B
government interest
date off
self interference
invisible interest
public school
better hand
classical back

b) Use these collocations to complete the sentences.


1. Fayol (1916), Taylor (1912), Weber (1924) and others com-
prise the “___________” of management theorists, while
Mayo (1949), McGregor (1960), Herzberg (1968) and
Maslow (1970) fall into the “human relations school”, which
produced a series of motivation theories which became
increasingly psychologically based.
2. While researching the island’s past, Gilli discovered culinary
traditions which ___________ to the Ancient Greeks.
3. Unfortunately, the union is currently controlled by minor-
ity, unrepresentative, ___________ groups who have little
concern for the views of ordinary members and their feelings.
4. Management at Hunslet is acutely aware of the risks of oper-
ating in a sector acutely vulnerable to too much or too little
___________.
5. For democratic elitists a dominant feature of government
policy-making is the existence of numerous sources of pres-
sure to define policy in ways which ignore ___________.
6. Some people in the Labour Party seem to believe that labour
will be ___________ without the unions.

143
7. As economic theory had not really moved beyond the
“___________” idea of Adam Smith, not surprisingly no one
really knew what was wrong with the machine.

5. Fill in the gaps using the prepositions/particles from the box


below.
into  • to • at • by • in • off • for
1. An economic principle, first postulated ___ Adam Smith,
holding that the greatest benefit ___ a society is brought
about by individuals acting freely ___ a competitive mar-
ketplace ___ the pursuit of their own self-interest.
2. Smith assumed that individuals try to maximize their own
good (and become wealthier), and ___ doing so, through
trade and entrepreneurship, society as a whole is better ___.
3. Any government intervention ___ the economy isn’t needed
because the invisible hand is the best guide ___ the economy.
4. The invisible hand puts more resources ___ producing goods
for which there is a shortage, as evidenced ___ high profit
margins, ___ the expense of goods for which there is a sur-
plus, as evidenced by low or negative profit margins.
5. When the price of a good increases due ___ higher demand
or lower supply, more people will start producing these
goods.

6. Read the sentences from text B and decide which meaning


(a, b or c) the word in italics has.
1. Smith attended the University of Glasgow at age 14, later
transferring to Balliol College in Oxford, England.
a) to change who owns or controls something
b) to change to a different job, team, place of study, etc. or to
make someone do this
c) to move something from one place to another
2. The material was well received and laid the foundation for
the publication of …
a) to get something that someone has given or sent to you
b) to formally welcome guests
c) to react to a suggestion or piece of work in a particular way

144
3. Smith argued that individuals pursuing their self-interest
would be led “as by an invisible hand” to do …
a) to state, giving clear reasons, that something is true,
should be done, etc.
b) to persuade someone to do or not do something
c) to disagree with someone in words, often in an angry way
4. Smith argued that the pursuit of self-interest, without any
central direction, could produce a coherent society making
sensible allocative decisions.
a) in the middle of an area or an object
b) more important and having more influence than anything
else
c) a place where something is happening a lot
5. … but also gained him a place in history as the father of eco-
nomics.
a) a male parent
b) a priest, especially in the Roman Catholic church
c) the man who was responsible for starting something

7. Give a definition of the word in bold using the words given


in the list below.
invisible to intervene interest
to see involved to want
to notice difficult to know
impossible to change interested
foundation to invent basis
basic to make fact
idea new idea
principle type to develop
banknote bank assistance
value organisation to assist
money money to help
paper interest work

8. Translate the sentences from Russian into English.


1. Невидимая рука рынка — популярная метафора, впер-
вые использованная Адамом Смитом в работе «Исследова-

145
ние о природе и причинах богатства народов» для описания
механизма влияния индивидуальных интересов на максими-
зацию общественного богатства.
2. Невидимая рука — по А. Смиту — объективный способ,
которым рыночный механизм координирует решения поку-
пателей и продавцов. При падении популярности товара
снижение спроса приводит к падению цены, в результате
чего производители начинают терпеть убытки, объемы про-
изводства такого товара падают, падают и объемы задей-
ствованных для его изготовления ресурсов. При повышении
спроса процесс разворачивается в обратном направлении.
3. Невидимая рука рынка — термин ввел в обращение
Адам Смит как метафорическое обозначение неорганизо-
ванного рынка: «Каждый индивидуум преследует лишь соб-
ственную цель, и в этом он, как и во множестве других слу-
чаев, ведом невидимой рукой, заставляющей его добиваться
результата, который никак не входил в его намерения»
(«Богатство наций», 1776). Смит, в отличие от некоторых
своих последователей, не верил, что реальные рынки обяза-
тельно координируются только невидимой рукой ничем не
сдерживаемой конкуренции.
4. Невидимая рука рынка — термин, введенный Адамом
Смитом, для характеристики способа, при котором функци-
онирование рынков дает возможность координировать эко-
номическую деятельность без наличия какой-либо централь-
ной организации. Деятельность, преследующая собственный
интерес, через рынки стимулирует людей производить
товары и услуги для удовлетворения потребностей других
людей, которых они могут никогда не встретить и по отно-
шению к которым могут не испытывать никакого располо-
жения. Равным образом рыночная система позволяет людям
удовлетворять свои собственные желания благодаря продук-
ции других людей, которые аналогичным образом связаны
с ними лишь через рынки. «Невидимая рука» не является
панацеей из-за отсутствия возможности учитывать внешние
эффекты экономической деятельности (externalities), моно-
полию и проблему распределения доходов.

146
VOCABULARY
1. Look at the following pair of words, spot the difference and
do the task.
ISSUE ≠ PROBLEM

issue — a subject which people problem — a difficult situation,


are thinking and talking about person or thing that needs at-
tention and needs to be dealt
with or solved
Insert the proper word issue or problem.
1. Don’t worry about who will do it — that’s just a side
_______________.
2. When is the government going to tackle the ____________
of poverty in the inner cities?
3. No one has solved the ________________ of what to do
with radioactive waste.
4. We need to discuss some physiological ________ which
have recently appeared in our group.
5. I’m having ______________ with my computer.
6. As employers we need to be seen to be addressing these
______________ sympathetically.
7. The very high rate of inflation is a serious _____________
for the government.

2. Look through the two sets of sentences and decide which


word issue or problem should be inserted to make these
sentences complete.
1. The police lack the resources and the expertise to tackle the
_________.
2. First, we shall consider the aggregate effect of fiscal policy on
the balance of the economy, which is especially relevant to
the __________ of inflation.
3. The above statistics highlight the world population _______.
The missing word is _______________

147
1. The most sensitive _________ facing congress delegates is
the future of the party after next year’s elections.
2. Birth control, however, is a very controversial _________.
3. Not merely science, but also the idea of science, was at
_________.
The missing word is _______________

3. Look at the two lists of idioms with problem and issue. Match
the idiom with its meaning.
problem issue
1) work the a) in spite of 1) take a) to argue
problem a person’s prob- issue with about smth, es-
lems smb pecially in a way
that annoys
other people
because they do
not think it is
important
2) teething b) an under- 2) make b) to have
problems/ standing of the an issue problems deal-
troubles causes or basis of (out) of ing with smth
a problem smth because of smth
that happened in
the past
3) for all c) to actively try 3) have is- c) the problem
someone’s different solu- sues (with or subject is the
problems tions smb or most important
smth) part of what you
are discussing or
considering
4) root of d) problems that 4) at issue d) to disagree
the problem you experience in with someone or
the early stages smth
of an activity

4. Use the idioms from exercise 3 to make the sentences complete.


problem
1. Let’s stop avoiding the issue and get at ________.
2. ________, she still seems to be a happy person.

148
3. There were the usual ________ at the start of the project,
but that’s to be expected.
4. The mayor has named a committee ________ of downtown
parking.
issue
1. I ________ with people who say it is unpatriotic to criticise
our government.
2. ________ here is the extent to which exam results reflect
a student’s ability.
3. Nor will he ________ of the incident in which the Home
Office combed its files to discover whether the President,
when an Oxford student, applied for British citizenship to
avoid a military draft.
4. There’s a self-help group for people who ______ with money.

GRAMMAR
1. These two sentences were taken from the texts of the unit.
A If resources are not used effectively and are wasted, they will
end up producing less
B If each resource had only one use, economics would be much
simpler.
Decide A or B sentence describes an event:
— which is true or likely to happen in the present or the
future;
— which is untrue in the present.

2. Choose the correct translation equivalent.


A If resources are not used effectively, they will end up produc-
ing less.
1) Если бы ресурсы использовались неэффективно, то
производилось бы меньше товаров.
2) Если использовать ресурсы неэффективно, то будет
производиться меньше товаров.
B If each resource had only one use, economics would be much
simpler.
1) Если бы тот или иной вид ресурсов использовался при
производстве лишь одного товара, то наука экономика была
бы значительно проще.

149
2) Если тот или иной вид ресурсов использовать при
производстве лишь одного товара, то наука экономика будет
значительно проще.

Practice

1. Put the verbs in brackets into the correct form.


1. If I _________ (to be) an economist, I would study the deci-
sions the governments make every day.
2. Everybody _________ (to be) happy if resources were
unlimited.
3. If time, space or convenience are considered as resources,
they _________ (to be) limited.
4. I _________ (to answer) what makes a state wealthy if I
knew economics better.
5. If you _________ (to spend) more time working, you will
make more money.
6. If you worked more, you _________ (to have) less time to
relax.
7. You would know about Adam Smith if you _________ (to
study) the history of economic thought.
8. If you are an economist you _________ (to think) about the
cost of production.
9. He _________ (to consider) the value of goods if he was a
classical economist.
10. If I _________ (to be) a consumer, I would want satisfaction
from my resources (time and money).

2. Match the halves of the sentences.


1. If the worst conceivable ac- a) if government statistics
cident were to occur in Britain were available.
at a nuclear power station,
2. If the department approves b) they will have to adapt
the application, to Community legislation,
which will alter national law.
3. One would not use coins to c) if government and in-
try to make any deductions stitutional impediments
about economic history or mat- to greater flexibility were
ters such as liquidity removed.

150
4. Even if companies do not d) one million men, women
export their goods or services and children would die.
to other Member States,
5. If companies are getting e) it will recommend the
leaner, candidate’s admission to the
Faculty Postgraduate Stud-
ies Committee.
6. However critics of Keynesian f) absenteeism becomes a
economics consider that labour big problem and cracks soon
markets would clear begin to appear, says Tarquin
Desoutter of Arthur Ander-
sen.
7. If we know the extent to g) it will make the appropri-
which changes in local spend- ate adjustments to overall
ing affect savings, policy.

SKILLS FOCUS
Reading
1. Read the descriptions of the three types of markets:
perfect competition, monopoly, and oligopoly. Decide which
description (A—C) refers to which type.
A __________________________
Situation in which one and only one company produces and/
or sells a particular product or service. This type of market situ-
ation occurs if a company has a patent on a product or a process
it invented or if a company is a public utility. It is characterised
by an absence of competition, leads to high prices and a general
lack of responsiveness to the needs and desires of consumers.
B __________________________
Market situation in which a small number of selling firms
control the market supply of a particular good or service and are
therefore able to control the market price. It can be perfect —
where all firms produce an identical good or service (cement) —
or imperfect — where each firm’s product has a different identity
but is essentially similar to the others (cigarettes). Because each
firm knows its share of the total market for the product or ser-
vice it produces, and because any change in price or change in
market share by one firm is reflected in the sales of the others,
151
there tends to be a high degree of interdependence among firms;
each firm must make its price and output decisions with regard
to the responses of the other firms, so that prices, once estab-
lished, are rigid.
C __________________________
Market condition wherein no buyer or seller has the power
to alter the market price of a good or service. Characteristics of
this market are a large number of buyers and sellers, a homoge-
neous (similar) good or service, an equal awareness of prices and
volume, an absence of discrimination in buying and selling, total
mobility of productive resources, and complete freedom of entry.
This market exists only as a theoretical ideal.

2. Read the text about perfect competition and write one word
which is missing.
Perfect competition
In contrast to a monopoly or oligopoly, it is impossible for
a firm in perfect competition to earn economic profit in the
long (1) ________, which is to say that a firm cannot make
any more money than is necessary to cover its economic costs.
In (2) ________ not to misinterpret this zero-long-run-profits
thesis, it must be remembered that the term profit is also used
in (3) _______ ways. Neoclassical theory defines profit as what
is left of revenue after all costs have been subtracted, includ-
ing normal interest on capital plus the normal excess over it
required to cover risk, and normal salary for managerial activ-
ity. Classical economists on the (4) ________ defined profit as
what is left after subtracting costs except interest and risk cov-
erage; thus, if one leaves aside risk coverage for simplicity, the
neoclassical zero-long-run-profit thesis would be re-expressed in
classical parlance (5) ________ profits coinciding with inter-
est in the long period, i.e. the rate of profit tending to coincide
with the rate of interest. Profits in the classical meaning do not
tend to disappear in the long period but tend to normal profit.
(6) _______ this terminology, if a firm is earning abnormal profit
in the short term, this will act as a trigger for other firms to enter
the market. (7) _________ other firms enter the market, the
market supply curve will shift out causing prices to fall. Existing
firms will react to this lower price (8) _______ adjusting their

152
capital stock downward. This adjustment will cause their mar-
ginal cost to shift to the left causing the market supply curve to
shift inward. However, the net effect of entry by new firms and
adjustment by existing firms will be to shift the supply curve
outward. The market price will be driven down (9) _______ all
firms are earning normal profit only.
It is important to note that perfect competition is a sufficient
condition for allocative and productive efficiency, but it is not a
necessary condition. Laboratory experiments in which partici-
pants have significant price setting power and (10) _______ or
no information about their counterparts consistently produce
efficient results given the proper trading institutions.

3. Read more about market liberalisation in China in Reading


file: Unit 5.

Speaking
A
Fair trade
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the two
economists: Ngaire Woods and Jagdish Bhagwati. They are
discussing the question “Is making trade fairer more impor-
tant than making it freer?” The brief description of the prob-
lem is given below:
Driven in part by a progressive lowering of barriers to trade
in both rich and developing countries, global trade expanded
faster in the decades leading up to the crisis than the global
economy grew. Economists argue that free trade makes every-
one better off, allowing more, and more varied, goods, and lower
prices, than would otherwise be possible. Some also argue that it
leads to faster economic growth and less poverty.
Some critics of free trade argue, however, that its supposed
benefits for poor people and developing countries are illusory.
Trade, they say, benefits rich countries at the expense of poor
ones, increasing inequality between nations. Others say that it
hurts rich-country workers, particularly the less skilled, thus
increasing economic equality within rich countries. All would

153
rather that the world concentrate its efforts on making trade
“fairer” rather than further attempt to reduce trade barriers.
What does the balance of the evidence say? What does it
actually mean to make trade fairer? Fairer for whom? Must the
two goals be mutually exclusive? These are some of the ques-
tions this debate will tackle.
Your task is to visit http://www.economist.com/debate/over-
view/172 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.
a) Ngaire Woods is a … She is defending the idea of … Her
arguments in favour of the statement are …
b) Jagdish Bhagwati is a … He is against the idea of … be­­
cause … His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.
B Discuss the following questions with the partner.
1. How do you understand the word fair in the collocation
fair trade? What makes trade fair?
2. Is it possible to set fair trading rules for the whole interna-
tional business?
3. Who decides whether the rules of trade are fair or unfair?
4. Yearly the second Saturday in May is declared as a day of
fair trade. How would you celebrate this date if you were a busi-
ness person?
5. Is trade in Russia fair? What criteria of fairness would you
suggest?

Writing
Render the following text using the plan.
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.
Совершенная конкуренция
Чистая (или совершенная) конкуренция  — это конку-
ренция, которая происходит на рынке, где взаимодействует

154
весьма большое число фирм, производящих стандартные,
однородные товары. В этих условиях любая фирма может
вступить на рынок, здесь не осуществляется контроль за
ценами.
На рынке чистой конкуренции ни один отдельный поку-
патель или продавец не оказывает большого влияния на
уровень текущих рыночных цен товаров. Продавец не может
запросить цену выше рыночной, так как покупатели могут
свободно приобрести по ней любое необходимое им коли-
чество товара. При этом, во-первых, имеется в виду рынок
определенного продукта, например, пшеницы. Во-вторых,
все продавцы предлагают на рынке одинаковый продукт,
т.е. покупатель будет в одинаковой степени удовлетворен
пшеницей, купленной у разных продавцов, и все покупа-
тели и продавцы имеют одинаковую и полную информацию
о конъюнктуре рынка. В-третьих, действия отдельного поку-
пателя или продавца не оказывают влияния на рынок.
Механизм функционирования такого рынка можно про-
иллюстрировать на следующем примере. Если цена пше-
ницы возрастает в результате увеличения спроса, фермер
прореагирует на это расширением ее посевов в следующем
году. По этой же причине и другие фермеры засеют боль-
шие площади, равно как и те, кто раньше этим не занимался.
В  результате увеличится предложение пшеницы на рынке,
что может привести к падению рыночной цены. Если это
произойдет, то все производители, и даже те, кто не рас-
ширял посевные площади под пшеницу, будут испытывать
проб­лемы с ее реализацией по более низкой цене.
Таким образом, рынком чистой конкуренции (или совер-
шенным) считается тот, на котором устанавливается одна
и та же цена на один и тот же продукт в одно и то же время,
для чего необходимы:
• неограниченное количество участников хозяйствен-
ных отношений и свободная конкуренция между ними;
• абсолютно свободный доступ к любой хозяйственной
деятельности всех членов общества;
• абсолютная мобильность факторов производства; не­­
ограниченная свобода передвижения капитала;
• абсолютная информированность рынка о норме при-
были, спросе, предложении и т.д. (осуществление принципа

155
рационального поведения рыночных субъектов (оптимиза-
ция индивидуального благосостояния в результате прироста
доходов) невозможно без наличия полной информации);
• абсолютная однородность одноименных товаров
(отсутствие торговых марок и т.д.);
• наличие ситуации, когда ни один участник конкурен-
ции не в состоянии оказать непосредственное влияние на
решение другого неэкономическими методами;
• стихийное установление цен в ходе свободной конку-
ренции;
• отсутствие монополии (наличие одного производи-
теля), монопсонии (наличие одного покупателя) и невмеша-
тельство государства в функционирование рынка.
Однако практически ситуации, когда все эти условия при-
сутствуют, не может быть, поэтому не существует свободного
и совершенного рынка. Многие реальные рынки функциони-
руют по законам монополистической конкуренции.
http://www.inventech.ru/lib/pricing/pricing-0044/
Unit 6
Demand and supply
Learning outcomes
After studying this unit you should be able to:
1) explain the law of demand and the law of supply;
2) explain the factors that influence demand and supply;
3) explain how supply and demand work together;
4) use the active vocabulary of the unit in speaking and writing;
5) read for different purposes (skimming, scanning);
6) use grammar effectively (passive voice).

Lead-in
Look at the picture below which shows the relationship
between supply and demand. Read the two lists of descrip-
tions (S — supply and D — demand) and label the curves
accordingly.
S 1 ___ 2 ___ D
1. The supply 1. The demand
curve shows the curve shows the
positive relation negative relation
Price

between price and between price and


quantity. quantity.
2. If prices are 2. If prices are
going up, supply is Quantity falling, demand is
rising. going up.

TOPICS

Text A
Demand
1 Economists have a very precise definition of demand. For
them demand is the relationship between the quantity of a good

157
or service consumers will purchase and the price charged for that
good. More precisely and formally the Oxford Economics Dic-
tionary defines demand as “the want or desire to possess a good
or service with the necessary goods, services, or financial instru-
ments necessary to make a legal transaction for those goods or
services.”
2 Demand is not simply a quantity consumers wish to pur-
chase such as “5 oranges” or “17 shares of Microsoft”, because
demand represents the entire relationship between quantity
desired of a good and all possible prices charged for that good.
The specific quantity desired for a good at a given price is known
as the quantity demanded. Typically a time period is also given
when describing quantity demanded.
3 The relationship between the quantity demanded and the
price is governed by the law of demand. This economic principle
describes something you already intuitively know — if the price
goes up, people buy less. The reverse is, of course, true — if the
price drops, people buy more. However, price is not the only
determining factor. Therefore, the law of demand is only true if
all other determinants don’t change. In economics, this is known
as ceteris paribus. Therefore, the law of demand formally states
that, ceteris paribus, the quantity demanded for a good or service
is inversely related to the price.
4 What drives demand? There are the five basic determinants
of demand:
1. The number of buyers. If there is an increase in the num-
ber of buyers (demanders), demand increases and therefore the
market demand curve shifts to the right; if the number of buyers
decreases, demand decreases and the curve shifts to the left.
2. Tastes. If tastes change in favour of a product (the good
becomes more popular), demand increases and the demand
curve shifts to the right; if tastes change against the product (it
becomes less popular) demand decreases and the demand curve
shifts to the left.
3. Income in the case of normal goods. When demand for a
good increases in response to an increase in consumer income,
the good is a normal good (a good is normal if the demand for
it varies directly with income). Most goods are normal goods.
Therefore an increase in income will give rise to a rightward shift

158
in the demand curve when the good is normal, and a decrease in
income will give rise to a leftward shift.
4. Income in the case of inferior goods. While most goods
are normal, there are some goods the demand for which falls as
consumer income increases; the good is then an inferior good
(a good is inferior if the demand for it varies inversely with
income). Examples of inferior goods are used clothes, used cars,
and bus tickets. As income increases, consumers switch to more
expensive alternatives (new clothes, new cars, and cars or air-
planes rather than travelling by bus), and so the demand for the
inferior goods falls. Thus an increase in income will give rise to
a leftward shift in the demand curve for an inferior good, and a
decrease in income will produce a rightward shift.
5. Prices of substitute goods. Two goods are substitutes if they
satisfy a similar need. An example of substitute goods is Coca-
Cola and Pepsi-Cola. A fall in the price of one will result in a fall
in the demand for the other. The reason is that as the price of
Coca-Cola falls, some consumers will switch from Pepsi to Coca-
Cola, and so the demand for Pepsi will fall. On the other hand,
if there is an increase in the price of Coca-Cola, there will be an
increase in the demand for Pepsi as some consumers switch away
from Coca-Cola towards Pepsi. Therefore for any two substitute
goods X and Y, a decrease in the price of X will produce a left-
ward shift in the demand for Y, while an increase in the price of
X will produce a rightward shift in the demand for Y. In brief,
in the case of substitute goods, the price of X and demand for Y
change in the same direction (they both increase or they both
decrease).
6. Prices of complementary goods. Two goods are complements
(complementary goods) if they tend to be used together. An
example of complementary goods is CDs and CD players. In this
case, a fall in the price of one (say CD players) will give rise to
an increase in the demand for the other (CDs). This is because
the fall in the price of CD players leads to a bigger quantity of
CD players being purchased, and therefore the demand for CDs
will increase. Therefore, for any two complementary goods X
and Y, a fall in the price of X will lead to a rightward shift in
the demand for Y, and an increase in the price of X will lead
to a leftward shift in the demand for Y. In the case of comple-

159
mentary goods, the price of X and the demand for Y change in
opposite directions (as one increases, the other decreases). More
examples of complementary goods are computers and computer
software, DVD players and DVDs, tennis shoes and tennis rack-
ets, and ping-pong balls and ping-pong rackets. Note that most
goods are not related to each other; these are called independent
goods. For example, pencils and apples, cars and ice cream, tele-
phones and books are unrelated to one another, and the change
in the price of one will have little or no effect on the demand for
the other.
7. Expectations of future income. If consumers expect that
their future income will increase, their demand for a good in the
present will be likely to increase (rightward shift in the demand
curve); if they expect their income to fall in the future, their
demand for a good in the present will be likely to fall (a leftward
shift in the demand curve).
8. Expectations of future price changes. If consumers expect
that the price of a good will increase in the future, they will
probably demand more of it in the present in order to take
advantage of the lower present price, and so demand will shift to
the right; if they expect that the price will fall in the future, they
will demand less of it in the present, as they will postpone their
purchases for the future, and so demand in the present shifts to
the left.
http://economics.about.com/od/demand/p/demand.htm

Target vocabulary of text A


complementary is a good with a negative cross elasticity of
good = demand, in contrast to a substitute good.
This means a good’s demand is increased
when the price of another good is decreased
The example of complementary goods is
printers and ink cartridges.
demand (n) = a need for smth to be sold or supplied
There’s an increasing demand for cheap
housing.
expectation (n) = when you expect smth to happen
He had gone away and there was no expec-
tation of his return.

160
inferior good = a good of which less is consumed (rather
than more) when the consumer’s income
increases
For some consumers hamburger is an infe-
rior good because when income increases,
they can afford to consume more steak and,
so, less hamburger.
inversely (adv) = opposite in relation to smth else
Sometimes it seems that press coverage of
an event is inversely proportional to its true
importance.
normal good = a good for which demand increases when
income increases, all other things being
equal
Examples of a normal good include holidays,
cars, diamonds, branded fashions, hi-tech
products, etc.
postpone (v) = to arrange for smth to happen at a later
time
The trip to the museum has been postponed
until next week.
quantity demand- a term used in economics to describe the
ed = total amount of goods or services that are
demanded at any given point in time
The quantity demanded is determined at any
given point along a demand curve in a price
vs. quantity plane.
shift (v) = to move into a different position
Conversely, a fall in B causes the demand
curve to shift down.
substitute (n) = someone or smth that is used instead of an-
other person or thing
Margarine can be used as a substitute for
butter.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
precisely, to possess, legal, to purchase, to determine, ceteris
paribus, to vary, inferior, therefore, to effect, an effect, advantage,
to postpone

161
b) Read text A and do the tasks/answer the questions below.
1. What is the difference between demand and quantity
demanded?
2. How does the law of demand work?
3. How do consumers’ tastes affect demand?
4. How do normal goods differ from inferior goods?
5. What goods are called complementary? Give some examples.

2. Decide whether the following statements are True or False


according to text A.
1. If the number of buyers decreases, demand increases and the
curve shifts to the right. ___
2. A good is inferior if the demand for it varies directly with
income. ___
3. Only some goods of special characteristics are normal goods.
___
4. If consumers expect their income to decrease in the future,
the demand for a good in the present will fall. ___
5. Future price changes never affect demand for consumer
goods. ___

3. Scan through text A and find the words corresponding to


these definitions.
para 1 and 2
1) exact and accurate (adj) ______________
2) to ask someone to pay an amount of money ______________
for smth, especially for an activity or a service
(v)
3) to have or own smth (v) ______________
4) used for saying what usually happens ______________
(adv)
para 3
5) to influence or control the way smth hap- ______________
pens or is done (v)
6) using intuition (adv) ______________
7) to fall (v) ______________
8) smth that strongly influences what you do ______________
or how you behave (n)

162
para 4
9) an answer or reaction to smth that has ______________
been said or done (n)
10) exactly in a particular position or direc- ______________
tion (adv)
11) not good, or not as good as someone or ______________
smth else (adj)
12) to think that smth will happen (v) ______________
13) smth that will probably happen or is ______________
probably true (adj)
14) a good or useful quality or condition that ______________
smth has (n)

4. Use the words from exercise 3 to fill in the gaps.


1. Your aim should be to make sure that your agreed deal
addresses the questions that are most ______ to arise.
2. The President’s comments provoked an angry ______ from
students.
3. The Trade Marks Act 1938 serves the main purpose to pre-
vent the public from being deceived into buying ______
goods in the belief that they are made by another manufac-
turer.
4. Unemployment has ______ from 8% to 6% in the last year.
5. Law is not merely a matter of the rules which ______ rela-
tions between private individuals.
6. A little nervousness is only to be ______ when you are start-
ing a new job.
7. Workers know this ______ from their daily experience and
this adds to their strain.
8. The Valley Hotel is competing ______ with three- and four-
star hotels — all of which have greater marketing resources —
in the Telford area.
9. A firm strategy for science is a major _______ of the success
or failure of a modern economy.
10. You can confidently take _______ of tomorrow’s technology
today.
11. _______, a credit crunch happens when banks start to worry
about the creditworthiness of their borrowers.
12. Shops will soon be able to _______ higher prices for goods
bought by credit card, the Trade and Industry Secretary,

163
Mr. Nicholas Ridley, announced yesterday in a written reply
to a parliamentary question.
13. This fundamental marketing information can easily be
gleaned from the vast stores of historic customer data which
hotels _______.
14. How can they achieve maximum or target levels of profits
or sales without _______ information concerning their rev-
enues and costs?

5. Fill in the gaps using the prepositions/particles from the box


below.
for  • in • at • by • to •  on
1. But for the next three to four years ___ least managers will
have to rely more ___ their judgment than on hard data in
deciding what to charge ___ their services.
2. As 1989 ends, it is tempting to imagine that Europe is emerg-
ing into a wholly new identity, governed ___ peace not war,
common aspirations rather than sectional concerns.
3. Although its meat is delicious, there is no special demand
___ it, and the same goes for its hard-wearing wool.
4. This is because the government’s objectives relate ___ the
welfare of New Zealanders rather than making a profit.
5. If an increase ___ national income is the result of an increase
___ the quantity of goods and services produced, then we
would expect the level of employment to rise as more people
are employed ___ the production of additional output.
6. It may therefore become economically and politically expe-
dient to encourage a shift ___ more labour intensive meth-
ods of primary production.
7. A company spokesman said last night that Salomon had
acted ___ response ___ payments being made by other insti-
tutions.
8. Good interviewers do not use tests as a substitute ___ inter-
view, merely as an additional aid.

6. Choose the correct letter (a, b or c).


1. The police think that the two incidents are ___related.
a) un b) mis c) dis

164
2. One can only assume that the Roman officials exceeded their
authority and treated the royal family with ___respect.
a) in b) un c) dis
3. Criminal behaviour can be linked to economic ___advan-
tage.
a) in b) un c) dis
4. The government have made a serious ___calculation.
a) in b) mis c) non
5. If you are ___satisfied with this product, please return it.
a) in b) un c) dis
6. Building conservation is environmentally friendly; it is a way
of using existing resources for an end-product that is unique
and ___replaceable.
a) in b) ir c) un
7. Recent advances in technology will ___evitably change mili-
tary thinking.
a) in b) un c) dis
8. The defendant’s lawyer argued that his past offenses were
___relevant to this case.
a) in b) ir c) un
9. It would be highly ___regular for a minister to accept pay-
ments of this kind.
a) in b) un c) ir
10. Many large companies seem totally ___concerned about the
environment.
a) un b) dis c) under
Text B
Supply
1 Economists describe supply as the relationship between the
quantity of a good or service producers will offer for sale and the
price charged for that good. More precisely and formally supply
can be thought of as the total quantity of a good or service that
is available for purchase at a given price.
2 Supply is not simply the number of an item a shopkeeper has
on the shelf, such as “5 oranges” or “17 pairs of boots”, because
supply represents the entire relationship between the quantity
available for sale and all possible prices charged for that good.
The specific quantity desired to sell of a good at a given price is
known as the quantity supplied.

165
3 The law of supply states that, ceteris paribus, the quan-
tity supplied for a good rises as the price rises. In other words,
the quantity demanded and price are positively related. Supply
curves are drawn as “upward sloping” due to this positive rela-
tionship between price and quantity supplied. Notice that there
are theoretical instances where the law of supply might not hold,
though these are rarely, if ever, seen in the real world.
4 The determinants of market supply include the following:
1. The number of firms. An increase in the number of firms
producing the good in question increases supply and gives rise to
a rightward shift in the supply curve; a decrease in the number
of firms decreases supply and produces a leftward shift. This fol-
lows from the fact that market supply is the sum of all individual
supplies.
2. Resource prices and costs of production. The firm buys vari-
ous resources (factors of production) that it uses to produce its
product. If the price of one or more resource rises, production
becomes less profitable and the firm produces less; the supply
curve shifts to the left. If one or more resource prices fall, pro-
duction becomes more profitable and the firm will produce more;
the supply curve shifts to the right. Resource prices are impor-
tant in determining the firm’s costs of production. In general,
when costs of production increase, production becomes less prof-
itable, and so supply falls (the supply curve shifts to the left) and
when costs decrease, supply increases (the supply curve shifts to
the right).
3. Technology. A new improved technology lowers costs
of production, thus making production more profitable. Sup-
ply increases and the supply curve shifts to the right. In the
(unlikely) event that a firm employs a less productive technol-
ogy, costs of production increase and the supply curve shifts left-
ward.
4. Prices of other goods the firm can produce. Suppose a farmer
grows wheat. If the price of another product, say corn, increases,
the farmer may switch to corn production, which is now more
profitable; this results in a fall in wheat supply: the supply curve
shifts to the left. If the price of corn falls, corn producers may
switch to growing wheat, as this is now more profitable; the sup-

166
ply of wheat increases and the supply curve shifts to the right.
Therefore the supply curve of a good can shift in response to
changes in the prices of other goods that the firm can produce.
5. Producer (firm) expectations. If firms expect the price of
their product to rise, they may withhold some of their cur-
rent supply from the market (i.e. not offer it for sale), with the
expectation that they will be able to sell it at the higher price
in the future; in this case there will result a fall in supply in the
present, and hence a leftward shift in the supply curve. If the
expectation is that the price of their product will fall, they will
increase their supply in order to take advantage of the current
higher price, and hence there will be a rightward shift in the
supply curve.
6. Taxes. Firms treat taxes as if they were costs of produc-
tion. Therefore the imposition of a new tax or the increase of an
existing tax represents an increase in production costs, so supply
will fall and the supply curve will shift to the left. The elimina-
tion of a tax or a decrease in an existing tax represent a fall in
production costs; supply increases and the supply curve shifts to
the right.
7. Subsidies. A subsidy is a payment made to the firm by the
government, and so has the opposite effect of a tax. (Subsidies
may be given in order to increase the incomes of producers or to
encourage an increase in the production of the good produced.)
The introduction of a subsidy or an increase in an existing sub-
sidy is equivalent to a fall in production costs, and will give rise
to a rightward shift in the supply curve, while the elimination of
a subsidy or a decrease in a subsidy will give rise to a leftward
shift in the supply curve.
8. Supply shocks. Supply shocks are sudden events that have
an impact on supply, such as unusual weather, war or cuts in
major input supplies (for example, imports of oil). An adverse
supply shock, such as unusually bad weather that affects agricul-
tural output, or a cut in oil supplies, will result in a decrease in
supply and leftward shift in the supply curve. A beneficial supply
shock (such as unusually good weather) results in an increase in
supply and a rightward shift in the supply curve.
http://economics.about.com/od/supply/p/supply.htm

167
Target vocabulary of text B
advantage (n) = smth that will help you to succeed
These new routes will give the airline a con-
siderable advantage over its competitors.
adverse (adj) = things that cause problems or danger
Pollution levels like these will certainly have
an adverse effect on health.
beneficial (adj) = helpful or useful
Exercise is beneficial to almost everyone.
elimination (n) = the removal or destruction of smth
the elimination of lead in petrol
item (n) = a single thing, especially one thing in a list,
group, or set of things
The store is having a sale on furniture and
household items.
productive (adj) = producing or achieving a lot
Most of us are more productive in the morn-
ing.
profitable (adj) = producing a profit or a useful result
The advertising campaign proved very prof-
itable.
slope (v) = to be high at one end and low at the other
The field slopes down to the river.
supply (n) = an amount of smth that is ready to be used
a supply of water
switch (to) (v) = to change from one thing to another
We’re trying to encourage people to switch
from cars to bicycles.
treat (v) = to consider smth in a particular way
He treated my suggestion as a joke.
withhold (v) = to not give someone the information, mon-
ey, etc. that they want
The company has decided to withhold pay-
ment until the job has been finished.

1. a) Use your dictionary to check the correct pronunciation


of the words (phrases) below.
entire, sloping, rarely, determinants, various, technology, i.e.,
tax, subsidy, adverse

168
b) Read text B and do the tasks/answer the questions below.
1. How to measure quantity supplied? How does quantity sup-
plied differ from quantity demanded?
2. How does the law of supply work?
3. What happens to the supply curve if costs of production
increase?
4. Where does the supply curve shift if technology advances?
5. What is a supply shock? How does it affect supply?

2. Decide whether the following statements are True or False


according to text B.
1. The law of supply states that the quantity supplied for a
good falls as the price rises. ___
2. If the price of resources rises, the supply curve shifts to the
left. ___
3. If firms expect that the price of a product will fall, they will
decrease their supply. ___
4. A decrease in tax rates leads to supply increases, and the sup-
ply curve will shift to the right. ___
5. A subsidy is a payment made to the government by the firm. ___

3. Scan through text B and find the words corresponding to


these definitions.
para 1 and 2
1) to give or provide smth (v) _____________
2) already arranged or agreed (adj) _____________
3) whole or complete (adj) _____________
para 3
4) to officially say or write smth (v) _____________
5) because of smth (prep) _____________
6) not often (adj) _____________
para 4
7) considered separately from other people or _____________
things in the same group (adj)
8) to reduce smth in amount, degree, strength, _____________
etc., or to become less (v)
9) as a result of smth that has just been men- _____________
tioned (adv)
10) what you think or hope will happen (n) _____________
11) to do smth that produces an effect or _____________
change in smth (v)

169
4. Use the words from exercise 3 to fill in the gaps.
1. The government needs to clearly __________ its policy on
UN intervention.
2. A number of groups __________ their services free of
charge.
3. The restaurant’s success was __________ its new manager
4. Trading has been adversely __________ by the downturn in
consumer spending.
5. There are thought to be around 10 000 young homeless
Scots in London at any __________ time.
6. The company has agreed to keep the average rise in domestic
telephone charges to four percentage points below inflation,
and to __________ international rates by 12% over the next
three years, starting with an 8% cut in the first year.
7. The market in modern art was not yet developed and con-
temporary painters __________ had a one-man show.
8. It would still appear, __________, that despite some initia-
tives jobs for older people remain a low priority.

5. Fill in the gaps using the prepositions/particles from the box


below.
for  • at • on • in • of • by • to

1. How quickly the services will be ___ offer depends ___ BT,
Mercury and the operators of mobile radio networks.
2. If the proposals which I put forward ___ behalf of the Con-
servative group had been adopted, £15 000 not £1500 would
have been available ___ practical environmental issues this
year.
3. Suppose that a contract to sell ___ a given price for a speci-
fied period is, for whatever reason, advantageous ___ both
buyers and sellers.
4. One of the factors cited ___ government as important ___
determining the structure of benefits is “the effect on family
stability”.
5. ___ response to the news, Anglo United pulled out of the
bidding for the company, explaining that the operation was
now too small to be ___ any interest.

170
6. Similarly, a fall ___ the real wage will induce a decrease ___
the supply ___ labour.
7. Lack of internal capital and entrepreneurial experience mean
that rural people are often not able to take advantage ___
such opportunities.
8. A service company makes its profits ___ hiring people ___
one price and selling their time ___ a higher price.

6. Read the sentences from text B and decide which meaning


(a, b or c) the word in italics has.
1. Economists describe supply as the relationship between the
quantity of a good or service consumers will offer for sale and
the price charged for that good.
a) the way in which two groups feel about each other and
behave towards each other
b) the way in which two or more things are connected and
affect each other
c) a situation in which two people spend time together or
live together
2. If firms expect the price of their product to rise, they may
withhold some of their current supply from the market (i.e.
not offer it for sale) …
a) to ask someone if they would like to have something
b) to say that you are willing to do something
c) to provide something that people need or want
3. In other words, the quantity demanded and price are posi-
tively related.
a) in a way that leaves no doubt
b) in a direct correlation
c) in a way that shows you agree with something or want it
to succeed
4. Firms treat taxes as if they were costs of production.
a) to deal with, regard, or consider something in a particular
way
b) to behave towards someone or something in a particular
way
c) to buy or do something special for someone that you know
they will enjoy

171
5. The introduction of a subsidy or an increase in an existing
subsidy is…
a) a written or spoken explanation at the beginning of
a book, speech, etc.
b) something that explains the basic facts of a subject.
c) the act of bringing something into use for the first time.

7. Match the halves of the sentences.


1. So if there is excess a) curve will shift to the right,
supply the quantity actu- and as it contracts it will shift to
ally traded will be the the left.
quantity
2. Consumer groups b) technology, and marketing ex-
claimed full and clear pertise.
labelling of food products
would be preferred, which
would enable customers,
at a given
3. As the stock expands, c) price, to choose between simi-
the supply lar products and decide what
constituted the best quality.
4. Cost-push inflation is d) technology, in this case the
said to exist when rising development of agriculture, but
production because agriculture implies a
growth in population density, and
an increased division of labour.
5. In principle, direct e) demanded, and if there is ex-
investment brings with cess demand the quantity actu-
it better management, ally traded will be the quantity
improved supplied.
6. This stage is reached f) subsidy to cover the differen-
not just as a result of the tial between market interest rates
increasing complexity of and the loan’s fixed interest rate.
the productive
7. The banks receive g) costs are passed on to consum-
a government ers in the form of higher prices,
regardless of the state of demand
in the economy.

172
VOCABULARY

1. Look at the following pair of words, spot the difference and


do the task.
TO RISE ≠ TO RAISE

to rise — to increase in num- to raise — to increase smth


ber, amount, or value — intran- (e.g. an amount, number, or
sitive; rose, risen level) — transitive; -ed, -ed
Sales rose by 20% over the The university is working
Christmas period. to raise the number of students
from state schools.
Insert the proper word rise or raise in these sentences. Change
the form of the words where necessary.
1. The research budget ______ from £175 000 in 1999 to
£22.5 million in 2001.
2. Many shops have ______ their prices.
3. The divorce rate has _______ steadily since the 1950s.
4. They are _______ funds to help needy youngsters.
5. Temperatures rarely _______ above freezing.
6. Dr. Hayward intends to ________ the museum’s profile.
7. The number of people seeking asylum in Britain has
________ sharply.
8. The country faces economic recession and _______ unem-
ployment.

2. Look through the two sets of sentences and decide which


word rise or raise should be inserted to make these sentences
complete.
1. Share prices that had remained nervously stable during
the morning fell dramatically once interest rates began to
_________.
2. Prices have continued to _________ in the North, but to
stagnate and fall in the South.

173
3. For example, it has been criticized for being unable to
deal with problems of unemployment, which continued to
__________ throughout the 1980s.
The missing word is _______________
1. In classical theory a spontaneous fall in the real wage rate is
the initiating force tending to _________ employment and
output.
2. They aimed to ________ people’s consciousness of their
position in society.
3. Critics argue that the proposals to ________ rents will have
relatively little effect on the supply of rented accommoda-
tion.
The missing word is _______________

3. Find partners among the words from the two lists A and B.
Then match the collocation with its definition (list C).
A B C
1) profit a) supply i. a tax paid on the money that you
earn
2) income b) technology ii. all the money that exists in
a country’s economic system at a
particular time
3) money c) tax iii. a system in which the govern-
ment provides money, free medical
care, etc. for people who are unem-
ployed, ill, or too old to work
4) welfare d) margin iv. the difference between the cost
of producing something and the
price at which you sell it
5) high e) state v. the use of the most modern ma-
chines and methods in industry,
business, etc.

4. Use the collocations from exercise 3 to complete the


sentences.
1. Even Sweden, once the paragon of all __________, has stiff
charges for prescriptions, seeing doctors and staying in hos-
pitals.
2. Texas has no company or personal __________, and the for-
mer, at least, may soon be seriously discussed.

174
3. The attractions of these products are that they store well, are
easily obtained and offer a high ____________.
4. We have vacancies in ____________ areas including elec-
tronics, software and R&D — fields include maths and phys-
ics.
5. There is scepticism that a return to controlling the growth
of broad ____________ would work when many of the eco-
nomic pressures on Britain are external.

GRAMMAR
1. Change from the active into the passive.
1. They sacrifice interests of __________________________
the community for profits. __________________________
2. The business invested __________________________
large funds into this con- __________________________
struction project.
3. The institute will invest __________________________
5 million $ into this project. __________________________
4. The council is consider- __________________________
ing the public inquiry. __________________________
5. They were raising prices __________________________
within the given period. __________________________
6. The National Bureau has __________________________
analysed the results of the __________________________
recent census.
7. The agency had com- __________________________
pleted the survey of the car __________________________
market.

2. Put the verb in brackets into the correct passive form.


1. Only when this ________ (to do) modern scientific technol-
ogy can be used to its best advantage.
2. Coinage _______ (to invent) only comparatively late in
human history.
3. On April 21 the Nigerian National Petroleum Corpora-
tion confirmed that 8 000 000 litres of petroleum products
_______ (to import) daily between 2007 and 2009.

175
4. The particular case of natural monopoly _______________
(to develop) further in Chapter 2.
5. Now a pilot study _______ (to carry) out with Manchester
University.
6. The system ________ (to invent) by a Frenchman, a teacher
called Louis Braille, who died in 1852.
7. They cover earning periods of one week and one month and
_________ (to use) to calculate the contributions to be paid.
8. The manager reported that despite year-long complaints
nothing _______ (to do) about the problem.
9. A recent survey by the US Pharmaceutical Manufacturers
Association reported that more than 90 medicines ________
(to develop) to combat AIDS from 1993 to 2012.
10. Recently the relation between this and other techniques
_______ (to analyse) by Letelier.
11. A further £265 000 ________ (to invest) in a fund to pro-
vide her with a tax-free, inflation-proof income for life.
12. Check whether subcontractors ________ (to use) now and
who is liable if things go wrong.

SKILLS FOCUS

Reading

1. Read the text Shifts vs. movements, choose the best sentence
from the list below to fill in each of the gaps.
Shifts vs. movements
For economics, the “movements” and “shifts” in relation to
the supply and demand curves represent very different market
phenomena:
1. Movements
A movement refers to a change along a curve. On the demand
curve, a movement denotes a change in both price and quantity
demanded (1) ___. The movement implies that the demand rela-
tionship remains consistent. Therefore, a movement along the
demand curve will occur when the price of the good changes
and the quantity demanded changes (2) ___. In other words,

176
a movement occurs when a change in the quantity demanded is
caused only by a change in price, and vice versa.
Like a movement along the demand curve, a movement along
the supply curve means that the supply relationship remains
consistent. Therefore, a movement along the supply curve will
occur when the price of the good changes and the quantity sup-
plied changes (3) ___. In other words, a movement occurs when
a change in quantity supplied is caused (4) ___, and vice versa.
2. Shifts
A shift in a demand or supply curve occurs when a good’s
quantity demanded or supplied changes even though price
remains the same. For instance, if the price for a chocolate bar
was $2 and the quantity of chocolate demanded increased from
Q1 to Q2, then there would be (5) ___. Shifts in the demand
curve imply that the original demand relationship has changed,
meaning that quantity demand is affected by (6) ___. A shift in
the demand relationship would occur if, for instance, chocolate
suddenly became the only type of sweets available for consump-
tion.
Conversely, if the price for a chocolate bar was $2 and the
quantity supplied decreased from Q1 to Q2, then there would be
(7) ___. Like a shift in the demand curve, a shift in the supply
curve implies that the original supply curve has changed, mean-
ing that the quantity supplied is effected by a factor other than
price. A shift in the supply curve would occur if, for instance, a
natural disaster caused (8) ___; chocolate manufacturers would
be forced to supply chocolate for the same price.
http://www.investopedia.com

A only by a change in price


B a factor other than price
C from one point to another on the curve
D in accordance to the original supply relationship
E a shift in the demand for chocolate
F a mass shortage of cocoa beans
G in accordance to the original demand relationship
H a shift in the supply of chocolate

2. Read more about the economist who won the Nobel Prize in
2010 in Reading file: Unit 6.

177
Speaking

1. The Economist.com raises a series of intriguing questions:


“Which economists are the most influential over the past
decade?”, “How has the crisis changed the relative standing of
leaders within the economics profession?” and “Which economists
have the most important ideas about the post-crisis world?”
Guillermo Calvo, a professor at Columbia University, tries
to answer these questions and mentions the three names:
Irving Fisher
Hyman P. Minsky
Ben Bernanke
Find out more about the economists mentioned above and
make a presentation about one of them.
Your presentation should include the following informa-
tion:
1. Reasons why you have chosen this economist.
2. What is his/her personal contribution into economics as
a science?
3. Were the results of his/her work acknowledged by other
professionals?
4. What are his/her famous publications (books, articles, etc.)?

2. Answer the following questions.


1. Do you know any economist who won a Nobel Prize for
economics?
2. Does any Russian economist have a Nobel Prize?
3. What do Nobel Prize winners have in common?
4. Are there any better prizes in the world than the Nobel
Peace prize?
5. How does winning a Nobel Prize change the winner’s life?
6. What would you like to ask a Nobel Prize winner?

Writing

Render the following text using the plan.


1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.

178
Лауреаты Нобелевской премии 2010
Лауреатами Нобелевской премии по экономике за 2010 г.
стали Питер Даймонд (США), Дэйл Мортенсен (США)
и Кристофер Писсаридес (Кипр). Ученые разделили между
собой денежное вознаграждение в размере 10 млн шведских
крон (1,5 млн долларов США). Премия присуждена за «ана-
лиз рынков с «шероховатостями» поиска».
В пресс-релизе Нобелевского комитета говорится, что
лауреаты в своих исследованиях развили теорию, способную
дать ответы на фундаментальные вопросы рынка труда, —
в частности, почему множество людей остаются безработ-
ными несмотря на то, что в экономике появляются все новые
и новые рабочие места.
Ученые попытались выяснить, каким образом экономи-
ческая политика может повлиять на безработицу. При этом
теория П. Даймонда, Д. Мортенсена и К. Писсаридеса приме-
нима к анализу не только рынка труда, но и других рынков.
«Многие рынки характеризуются тем, что покупатели
и продавцы не всегда могут вступить во взаимодействие
немедленно. Это касается, например, работодателей, которые
подбирают себе сотрудников, и работников, которые ищут
работу. Поскольку этот процесс требует времени и ресурсов,
на рынке создаются «трения», «шероховатости» (frictions)», —
поясняется в заявлении Нобелевского комитета.
Рынки с такими характеристиками не могут удовлетво-
рить спрос со стороны всех покупателей, аналогичным обра-
зом часть продавцов не в состоянии реализовать свое пред-
ложение настолько, насколько они бы этого хотели. В одно
и то же время на рынке труда существуют свободные вакан-
сии и безработные.
Трое лауреатов 2010 г. сформулировали теоретическую
модель для анализа таких «рынков поиска». П. Даймонд
(работает в Массачусетском технологическом институте,
США) исследовал теоретические основания этих рынков,
тогда как Д. Мортенсен (Северо-Западный университет,
США) и К. Писсаридес (Лондонская школа экономики,
Великобритания) расширили эту теорию и применили ее
к анализу рынка труда. Их модель помогает, в том числе,
понять, каким образом государственное регулирование
179
и эко­­номическая политика влияют на безработицу, свобод-
ные рабочие места и заработные платы.
Нобелевский комитет отмечает, что концепция П. Дай-
монда, Д. Мортенсена и К. Писсаридеса работает не только
применительно к рынку труда, но и к другим рынкам (в част-
ности, рынку недвижимости), что делает эту теорию универ-
сальной и актуальной.
Имена П. Даймонда и Д. Мортенсена фигурировали
в списках наиболее вероятных претендентов на Нобелев-
скую премию по экономике за 2010 г.
Напомним, в 2009 г. Нобелевскую премию по экономике
получили двое американских ученых — Элинор Остром
и Оливер Уильямсон — за исследования в области экономи-
ческой организации. При этом Э. Остром стала первой жен-
щиной, получившей эту престижную награду.
Премия по экономике не упоминалась в оригинальном
завещании Альфреда Нобеля и была учреждена в 1968 г.
В остальном она ничем не отличается от других Нобелев-
ских премий. Лауреат получает денежное вознаграждение
в размере 10 млн шведских крон (около 1,5 млн долларов).
Объявлением лауреата по экономике завершается сезон при-
суждения Нобелевских премий.
http://top.rbc.ru/economics/11/10/2010/480084.shtml

Check your progress (3)

1. Match the word with its definition.


1) ensure (v) = a) an arrangement in which your
employer will pay for the things you
need to buy while doing your job
2) expense account = b) to do and complete a business ac-
tivity
3) reconcile (v) = c) a good with a negative cross
elasticity of demand, in contrast
to a substitute good. This means
a good’s demand is increased when
the price of another good is de-
creased

180
4) stock market = d) a good of which less is consumed
(rather than more) when the con-
sumer’s income increases
5) transact (v) = e) a term used in economics to de-
scribe the total amount of goods or
services that are demanded at any
given point in time
6) complementary good = f) to make certain that smth is done
or happens
7) inferior good = g) to move into a different position
8) quantity demanded = h) to arrange for smth to happen at
a later time
9) shift (v) = i) to make two different ideas, be-
liefs, or situations agree or able to
exist together
10) postpone (v) = j) the place where stocks and shares
in companies are bought and sold

2. Use the words from the box to complete the sentences.


devote  • conversely • contract • stall
demand  • expectation • substitute • inversely
1. In the order of succession, the president of the Senate was
empowered _____ for the President during a temporary
absence if the Vice-President was also absent.
2. _____ on the pavement as you see is not the same as having
a proper shop, in the summer it gets so hot.
3. In any case, few men or women had sufficient time or energy
after long hours of farm labouring or housework _________
to a garden or allotment.
4. Investment spending by firms depends ________ on the rate
of interest.
5. Unemployment is rising, with the industrial sector expected
______ by 20 per cent this year.
6. ________, the competition rules can be invoked by busi-
nesses as a “sword” to cut away the private barriers to trade.
7. They are put into a situation where ________ of their per-
formance are much higher than they can possibly deliver.

181
8. Simultaneously, the discovery of the North Sea’s oil and gas
fields in the late 1960s and early 1970’s increased ________
for trained geologists and geophysicists.

3. Fill in the gaps using correct prepositions.


1. Sbrinz, a grana cheese from Switzerland, is a very good
substitute ___ Parmesan, being only approximately half as
expensive.
2. If a product fails to sell well, the company may be left with
a lot of unwanted stock which it has to sell ___ a reduced
price.
3. Arguments ___ favour ___ a more substantial increase in the
supply of medical staff come from several sources.
4. If you wish to switch ___ a new scheme, this could either be
to another company scheme or to a personal pension.
5. Moreover, a parliament will benefit ___ a thriving political
culture and critical scrutiny and debate in the media and,
conversely, suffer from public apathy.
6. Her mansion was refurnished ___ taxpayers’ expense.
7. Isaac Newton (1642—1727) had demonstrated that natural
phenomena were governed ___ universal laws.
8. The caterers worked at full stretch and their kettle just man-
aged to keep pace with the demand ___ tea.
9. Last, but not least, a flexible and imaginative management
strategy could produce an increase ___ the availability of
manpower.
10. Bring your cheque books, credit cards, etc. and take advan-
tage of the various deals that are bound to be ___ offer.

4. Find word partners between the two lists of words (A and B).
A B
given tax
income margin
welfare price
quantity subsidy
production costs
improved technology
profit supplied
government states

182
5. Choose the correct word.
issue (n)  •  problem (n)  •  rise (v)  •  raise (v)
1. The key problem / issue is whether workers should be classi-
fied as “employees”.
2. The charge for school meals is one sensitive problem / issue.
3. They still have some serious problems / issues to overcome.
4. The shortage of teachers poses a major problem / issue.
5. Unemployment is not the problem / issue — the real problem
is the decline in public morality.
6. We still haven’t sorted out the thorny problem / issue of
where exactly the money is going to come from.
7. The university is working to rise / raise the number of stu-
dents from state schools.
8. The divorce rate has risen / raised steadily since the 1950s.
9. The trust hopes to rise / raise $1 million to buy land.
10. They are rising / raising funds to help needy youngsters.
11. Inflation continued to rise / raise sharply, partly through the
effect of the Clegg awards.
12. Thirty or forty times that would be a fair price today and
they will undoubtedly continue to rise / raise in the market.

6. Use the proper form of the verbs in brackets.


1. If the economic situation _________ (to change), the con-
sumers would still prefer quality goods to nasty ones.
2. If it comes to the recession in that industry, producers
________ (to take) their investments back.
3. If the price level change has no other impacts on the vari-
ables introduced above, the curve __________ (to intersect)
the stationary curve at a higher rate of interest and a lower
level of income.
4. If the price level ________ (to rise) when the nominal wage
remains constant, the real wage ________ (to fall).
5. If the price of crude oil remained high and volatile, this
_________ (to impose) severe strains on economies which
are already under pressure.

183
7. Use the correct passive form of the verbs in brackets.
1. What the scholars study ________ (to determine) by what
is available to study.
2. Last year the government organisation concerned with food
distribution ________ (to improve), so that its subsidised
outlets could be found in many poor areas, both urban and
rural.
3. With the creation of further women’s organisations it is
expected that a new co-ordinating body ________ (to
found) in the near future.
4. An agreement in principle to sell the building to its bankers
_______ (to reach).
5. One leading businessman said this week that up to 70 per
cent of shares traded every day _______ (to sell) overseas.

8. Answer the questions.


1. What role does a market play in the economy?
2. How does a market help to decide the three economic ques-
tions?
3. What is meant by the invisible hand? Does the government
control this hand?
4. Who was Adam Smith? What is he known for?
5. Do modern economists agree with the theory of the invisible
hand?
7. How does the law of demand (supply) work?
8. Which factors determine supply and demand on the market?
9. What is the difference between a movement and a shift in
the graph which shows the supply-demand relationship?
10. How to measure quantity supplied? How does quantity sup-
plied differ from quantity demanded?
11. How does the law of supply work?
12. What happens to the supply curve if costs of production
increase?
Unit 7
Government in the economy
Learning outcomes
After studying this unit you should be able to:
1) identify the role of the government in economy;
2) distinguish between government intervention and support;
3) explain the difference between different types of government
structures;
4) use the active vocabulary of the unit in speaking and writing;
5) read for different purposes (skimming, scanning);
6) use grammar effectively (tenses: Present Perfect, Present Perfect
Continuous, Past Simple).

Lead-in

1. Read the sentences (1—8) and decide which meaning (a—d)


the word government has.
1. The importance of good government
in developing countries is obvious.
___ a) the group of people
2. The protest march was really about who govern a country
big government. ___ or state
b) a form or system of
3. The Government are planning fur-
government
ther cuts in public spending. ___
c) the process or way
4. Hong Kong has followed small gov- of governing
ernment, laissez-faire policies for de- d) the degree to which
cades, limiting government interven- the government con-
tion in business. ___ trols economic and
5. Most people in the country support social activities
the return to democratic government.
___

185
6. The US government has tightened
restrictions on firearms. ___
7. Simply handing over powers to lo-
cal government (or stopping the re-
moval of them) is not enough. ___
8. What would the opposition do if
they were in government? ___

2. How would you characterise the type of government in these


countries?
a) Russia b) China c) Germany
Types of government
• Federal Republic
h) Iran d) Pakistan
• Socialistic Republic
• Islamic Republic
g) Switzerland f) the USA e) Vietnam

TOPICS

Text A
What do governments do?
1 Most resources in Western economies are allocated through
markets in which individuals and privately owned firms trade
with other individuals or firms. However, governments also play
a major role. They set the legal rules; in the marketplace they
buy goods and services, from paper clips to aircraft carriers; they
produce some services, such as defence; and they make payments
such as social security benefits. In financing themselves through
taxation and borrowing, governments exert a major influence on
prices, interest rates, and production.
2 Governments in modern industrial economies collect
between one-quarter and one-half of GNP in taxes each year and
typically spend a little more than they receive in taxes. Because
governments play so large a part in economic life, to understand
the operation of a modern economy we have to understand not
only how markets work but also how government affects the
operation of the economy.

186
3 What do governments actually do?
Create laws, rules, and regulations
Governments determine the legal framework that sets the
basic rules for the ownership of property and the operation of
markets. If the legal framework outlaws private ownership of
businesses, the economy is socialist; if businesses are owned
by individuals and operated for private profit, the economy is
capitalist. Even in the most capitalist economies, there are lim-
its to the rights of ownership. Not everyone can own a gun, for
instance. Nor are people entirely free to use their property as
they please; it is usually illegal to build a factory on land in a
residential area.
4 In addition, governments at all levels regulate economic
behaviour, setting detailed rules for the operation of businesses.
Regulations include planning permission (how land can be used
and where businesses can locate), health and safety regulations,
and attempts to prevent some types of business, such as the sale
of heroin. Some regulations apply to all businesses; examples
include laws against fraud and laws that prohibit competitors
from agreeing to fix prices. Some regulations apply only to cer-
tain industries, such as requirements that barbers and doctors
have appropriate training.
5 Make transfer payments
Governments also make transfer payments, such as social
security and unemployment benefits, to individuals. Transfer
payments are payments for which no current direct economic
service is pro­vided in return. A fireman’s salary is not a transfer
payment; a social security cheque is, as are unemployment ben-
efits and interest payments on government borrowing.
Government spending is the sum of govern­ment purchases of
goods and services and transfer payments.
6 Impose taxes
Governments pay for the goods they buy and for the transfer
payments they make by levying taxes or by borrowing. Taxes
raised at national level, such as income tax or VAT, are usu-
ally supplemented by local taxes assessed on prop­erty values or
household size.

187
7 Try to stabilize the economy
Every market economy suffers from business cycles. The busi-
ness cycle consists of fluctuations of total production, or GDP,
accompanied by fluctuations in the level of unemployment and
the rate of inflation. Governments, through their control of taxes
and government spending and through their ability to control
the quantity of money in the economy, often attempt to modify
fluctuations in the business cycle. The national government may
reduce taxes in a recession in the hope that people will increase
spending and thus raise the GDP. The central bank (in the UK
the Bank of England), which controls the quantity of money,
may increase the quantity of money more rapidly in a recession
to help bring the economy out of the recession. When inflation
is high, the central bank may reduce the rate of money growth
with the aim of reducing inflation.
8 Affect the allocation of resources
By spending and taxing, the government of course plays a
major part in allocating resources in the economy. In terms of
what, how, and for whom, government chooses much of what
gets produced, from defence expenditures to education to its
support for the arts. It affects how goods are produced through
regulation and through the legal system. It affects for whom
goods are produced through its taxes and transfers, which take
income away from some people and give it to others.
9 Beyond these direct effects, the government also affects the
allocation of resources indirectly through taxes (and subsidies,
which are nega­tive taxes) on the price and level of production in
individual markets. When government taxes a good, such as cig-
arettes, it generally reduces the quantity of that good produced;
when it subsidizes a good, such as milk, it generally increases the
quantity of the good produced.
10 The power to tax is thus the power to affect the allocation
of the economy’s resources, or to change what gets produced.
By taxing cigarettes, the government can reduce the amount
of cigarettes smoked and thereby improve health. By taxing
income earned from work, the government affects the amount of
time people want to work. Because they affect the allocation of
resources indirectly, through their effects on relative prices, as
well as directly, taxes loom large in the workings of the market

188
system and have a profound effect on the way society allocates
its scarce resources.
Begg David. Economics. — McGraw-Hill Book Company, 1991. — 3rd ed. — P. 48.

Target vocabulary of text A


borrowing (n) = when a person, government, company, etc. bor-
rows money, or the money that they borrow
Public borrowing has increased.
business cycle = a period during which a country’s economy
goes from growth to recession and back to
growth
The typical business cycle is three to five years.
inflation (n) = a general, continuous increase in prices
The annual rate of inflation fell.
GNP = (abb.) gross national product
GNP is the total value of all the goods and
services produced in a country, usually in a
single year.
prohibit (v) = to say that an action is illegal or not allowed
Smoking is strictly prohibited inside the factory.
property (n) = the thing or things that someone owns
The hotel is not responsible for any loss or
damage to guests’ personal property.
recession (n) = a period when the economy of a country is not
successful and conditions for business are bad
The country is sliding into the depths of (a)
recession.
regulations (n) = an official rule or the act of controlling
The correct procedure is laid down in the rules
and regulations.
subsidy (n) = money given as part of the cost of smth, to
help or encourage it to happen
The government is planning to abolish subsi-
dies to farmers.
taxation (n) = the system of taxing people
The government’s economic and taxation pol-
icy is tight.
VAT = (abb.) value added tax
VAT is a tax added to the price of goods and
services in Britain and the EU.

189
1. a) Use your dictionary to check the correct pronunciation
of the words below.
exert, residential, requirements, transfer, social, cheque, to
levy, cycle, major, thereby

b) Read text A and answer the questions below.


1. How do the governments regulate economic behaviour of
market participants?
2. Given the legal frameworks set by the governments, which
two types of the economy can be determined?
3. What is “transfer payments”?
4. What are the basic stages of the typical business cycle?
5. Explain the difference between taxes and subsidies.

2. Decide whether the following statements are True or False


according to text A.
1. Governments of the capitalist economies don’t create laws or
set rules for the ownership of property. ___
2. Governments create rules and requirements that can be
applied to every industry and company within the boundar-
ies of the country. ___
3. Transfer payments are payments without provision of any
service in return. ___
4. In order to reduce the rate of inflation the central bank
should increase money supply. ___
5. A decrease in quantity of production is the result of taxation.
___

3. Scan through text A and find the words corresponding to


these definitions.
para 1 and 2
1) very important, when compared to other ______________
things or people of a similar kind (adj)
2) allowed by the law (adj) ______________
3) an amount of money that has been or must ______________
be paid (n)
4) to use your power, influence, etc. in order ______________
to make smth happen (v)
5) to do smth that produces an effect or ______________
change in smth or in someone’s situation (v)

190
para 3 and 4
6) to officially decide smth (v) ______________
7) a set of ideas, rules, or beliefs from which ______________
smth is developed, or on which decisions are
based (n)
8) to completely stop smth by making it il- ______________
legal (v)
9) to control an activity or process, especially ______________
by rules (v)
10) the crime of deceiving people in order to ______________
gain smth such as money or goods (n)
para 5 and 6
11) protection from bad things that could ______________
happen to you (n)
12) happening or existing now (adj) ______________
13) money that you receive as payment from ______________
the organisation you work for, usually paid to
you every month (n)
14) to force people to accept smth (v) ______________
15) to add smth, especially to what you earn, ______________
in order to increase it to an acceptable level
(v)
para 7 and 8
16) a change in a price, amount, level, etc. (n) ______________
17) to make small changes to smth in order ______________
to improve it and make it more suitable or
effective (v)
18) a charge or payment that is set according ______________
to a standard scale (n)
19) the total amount of money that a govern- ______________
ment, organisation, or person spends during a
particular period of time (n)
para 9 and 10
20) done without any other people, actions, ______________
processes, etc. coming between (adj)
21) considering or relating to the whole of a ______________
thing or group, rather than to details or spe-
cific cases or parts (adv)
22) with the result that smth else happens ______________
(adv)
23) to seem important, worrying and difficult ______________
to avoid (v)
24) having a strong influence or effect (adj) ______________

191
4. Use the words from exercise 3 to fill in the gaps.
para 1 and 2
1. The country cannot meet the __________ on its £80 billion
foreign debt.
2. Trading has been adversely __________ by the downturn in
consumer spending.
3. The government’s __________ concern is with preventing
road accidents.
4. Environmental groups are __________ pressure on the gov-
ernment to tighten pollution laws.
5. There are no firm __________ rules about the proper
approach that a company should adopt.
para 3 and 4
1. The bill would have __________ several types of guns.
2. It is for government __________ on behalf of the commu-
nity, to set the standards and the environmental goals.
3. It may, however, be difficult __________ what the basic
imbalance is.
4. We have to act within the existing legal __________.
5. Yet every year, some £50 million is lost through cheque
__________.
para 5 and 6
1. The government __________ a ban on the sale of ivory.
2. In its __________ state, the car is worth £1000.
3. Kia __________ her regular salary by tutoring in the eve-
nings.
4. This insurance plan offers your family financial __________
in the event of your death.
5. Parker’s annual __________ is just under $48 000.
para 7 and 8
1. Presumably such marked __________ are connected with
the prevailing weather conditions.
2. Thus, if interest __________ are expected to fall, market
participants will be unwilling to sell bills outright to the
Bank.
3. The significant changes initiated in 1976 have led to a reduc-
tion in government __________.
4. The regulations can only be __________ by a special com-
mittee.

192
para 9 and 10
1. In studying housing issues, questions of tenure __________
large.
2. Educational level has a sizeable _____________ effect on
income.
3. _____________, part-timers work in low-status, low-wage
occupations.
4. The politicians and bureaucrats at this level can have a
__________ effect upon the local people, and can obstruct,
alter or intensify central government actions.
5. He became a citizen in 1978, __________ gaining the right
to vote.

5. Match the term with its definition.


1) social benefits a) a noncompensatory government pay-
ment to individuals, as for welfare or so-
cial security benefits
2) residential areas b) cash transfers to those who lose their
jobs and actively seek employment
3) safety regula- c) a part of a town or city where people
tions live, but there are no shops or offices
4) transfer pay- d) the price of one unit of good x mea-
ments sured not in currency, but in the number
of units of good y that must be sacrificed
to acquire good x
5) unemployment e) a set of rules which prevent employees
benefits from being injured at their working places
6) interest pay- f) benefits under social security intended
ments to provide basic, minimum support to
families faced with the loss of a principal
wage earner
7) government bor- g) an institution that oversees the banking
rowing system and regulates the money supply
8) business cycle h) the amount of funds borrowed by the
government in the financial markets
9) the central bank i) recurring fluctuations in economic ac-
tivity consisting of recession and recovery
and growth and decline
10) relative prices j) income received from lending money

193
6. Fill in the gaps with the prepositions (where necessary).
between  • on • in • from
against  • with • for • by
1. Locus believes Microsoft has underestimated the importance
of open networking ___ the marketplace.
2. Another set of official statistics showed the price of industrial
products was slightly higher ___ last month, although not
high enough to affect ___ forecasts of a continuing decline
___ consumer inflation.
3. The administration has expressed satisfaction ___ the pack-
age which includes real cuts of $4.6 billion and $6 billion
___ taxes.
4. The government’s annual report ___ the production costs of
electricity in France has confirmed that nuclear-powered sta-
tions are the most cost-effective means of producing electri­
city provided they operate ___ at least 6000 hours per year.
5. They are prohibited ___ revealing details about the candi-
dates.
6. A council has been asked to give permission ___ the devel-
opment ___ return for money for recreational facilities.
7. We lease rather than buy ___ hire purchase so we can match
the payments ___ equipment to its lifetime and its earnings.
8. Her rapid rise to the top is well deserved and she does not
suffer ___ having political labels stuck ___ her.
9. Nigel Lawson, ___ contrast, saw the EMS as a potential
brake ___ violent fluctuations ___ the rate of exchange.
10. The considerable price inflation ___ these two dates, for
example, had an effect ___ the figures.

7. Choose the correct letter (a, b or c).


1. For example, the long-term programme of economic stabili-
zation recommended that there should be a shift away from
___direct taxation towards direct taxation.
a) un b) in c) dis
2. Although this does not actually prohibit the possession of
weapons whose use is ___legal, it is clearly moving in that
direction.
a) in b) un c) il

194
3. Some are rushed in as emergency cases leaving bills ___paid,
rent in arrears and families in financial hardship.
a) in b) un c) dis
4. This method of solving the model is therefore called the
method of ___determined coefficients.
a) in b) un c) non
5. As the British moved to create a new regime for their air-
lines after the war, the outstanding ___resolved issue from
the Chicago conference remained: the need for an Anglo-
American air transport agreement.
a) in b) non c) un
6. While profit is the dominant goal for profit-orientated organ-
isations the dominant goal of ___profit organisations is to
render services to society.
a) in b) dis c) non
7. These were overtaken by the Government’s plans to ___
regulate the British securities market, announced in 1983,
which were to lead to Big Bang.
a) de b) non c) dis
8. This would be an ___appropriate measure for most purposes
as most of the effects of a 10 per cent inflation rate would
still apply.
a) in b) un c) ab
9. The two most basic benefits are income support and ___
employment benefit.
a) in b) un c) dis
10. The current scenario of an ageing population suggests that
we can expect an increase in ___ability prevalence as the
elderly population itself ages.
a) un b) dis c) under
Text B
What should governments do?
Why should governments intervene in a market economy?
Adam Smith, the father of economics, argued in his 1776 classic,
The Wealth of Nations, that people pursuing their own interests
are led as if by “an invisible hand” to promote the interests of
society. If there is an invisible hand, if markets allocate resources
efficiently so that consumers’ wants are satis­fied at minimum
cost, why should governments intervene in the economy at all?

195
The general argument for government intervention is market
failure. Sometimes markets do not allocate resources efficiently,
and government intervention may improve economic perfor-
mance. Economic theory identifies six broad types of market
failure, which we describe below.
1. Public Goods
Most of the goods supplied by businesses and demanded by
consumers are private goods.
A private good is a good that, if consumed by one person, can-
not be consumed by another.
Ice cream is a private good. When you eat your ice cream
cone, your friend doesn’t get to consume it. Your clothes are also
private goods. When you wear them, everyone else is pre­cluded
from wearing them at the same time.
But there are goods we can all consume simultaneously, with-
out anyone’s consumption reducing anyone else’s. These are
called public goods.
A public good is a good that, even if it is consumed by one
person, is still available for consumption by others.
Clean air is a public good. So is national defence, or public
safety. If the armed forces are protecting the country from dan-
ger, your being safe in no way prevents anyone else from being
safe.
It is no coincidence that most public goods are not provided
in private markets. Because of the free-rider problem, private
markets have trouble ensuring that the right amount of a public
good will be produced. A free-rider is someone who gets to con-
sume a good that is costly to produce without paying for it. The
free-rider problem applies particularly to public goods because,
if anyone were to buy the good, it would then be available for
everyone else to consume.
To get around the free-rider problem, the country has to find
some way of deciding together how much to spend on defence.
Governments are set up to make such collective decisions. Many
of the goods provided by the government are in fact public
goods. National defence and police services are certainly public
goods. National parks are a mixed case, since the views in the
parks are a public good, at least until congestion sets in, but use
of the eating facilities is not.

196
It may seem from this discussion that the government should
produce public goods and should not produce any other goods.
Neither conclusion is correct. The government does not have to
produce public goods; it only has to specify how much of each
should be produced. It may rely on private contractors to do the
actual production, as it does, say, with regard to defence equip-
ment. Indeed, it used to be common for countries to have private
con­tractors provide armies on a commercial basis. It is increas-
ingly common for municipalities to hire private contractors to
remove the rubbish.
On the other hand, there is no general economic reason why
governments should not produce private goods. There are gov-
ernment-owned firms or nationalized industries in most coun-
tries. Some government enterprises appear to be commercially
successful and efficient. None the less, experience suggests that
in many circumstances the government is less likely to produce
efficiently than is the private sector.
2. Externalities
Markets work well when the price of a good equals society’s
cost of producing that good and when the value of the good to
the buyer is equal to the benefit of the good to society. How-
ever, the costs and benefits of production are sometimes not fully
reflected in market prices.
Consider the problem of pollution. A firm produces chemicals
and discharges the waste into a lake. The discharge pollutes the
local water supply, kills fish and birds, and creates an offensive
smell. These adverse side-effects represent costs to society of pro-
ducing the chemical, and they should accordingly be reflected in
its market price — but they may not be. Unless the chemical
company is charged for the damages caused by its pollution, the
market price of its output will understate the true cost of pro-
duction to society. In this case chemical.
An externality exists when the production or consumption of
a good directly affects businesses or consumers not involved in
buying and selling it and when those spillover effects are not
fully reflected in market prices.
Externalities are not all negative. The home­owner who
repaints her house provides spill­over benefits for the neighbours;
they no longer have to look at a peeling or dilapidated house. In

197
all externalities, there exists something that affects firms’ costs or
consumers’ welfare (such as pollution or views of newly painted
houses) but is not traded in a market. Economists often speak of
externalities as caused by “missing markets”.
When externalities are present, market prices do not reflect
all the social costs and benefits of the production of a good. Gov-
ernment intervention may improve the functioning of the econ-
omy, for example by requiring firms to treat their waste prod-
ucts in certain ways before dumping them. Since externalities
involve missing markets, they can also be handled in principle by
market-type solutions. The govern­ment might charge firms (an
estimate of) the damages their pollution causes, or might permit
a certain amount of total pollution and allow firms to buy and
sell rights to pollute.
The presence of externalities can provide the justification
for a number of government activities besides pollution control.
Examples range from control of broadcasting (inter­ference is an
externality) to various restrictions on land use.
David Begg. Economics. — 3rd ed. — McGraw-Hill Book Company, 1991. —
P. 50.

Target vocabulary of text B


adverse (adj) = not good or favourable
They fear it could have an adverse effect on
global financial markets.
coincidence (n) = when two things happen at the same time,
in the same place, or to the same people in a
way that seems surprising or unusual
Is it just a coincidence that the wife of the man
who ran the competition won the first prize?
consume (v) = to use time, energy, goods, etc.
A smaller vehicle will consume less fuel.
contractor (n) = a person or company that agrees to do work
or provide goods for another company
But the actual letter appointing the consul-
tant and the actual payment of the fee will
be just like any other contractor.
dilapidated (adj) = a dilapidated building, vehicle, etc. is old
and in very bad condition
The hotel we stayed in was really dilapidated.

198
enterprise (n) = an organisation, especially a business, or a
difficult and important plan, especially one
that will earn money
Don’t forget this is a commercial enterprise —
we’re here to make money.
facilities (n) = the buildings, equipment and services pro-
vided for a particular purpose
The hotel has its own pool and leisure facili-
ties.
specify (v) = to state smth in an exact and detailed way
Payments will be made for a specified num-
ber of months.
spillover (n) = the effect that one situation or problem has
on another situation
The weak European economy will have a
spillover effect on the US dollar.

1. Read text B and do the tasks/answer the questions below.


1. What is the distinction between a private good and a public
good? Give the examples of the goods of these types.
2. Explain the essence of the free-rider problem.
3. Should the government produce only public goods? Why?
4. What are the two types of externalities? Give some exam-
ples.
5. Do firms and consumers make fully informed decisions in the
free market economy?

2. Decide whether the following statements are True or False


according to text B.
1. Thanks to “an invisible hand”, markets always allocate
resources efficiently. ___
2. There are no public goods in modern market economies. ___
3. A free-rider is someone who consumes a good after paying
for it. ___
4. There are two types of externalities: positive and negative.
___
5. Since modern economies are so complex, firms are fully in­­
formed about the consequences of their decisions. ___

199
3. Match the word with its definition.
1) discharge (v) a) to deal with a situation or problem by be-
having in a particular way and making par-
ticular decisions
2) ensure (v) b) to need smth
3) handle (v) c) to send out gas, liquid, smoke, etc., or to
allow it to escape
4) identify (v) d) to continue doing an activity or trying to
achieve smth over a long period of time
5) preclude (v) e) to recognise a problem, need, fact, etc. and
to show that it exists
6) promote (v) f) to help smth to develop or increase
7) pursue (v) g) to make certain that smth will happen
properly
8) require (v) h) to prevent smth or make smth impossible

4. Fill in the gaps using the words from exercise 3.


1. A meeting _____ trade between Taiwan and the UK takes
place this Sunday.
2. Most customers were satisfied with the way their complaints
were _____.
3. The research will be used _____ training needs.
4. She plans ______ a career in politics.
5. Rainwater collects here and then ______ into the river Ken-
nett.
6. Schools should recognise their responsibility _______ that
young people understand how and why trade unions work.
7. What’s _______ is a complete reorganisation of the system.
8. Age alone will not _______ him from standing as a candi-
date.

5. Fill in the gaps using the prepositions/particles from the box


below if necessary.
on  • for • at • in • of • up
1. Knowing the problems and the opportunities that your tools
offer, you design maximum effect ___ minimum effort.

200
2. The effects ___ the comprehensive policies of the 1960s,
reforms of the 1970s and practices of the 1970s and 1980s
are available ___ serious discussion only ___ the 1990s.
3. For what reasons has the price ___ fish from South West
England risen sharply?
4. The decline ___ the price of oil ___ nominal as well as real
terms made this clearly less of a problem.
5. The British government has set ___ an inter-departmental
committee to review the future of forestry in the country.
6. But ___ the next three to four years at least managers will
have to rely more ___ their judgment than ___ hard data in
deciding what to charge ___ their services.
7. There was clearly a rising consumption ___ gin which was
equally clearly a capitalist product.
8. American politicians were turning to the academic commu-
nity to provide the intellectual justification ___ confronting
Soviet power.
9. Population growth and restrictions ___ settling forest land
were other causes ___ this fragmentation.

6. Use the following terms and expressions to complete the


sentences.
public interest  •  market failure  •  public good
private good  •  commercial basis  • side-effect
water supply
1. In business life, we are suspicious of monopoly, and com-
petition in an open market place is believed to best serve
________________.
2. ________________ is a good that, if consumed by one per-
son, cannot be consumed by another person.
3. In general, public law should ensure that the legal frame-
work within which government operated provided an effec-
tive and equitable structure for the implementation of
________________, as expressed in the positive functions
of the state.
4. An unexpected ________________ of Cromer’s reform of
the prison system was to make conditions inside prison bet-
ter for the poor than they often were outside.

201
5. We use the term ________________ to cover all the cir-
cumstances in which equilibrium in free unregulated mar-
kets (i.e., markets not subject to direct price or quantity reg-
ulation by the government) will fail to achieve an efficient
allocation.
6. Although the corporation had power to cut off ________ in the
event of non-payment of rates it had not threatened to do so.
7. A Swiss company, Batrec AG, has become the world’s
first company to begin recycling domestic batteries on
________________.

VOCABULARY

1. Look at the following pair of words, spot the difference and


do the task.
ALTERNATE ≠ ALTERNATIVE

alternate — if smth happens alternative — an alternative


on alternate days, weeks, etc., idea, plan, etc. is different
it happens on one day, etc. and from the one you have and can
not the next, and continues in be used instead
this pattern Have you any alternative sug-
The service runs on alternate gestions?
days.
Choose the correct word to complete the sentences.
1. _____ forms of monetary union, involving less than com-
plete integration and the retention of national currencies,
have been rejected as incompatible with the objectives of the
Single European Act.
2. In this instance Bristol & West Home Contents Insurance
provides an ______ way to insure your belongings.
3. They’re currently working ______ four and five day weeks.
4. They should consider ______ courses of action which might
remove the cause of the request.
5. Private cars are banned from the city on ______ days.
6. This strategy was an ______ to trading fungible contracts.
202
2. Look through the two sets of sentences and decide which
word alternate or alternative should be inserted to make these
sentences complete.
1. An __________ course would be to introduce general legis-
lation to protect the public interest when an essential service
is threatened.
2. A merger, Nicholson added, is a more viable __________
to keeping the brewery open than the planned management
buy-out.
3. Two or three European car makers — possibly including
Peugeot of France — are still understood to be discussing
__________ rescue packages with Jaguar.
The missing word is _______________
1. Table 8.1 gives a picture of the relative importance of these
different sources of revenue in __________ years of the
period 1979-87.
2. The service will initially run __________ days, increasing
eventually to daily sailings in both directions.
3. We accept that shops or factories be forbidden in some
zones and not others and that parking be prohibited on
__________ sides of the same street on alternate days.
The missing word is _______________

3. Match the words in the box on the left with the words that
they collocate with on the right.
1) social a) economy
2) legal b) payments
3) capitalist c) benefits
4) safety d) failure
5) transfer e) cycle
6) business f) framework
7) market g) regulations

4. Use the collocations from exercise 3 to complete the


sentences.
1. This section of the labour market is also virtually non-
unionized, providing for almost no representation on pay and
working conditions, or health and ______________.

203
2. It appeared that output and employment in one period were
correlated with lagged values of these variables over the
phase of ________________.
3. The classic example of _____________ is environmental
protection.
4. Over the 1950s and 1960s direct government expenditure
on goods and services averaged 20 per cent of GDP to
which has to be added a further 15 per cent in respect of
______________.
5. Economic life, more generally, was to be regulated through
a “socialist market”, but with an improved system of
________________ to protect the disadvantaged from its
worst effects.
6. But the economy is still more important than psychology:
in Russia, we already have _______________, which makes
the Russian language essential.
7. The lack of a stable _________________, the low fixed
price of oil and insecure borders with other former Soviet
republics encouraged illegal exports for resale at free market
prices.

5. Translate the sentences from Russian into English using the


collocations from exercise 3.
1. Несостоятельность рынка заключается в его неспособ-
ности обеспечить производство общественных благ и
справедливого распределения дохода.
2. Трансфертные платежи — это денежные выплаты из
государственного бюджета населению и частным пред-
принимателям, не связанные с выполнением ими госу-
дарственной службы, а осуществляемые в порядке пере-
распределения средств в пользу более нуждающихся в
них граждан через бюджет.
3. Помимо этого, власти на 12% увеличат расходы на обра-
зование, создание новых рабочих мест, здравоохранение,
пенсионное и прочее социальное обеспечение.
4. Капиталистическая экономика должна расти и разви-
ваться с накопления, с прибавочной стоимости.
5. Создана законодательная основа для партнерства труда и
капитала в условиях рыночных отношений.

204
6. С момента зачисления вас в качестве практикантов на
рабочие места на вас распространяются правила охраны
труда и правила внутреннего распорядка, действующие
в организации.
7. В начале октября Алексей Кудрин предупреждал, что
мировой экономический цикл предполагает замедление
мировой экономики в 2009—2010 гг.
6. Find synonyms among the following words.
profit  •  to forbid  •  significant  •  company
benefit  •  to guarantee  •  rules  •  to prohibit
to modify  •  direct  •  profound  •  to pursue
failure  •  enterprise  •  adverse  •  to handle
to ensure  •  negative  •  to control  •  regulations
to change  •  straight  •  to follow  •  shortcoming
1) __________ — _________ 7) __________ — _________
2) __________ — _________ 8) __________ — _________
3) __________ — _________ 9) __________ — _________
4) __________ — _________ 10) _________ — _________
5) __________ — _________ 11) _________ — _________
6) __________ — _________ 12) _________ — _________

GRAMMAR
1. Read the descriptions (A, B and C) of the three tenses and
decide which of them is Past Simple, Present Perfect and
Present Perfect Continuous.
A _____________ B ______________ C ______________
Used for: Used for: Used for:
• recently com- • actions started in • completed past
pleted actions the past and con- actions
• changes which tinuing up to the • past habits or
have happened present states
• completed ac- • past actions of • past actions
tions connected to certain duration which happened
the present having visible ef- one immediately
• emphasis on fects in the present after another
number

205
2. Match the time expressions with their tenses.
just  •  yesterday  •  recently  •  last week
since  •  ago  •  already  •  for
Past Simple Present Perfect
Present Perfect
Continuous
________________ ________________ ________________
________________ ________________ ________________
________________ ________________ ________________

3. Fill in with Past Simple, Present Perfect or Present Perfect


Continuous.
1. Over the last decade, the upper disposable income limit ___
(to rise) by about 50 per cent, but earnings ____________
(to increase) by 135 per cent and prices by 93 per cent.
2. This year we ____________ (to raise) over £34 000 for
Christian Aid.
3. The costs of entering the housing market ____________ (to
rise) substantially this year.
4. Grain output ____________ (to rise) by 6%, and wheat was
in surplus for the first time in four years.
5. Insurance premiums for works travelling to and from Paris
____________ (to rise) sharply over recent years, often rep-
resenting more than a third of the total cost of an exhibition.
6. We ____________ (to raise) the basic single person’s tax
allowance by 27 per cent more than would be needed to keep
pace with inflation.
7. Saab similarly sells relatively few cars in the US, though its
numbers ____________ (to rise) dramatically.
8. The problem is that high interest rates ____________ (to
raise) financial burdens directly for weaker firms that are
still net debtors.
9. The salaries of senior directors ____________ (to rise) by
between 20 per cent and 30 per cent over the last year and
the trend shows little sign of slowing.
10. In most areas there are simply not the resources to meet the
expectations that the 1970 Act ____________ (to raise).

206
11. Expenditure on the police ____________ (to rise) by 55%
in real terms over the same period, and policy pay showed a
29% real rise.

4. Choose the correct letter (a, b or c).


1. The demand for buses ___ dramatically since the late 1970s
and this process has been accelerated by the ending of both
the bus grant and revenue support for bus services.
a) dropped b) has been dropping c) has dropped
2. Recently movements in the housing market ___ wide dis-
parities between the value of property in different parts of
Britain.
a) have been producing b) have produced c) produced
3. The amazing leap took his salary to £910 319, when his
Kalon company profits ___ by 57 per cent.
a) increased b) have increased c) have been increasing
4. The main argument or basic responses you ___ for are short
statements which represent a stance or attitude to the ques-
tion.
a) searched b) have searched c) have been searching
5. Prices ___ relatively stable and have increased by about
10 per cent a year, according to John Morton Morris of
Hazlitt Gooden and Fox.
a) remained b) have remained c) have been remaining
6. Critics of the firm as a cooperative family ___ a more pen-
etrating assessment of Japanese industrial relations which
shows them to be less unique than they at first appear.
a) have produced b) have been producing c) produced
7. Since the publication in 1982 of the Barclay Report, Social
Workers: Their Role and Tasks, many social services depart-
ments in the UK ___ for ways of putting into practice ideas
about community-based social work.
a) have been searching b) have searched c) searched
8. Let me yet again express the view that Lord Cullen and his
staff ___ a document of world-class significance — in, given
the circumstances, a remarkably short time.
a) produced b) have been producing c) have produced
9. Instead, lending from Japan ___ by $19 billion last year,
whilst lending from Britain increased by $18 billion.
a) has been falling b) fell c) has fallen

207
10. Over the last decade motor traffic ___ by 49 per cent overall.
a) increased b) has increased c) has been increasing

SKILLS FOCUS
Reading
1. Read the text Education as a public good, choose the best
sentence from the list below to fill in each of the gaps.
Education as a public good
It is often argued that education is a public good, and (1) ____.
Economists define a public good as satisfying up to three condi-
tions: (1) indivisibility, (2) nonrivalry, and (3) nonexcludabil-
ity. Indivisibility can be illustrated by the example of a bridge
over a river, which can be used by anyone without extra costs
being incurred. Nonrivalry is virtually the same, except (2) ____
that are not reduced, rather than the amount of the good. For
example, the good of hiking in the Grand Canyon could be, to a
large extent, indivisible, in that many millions of people could do
it without thereby hindering others also doing it. However, the
greater the number of people who hike, the lower the enjoyment
of those who wish to be in an empty wilderness — in (3) ____.
Finally, nonexcludability pertains when it is not feasible to
exclude any individual members of the group from consuming
the good. The classic economic example is of a lighthouse.
It would seem (4) ____. It is clearly not nonexcludable, for
a particular child can be excluded from a classroom or any other
educational opportunity. The situation is similar for nonrivalry
and indivisibility, for it is the case that if some children have the
attention of an excellent teacher, then that teacher has less time
for others, who therefore can obtain less benefit from the teacher.
Indeed, it seems likely (5) _____ that reformers wanted govern-
ment to intervene in education — to alleviate this inequality of
access.
However, if it is not a public good in this sense, education
does seem likely to have neighborhood effects, or externalities —
defined by economists as (6) ____. That is, there are likely to be
benefits to the community or society at large (if there are edu-
cational opportunities available) in terms of equality of oppor-
tunity, social cohesion, democratic benefits, law and order, eco-
208
nomic growth, and so on. Crucially, these externalities are likely
to exhibit a large degree of nonexclusion (it is costly to exclude
people from these benefits or costs) and there are usually con-
siderations relating to nonrivalry or indivisibility (the external
benefits or costs are likely to be available to all with near zero
marginal costs). For example, a society lacking in equality of
opportunity could be a dissatisfied, lawless society. One could
exclude oneself from the problems of such a society, but only
at the expense of burglar alarms, bodyguards, high fences, or by
restricting one’s movements. It is in this sense (7) _____; and it
is in this sense that it could legitimately be argued (8) _____.
From these considerations, the discussion would need to focus
on the perceived effectiveness, efficiency, and equity of public
education, and the presence, or lack, of private initiatives. These
concerns bring us squarely back to the major reasons adduced
earlier for questioning the role of government in education.
http://www.answers.com/topic/the-changing-role-of-government-and-
education#ixzz2FdAj006K

A which case the good is not nonrival


B that it was precisely because of this nonrivalry or indivis-
ibility
C that this implies a particular role for government
D that education satisfies none of these conditions
E when an activity undertaken by one party directly effects
another party’s utility
F that education needs government intervention to ensure its
provision and obtain these externalities
G that it is the benefits available to every member of the public
H that education could be referred to as a public good

2. Read more about government involvement into American


economy in Reading file: Unit 7.

Speaking
A
Should governments encourage their citizens to marry?
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the
two economists: Ron Huskins and Stephanie Coontz. They
209
are discussing the question “Should governments encourage
their citizens to marry?” The brief description of the problem
is given below:
This debate has so far been marked not merely by the cour-
tesy and sharpness of Ron Huskins and Stephanie Coontz, but
by the broad areas of agreement between them. Both believe
that, on balance, marriage is a good thing. Both seem to feel that
a host of outcomes would be better if children were raised by
their biological parents in stable, happy marriages. Both agree
that disincentives to marriage written, inadvertently, into tax
codes ought to be eliminated. But perhaps most important, nei-
ther believes that marriage in and of itself is a magic bullet to
cure all social woes.
The main area of disagreement concerns the causes and effects
of America’s declining marriage rate. In her rebuttal, Ms. Coontz
raised an interesting logical concern: that studies showing soci-
etal benefits accruing to marriage may be mistaking selection
effects for causation effects. Married people, she writes, “are hap-
pier, healthier, more economically self-sufficient and less prone
to crime than the unmarried”. But that may not be a result of
entering into marriage; it may be because people who are already
happier, healthier, wealthier and more law-abiding are likelier
than those who are not to enter into marriage.
Your task is to visit http://www.economist.com/debate/days/
view/914 and do the following:
1. Summarise the viewpoints of the debate participants. Use
the speech patterns given below.
a) Ron Huskins is a … He is defending the idea of … His argu-
ments in favour of the statement are …
b) Stephanie Coontz is a … She is against the idea of …
because … Her arguments are …

2. Speak about the results of the debate.

3. Tell your partner about your own viewpoint on the problem


discussed.
B Discuss the following questions with the partner.
1. Is marriage different today than it was a hundred years
ago?
210
2. Why are fewer and fewer people getting married?
3. Do you think people should agree on a marriage contract
before they get married?
4. What would the world be like if there was no marriage?
5. Why do so many marriages go wrong?
6. Who has the happiest marriage you know? Why do you
think so?

Writing
Render the following text using the plan:
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.
Роль государства в рыночной экономике
Роль государства в рыночной экономике проявляется
через его функции. Деятельность государства направлена на
достижение генеральной цели — блага человека, его благопо-
лучия, максимальной правовой и социальной защищенности
личности.
Каждая функция государства имеет предметно-политиче-
скую характеристику. Ее содержание показывает, что явля-
ется предметом деятельности государства, какие средства им
используются для достижения той или иной цели.
Центральный вопрос государства — проблема разработки
стратегии социально-экономического развития страны с чет-
ким определением конечных целей. Государство инициирует
разработку такой стратегии и несет ответственность за ее
направленность и конкретную реализацию.
Одна из важнейших функций — стабилизация экономики
и стимулирование сбалансированного экономического роста.
Системой определенных мер в области бюджетной, денежно-
кредитной и фискальной политики государство пытается
преодолеть кризисные явления, снизить инфляцию. В этих
целях оно стимулирует совокупный спрос на товары, инве-
стиции, регулирует банковский процент и налоговые ставки.
В общем государство для сглаживания циклических колеба-
ний в период спада экономики проводит политику активи-
211
зации всех хозяйственных процессов, а в период ее подъема
стремится сдерживать деловую активность.
Особо следует выделить функцию обеспечения занятости.
Известно, что рыночная экономика не обеспечивает полной
занятости населения. В ней неизбежна вынужденная безра-
ботица. Поэтому государство стремится обеспечить полную
занятость трудоспособного населения, регулирует рынок
рабочей силы, для чего создает соответствующие службы
занятости, организует новые рабочие места, переподготовку
и переквалификацию рабочей силы и т.д.
В сферу деятельности государства входит и регулиро-
вание цен. Значимость данной функции велика, поскольку
динамика и структура цен объективно отражают состояние
экономики. В свою очередь, цены активно влияют на струк-
туру хозяйства, инвестиционный процесс, устойчивость
национальной валюты, социальную атмосферу. В связи
с этим государство обязано влиять на цены, используя раз-
личные методы воздействия, проводить определенную поли-
тику ценообразования. Например, в любой стране имеется
множество товаров и услуг, цены на которые определяются
государством: тарифы на железнодорожные перевозки,
электроэнергию и др. Зачастую государство предоставляет
ценовые субсидии, специальные доплаты производителям
социально значимых товаров, устанавливает так называемые
лимитные цены, определяя только их верхние границы.
Одной из основных функций государства является обе-
спечение правовой базы деятельности хозяйствующих
субъектов. Государство в лице его органов разрабатывает
и при­­нимает законодательные акты, регулирующие эконо-
мическую деятельность в стране и ставящие экономических
субъектов в равные условия. Оно определяет права и формы
собственности, правила ведения предпринимательской дея-
тельности, устанавливает условия заключения и выполне-
ния контрактов, взаимоотношений профсоюзов и нанимате-
лей, предупреждает злоупотребления, обеспечивает защиту
потребителя. Для контроля за соблюдением законов созда-
ются специальные органы, принимающие действенные меры
к нарушителям.
http://www.be5.biz/ekonomika/mlev/22.htm

212
Unit 8
Micro- and macroeconomics
Learning outcomes
After studying this unit you should be able to:
1) distinguish between macro- and microeconomics;
2) calculate the basis macroeconomic indexes: GDP and GNP;
3) use the active vocabulary of the unit in speaking and writing;
4) read for different purposes (skimming, scanning);
5) use grammar effectively (tenses: Past Simple, Past Continuous,
Past Perfect).

Lead-in

1. Choose either microeconomics or macroeconomics to make


the sentences complete.
1. ____________ is a branch of economics dealing with the
performance, structure, behaviour, and decision-making of
an economy as a whole, rather than individual markets.
2. ____________ is a branch of economics that studies the
behaviour of individual households and firms in making deci-
sions on the allocation of limited resources.
3. _______ looks also at price inflation and unemployment.
4. Significant fields of study in ____________ include general
equilibrium, markets under asymmetric information, choice
under uncertainty.
5. Gross Domestic Product, standards of living and the choices
of larger groups like nations are studied in ______________.
6. One of the goals of __________ is to analyse market mecha-
nisms that establish relative prices amongst goods and ser-
vices and allocation of limited resources amongst many alter-
native uses.

213
2. Divide the words given in the box into the two groups:
microeconomics and macroeconomics.
GDP  •  quantity supplied  •  price indices
market failure  •  unemployment rates
individual households
Microeconomics Macroeconomics
1) ______________________ 1) ______________________
2) ______________________ 2) ______________________
3) ______________________ 3) ______________________

TOPICS

Text A
Microeconomics and macroeconomics
1 Many economists specialise in a particular branch of the
subject. Labour economics deals with problem of the labour mar-
ket as viewed by firms, workers, and society as a whole. Urban
economics deals with city problems: land use, transport, conges-
tion, and housing. How­ever, we need not classify branches of
econo­mics according to the area of economic life in which we
ask the standard questions what, how, and for whom. We can
also classify branches of economics according to the approach or
methodology that is used. The very broad division of approaches
into microeconomic and macroeconomic cuts across the large
number of subject groupings cited above.
2 Microeconomic analysis offers a detailed treatment of indi-
vidual decisions about particular commodities. For example, we
might study why individual households prefer cars to bicycles
and how producers decide whether to produce cars or bicycles.
We can then aggregate the behaviour of all households and all
firms to discuss total car purchases and total car production.
Within a market economy we can discuss the market for cars.
Comparing this with the market for bicycles, we may be able to
explain the relative price of cars and bicycles and the relative
output of these two goods. The sophisticated branch of micro-
economics known as general equilibrium theory extends this
approach to its logical conclusion. It studies simultaneously

214
every market for every com­modity. From this it is hoped that
we can understand the complete pattern of con­sumption, pro-
duction, and exchange in the whole economy at a point in time.
3 If you think this sounds very complicated you are cor-
rect. It is. For many purposes, the analysis becomes so compli-
cated that we tend to lose track of the phenomena in which we
were interested. The interesting task for econo­mics, a task that
retains an element of art in economic science, is to devise judi-
cious simpli­fications which keep the analysis manageable with-
out distorting reality too much. It is here that microeconomists
and macroeconomists proceed down different avenues. Micro-
economists tend to offer a detailed treatment of one aspect of
economic behaviour but ignore interactions with the rest of the
economy in order to preserve the simplicity of the analysis. A
microeconomic analysis of miners’ wages would emphasise the
characteristics of miners and the ability of mine owners to pay.
It would largely neglect the chain of indirect effects to which a
rise in miners’ wages might give rise. For example, car workers
might use the precedent of the miners’ pay increase to secure
higher wages in the car industry, thus being able to afford larger
houses which burned more coal in heating systems. When micro-
economic analysis ignores such indirectly in­duced effects it is
said to be partial analysis.
4 In some instances, indirect effects may not be too important
and it will make sense for economists to devote their efforts to
very detailed analyses of particular industries or activities. In
other circumstances, the indirect effects are too important to be
swept under the carpet and an alternative simplification must
be found.
5 Macroeconomics emphasises the interactions in the econ-
omy as a whole. It deliberately simplifies the individual building
blocks of the analysis in order to retain a manageable analysis
of the complete interaction of the economy. For example, mac-
roeconomists typically do not worry about the breakdown of
consumer goods into cars, bicycles, televisions, and calculators.
6 They prefer to treat them all as a single bundle called “con-
sumer goods” because they are more interested in studying the
interaction between households’ purchases of consumer goods
and firms’ decisions about purchases of machinery and buildings.

215
7 Because these macroeconomic concepts are intended to
refer to the economy as a whole, they tend to receive more cov-
erage on television and in the newspapers than microeconomic
concepts, which are chiefly of interest to those who belong to the
specific group in question. To give an idea of the building blocks
of macroeconomics, we introduce three concepts which you have
probably read about in the newspapers or seen discussed on tele-
vision.
Gross domestic product (GDP) is the value of all goods and
services produced in the economy in a given period such as a
year.
GDP is the basic measure of the total output of goods and
services in the economy.
8 The aggregate price level is a measure of the average level
of prices of goods and services in the economy, relative to their
prices at some fixed date in the past.
9 There is no reason why the prices of different goods should
always move in line with one another. The aggregate price level
tells us what is happening to prices on average. When the price
level is rising, we say that the economy is experiencing inflation.
10 The unemployment rate is the percentage of the labour
force without a job.
By the labour force we mean those people of working age who
in principle would like to work if a suitable job were available.
Some of the landed gentry are of working age but have no inten-
tion of looking for work. They are not in the labour force and
should not be counted as unemployed.
11 Already we can see two themes of modern macroeconomic
analysis. Society reveals, both through statements by individu-
als and by the policy pronouncements of politicians who must
submit themselves for re-election by the people, that it does not
like inflation and unemploy­ment. Yet for most of the 1970s eco-
nomic interactions within and between national econo­mies led
to substantial inflation rates. In the 1980s, most Western econo-
mies faced sharp rises in the aggregate unemployment rate. Mac-
roeconomists wish to understand how interactions within the
economy can lead to these outcomes and whether government
policy can make any difference.
David Begg. Economics. — 3rd ed. — McGraw-Hill Book Company, 1991. — P. 11.

216
Target vocabulary of text A
aggregate (v) = to be a particular amount when added to-
gether
Sheila’s earnings from all sources aggregated
£100 000.
breakdown (n) = a list of all the separate parts of smth
Can you give us a breakdown of the figures?
bundle (n) = a number of things that belong or are dealt
with together
bundles of data
congestion (n) = describes roads and towns where there is too
much traffic and movement is made difficult
The (traffic) congestion in the city gets even
worse during the summer.
devise (v) = to plan or invent a new way of doing smth
She devised a method for quicker communi-
cations between offices.
distort (v) = to change a situation from the way it would
naturally be
an expensive subsidy which distorts the market
equilibrium (n) = a balance between different people, groups,
or forces that compete with each other, so
that none is stronger than the others and a
situation is not likely to change suddenly
The government is anxious not to upset the
economic equilibrium.
GDP = (abb.) gross domestic product
GDP is the total value of all goods and ser-
vices produced in a country, in one year, ex-
cept for income received from abroad.
housing (n) = the work of providing houses for people to
live in
public services such as education, housing
and transport
induce (v) = 1) to persuade someone to do smth, espe-
cially smth that does not seem wise
The doctor decided to induce labour.
2) to induce a state or condition means to
cause it
The economic crisis was induced by high oil
prices.

217
preserve (v) = to save smth or someone from being harmed
or destroyed
We must encourage the planting of new trees
and preserve our existing woodlands.
retain (v) = to keep smth or continue to have smth
You have the right to retain possession of the
goods.
specialise (v) = to limit all or most of your study, business,
etc. to a particular subject or activity
Simmons specialised in contract law.

1. a) Use your dictionary to check the correct pronunciation


of the words below.
branch, society, urban, congestion, an aggregate, to aggregate,
equilibrium, simultaneously, judicious, partial, circumstances,
machinery
b) Read text A and answer the questions below.
1. What is the crucial difference between micro- and macroeco-
nomic analysis?
2. Why do macroeconomists consider consumer goods as a sin-
gle bundle?
3. What is GDP? How to calculate this macroeconomic index?
4. What does the aggregate price level show?
5. What is the difference between those individuals who are a
part of the labour force and those who are not?

2. Decide whether the following statements are True or False


according to text A.
1. General equilibrium theory is a crucial branch of macroeco-
nomic theory. ___
2. The main advantage of microeconomic analysis is the sim-
plicity of the equilibrium theory. ___
3. In microeconomics, analysts examine one aspect of economic
behaviour and ignore interactions with the rest of the econ-
omy. ___
4. GDP is the basic measure of the total output in microeco-
nomics. ___
5. People who are of working age and strive for employment
should be considered as the labour force. ___

218
3. Scan through text A and find the words corresponding to
these definitions.
para 1 and 2
1) to regard people or things as belonging to ____________
a particular group because they have similar
qualities (v)
2) the set of methods and principles that you ____________
use when studying a particular subject or do-
ing a particular kind of work (n)
3) a product that is bought and sold (n) ____________
4) the regular way in which smth happens, de- ____________
velops, or is done (n)
para 3 and 4
5) the direction or line taken by smth as it ____________
moves (n)
6) done in a sensible and careful way (adj) ____________
7) to make smth more noticeable (v) ____________
8) an action or official decision that can be used ____________
to give support to later actions or decisions (n)
para 5—9
9) done in a way that is intended or planned ____________
(adv)
10) when smth affects or covers a particular ____________
area or group of things (n)
11) an amount or unit in a measuring system ____________
(n)
para 10 and 11
12) people who belong to a high social class (n) ____________
13) a plan or desire to do smth (n) ____________
14) the final result of a meeting, discussion, ____________
war, etc. — used especially when no one knows
what it will be until it actually happens (n)

4. Use the words from exercise 3 to fill in the gaps. (Change


the form of the words so that they could fit in the sentences.)
1. The Prime Minister _____________ that there are no plans
to raise taxes.
2. UN involvement in the country’s affairs would set a danger-
ous ___________.

219
3. Gombrich’s book is a fine example of a survey, ambitious in
scope, clear-sighted in its emphasis on the history of styles,
and _______ in appraisals of the work of individual artists.
4. The Daily Mail and Daily Mirror reduced __________ of
political, social and economic affairs during the inter-war
period.
5. He couldn’t afford any rumours getting out that he had
___________ destroyed the Hochhauser Company.
6. The rate of growth is ___________ of the increase in output
over a period of time.
7. It is our ___________ to be the number one distributor of
health products.
8. We’ve been developing a new __________ for assessing new
products.
9. Between 1970-71 and 1980-81, per capita income rose by
143 per cent, and the wholesale prices of all ___________
rose by 150 per cent.
10. Since many of these are financed by their Health Service
employers, there is at least prima-facie evidence that these
employers will be looking for __________ in terms of
enhanced performance.
11. Sometimes the analysis is so sophisticated that researchers
loose __________ of the phenomenon under investigation.
12. He earns just under £43 000 a year, enough _________ him
as “rich” under Labour plans.
13. Yet research into contemporary demography and statistics
soon demonstrates that in recent years there have been
dramatic changes in trends and ___________ of marriage,
divorce and cohabitation.
14. The new men were not aping the landed _________; they
were basing their careers upon the infrastructure provided
by urban Britain.

5. Fill in the gaps using the prepositions from the box below
(where necessary).
for  •  to  •  on  • between
into  • in • at • with

220
1. There is often a legitimate but hazy division _________ two
“groups” of older people: the young, recently retired and the
older group.
2. Employees said they would prefer more flexible working
hours _____ a rigid timetable.
3. Its policy was to restrict public expenditure ______ fields
such as housing and to extend home ownership for council
house tenants ______ their Right-to-Buy legislation in the
Housing Act 1980.
4. It is difficult to assess effectiveness _____ a point in time as
environmental changes take place.
5. Lower oil prices also tend to influence _____ the rate of
exploration and exploitation of new oil wells along ______
reduced investment in energy conservation.
6. Toyota in Kentucky and Nissan in Britain emphasise ____
their managers’ open-plan, egalitarian offices.
7. To give you the flexibility you need, one information and
communication company has committed itself _____ provid-
ing answers that make sense ______ your particular needs.
8. As the total area allocated ______ these crops increased, so
the amount of time and land which a family could devote
_____ food crop production for its own consumption often
diminished.
9. Against that competition it is not altogether surprising
that British newspaper readers found better issue coverage
______ British television.
10. This process is known as elaboration, and involves a fruitful
interaction _____ theory and data.

6. Find word partners between the two lists of words (A and B).
A B
equilibrium gentry
indirect output
landed theory
heating goods
consumer age
total effect
working system

221
7. Use the collocations from exercise 6 to complete the sets of
sentences.
Example:
a) This is the upshot equilibrium known as Walras’s
of a more general theory Law.
principle of general …
b) For valuable sur- , see Bliss (1975) and
veys of temporary … Grandmont (1977).
1.
a) After marrying one and another from the
woman from … ______________ people, Cecil’s third
marriage was from
the high ranks of the
peerage.
b) There is a small … and a growing profes-
sional class that make
up perhaps eight per
cent of the popula-
tion.
2.
a) Classic cases of sector, such as Coca-
successful global mar- ______________ Cola, may seem to
keting by companies contradict this view.
in the packaged …
b) And western poli- to fill shops and soak
ticians would prob- up roubles — to con-
ably find themselves tain the shock of a So-
faced with a request viet Big Bang.
for enormous help —
including …
3.
a) The dependency ra- per pensioner, would
tio, that is the number ______________ improve from 2 in
of people of … 1981 to 3 in 2000.
b) Ethnic minority population in
groups account for Britain and about
3.9 per cent of the 10 per cent in
econo­­mically-active … London.

222
4.
a) The oil is used for the with any surplus
factory’s own … ______________ sent for refining.
b) We also desperately – this has been
need to install a safe talked about for
and economical … too many years.
5.
a) The financial needs through the sup-
of the family and the ______________ port he can offer his
demands of a career partner.
directly affect his avail-
ability to his children
and have …
b) Britain’s pursuit of the physical en-
of regional economic vironment of many
policies since the war towns and cities.
encouraged forms of
economic development
to the disadvantaged
regions, have had …
6.
a) Britain had success- from the Congo,
fully negotiated long- ______________ and so had a near
term contracts for … monopoly of ore
supplies.
b) Spanish rules and will be exported
regulations then deter- and what the local
mine what percentage component content
of … will be.

Text B
Distinction between domestic and national:
GDP versus GNP
The distinction between “domestic” and “national” arises
because in practically every country, income generated within
the country is not exactly the same as income received by the
residents of the same country. The reason is that incomes (wages,
rent, interest and profits) are sometimes generated by factors of
production located within one country, but whose owners are

223
residents of another. Consider the case where a United States
multinational firm operating in India remits (sends back) its
profits to the United States. The profit income is generated in
India (it is income resulting from a process of production that
is located in India), but is received by residents in the United
States. Should this income count as part of the income and out-
put of the United States or of India? Consider also a Russian
worker who lives and works in Spain, and sends a large part of
her income to her family in Russia. Should her income count as
part of Spanish or Russian income and output?
The concepts “domestic” and “national” are used to dis-
tinguish between different measures of aggregate output and
income that have been developed to deal with this issue. The
term “domestic” in “gross domestic product” means that the out-
put being measured has been produced by factors of production
located within the boundaries of a country, regardless of whether
these factors of production are owned by residents of the coun-
try or by foreigners. The income represented by the GDP mea-
sure is similarly income generated within the boundaries of the
country, regardless of factor ownership.
By contrast, the term “national” is used in another measure of
aggregate output known as gross national product (GNP). The
term “national” means that the output being measured has been
produced by factors of production owned by residents of a single
country, regardless of the factors’ location within or outside of
the country. The income represented by the GNP measure is
therefore the income of the residents of a country, regardless of
where this income was generated, i.e. regardless of where the fac-
tors of production are located. You may note that the GNP mea-
sure is closer to national income, or the sum of factor incomes
as in the income approach to measuring aggregate output, than
to GDP, because national income includes the income earned
by factors of production of the residents of a country, regard-
less of the location of the factors. In fact, since 1998, the expres-
sion “gross national product”, which had been in use for many
decades, has been replaced by “gross national income” (GNI).
GNI is identical to GNP.
To convert GDP to GNP, we:
• add to GDP the income of domestic residents that is
earned abroad

224
• subtract from GDP the income earned domestically and
paid abroad to foreigners.
Therefore
GNP = GDP + income from abroad — income sent abroad
Returning to the example above, the profit income remitted
(sent back) to the United States counts as Indian gross domestic
product (GDP), because it was generated within India, but it
counts as part of United States gross national product (GNP),
because it is income paid to United States residents.
GDP is the total market value of all final goods and services
produced within the boundaries of a country during a given time
period (usually a year), regardless of ownership of the factors
of production. GNP is the total market value of all final goods
and services produced by the factors of production supplied by
the residents of a country during a given time period (usually a
year), regardless of where the factors are located.
For some countries the difference in the relative sizes of the
two measures of output, GDP versus GNP, is not very large.
This happens when most of the production occurring within the
geographical boundaries of a country is by factors of production
owned by residents of the country. When this is not the case, the
difference can be quite significant. The factors of production that
mainly account for differences in the two measures are labour
and capital. Countries that have a large foreign presence, either
as workers from other countries (labour), or as foreign corpora-
tions (capital), tend to have a larger GDP per capita than GNP
per capita, because the wages and profits of the foreigners are
included in their measure of GDP but excluded from GNP. This
is because a portion of wages of foreign workers and profits of
foreign corporation owners are sent back to the home country,
thus counting as the GNP of workers’ and corporation owners’
home country. By contrast, countries that receive large trans-
fers of money from workers or corporation owners located in a
foreign country are likely to have a larger GNP per capita than
GDP per capita. For this reason, it is possible for some countries
to enjoy a higher standard of living even though they may have
relatively low levels of domestic production.
In developing countries, the presence of multinational corpo-
rations that “repatriate their profits”, in other words, send their
profits back to the home country, tends to make GDP larger

225
than GNP. On the other hand, if there are workers living abroad
who are sending some of their income back home (this is referred
to as “worker remittances”), this will tend to make GNP larger
than GDP. On balance, for most developing countries that host
multinational corporations (have multinational corporation
operating within their boundaries), profit repatriation tends to
be far more important than worker remittances, and therefore
GDP is likely to be larger than GNP.
GNP per capita is a better indicator of the standards of liv-
ing of a country, because it represents incomes actually received
by the residents. On the other hand, GDP per capita is a better
indicator of the level of output per person produced in a country.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 191.

Target vocabulary of text B


boundaries (n) = the real or imaginary line that marks the
edge of a state, country, etc., or the edge of
an area of land that belongs to someone
National boundaries are becoming increas-
ingly meaningless in the global economy.
convert (v) = to change smth into a different form of thing,
or to change smth so that it can be used for a
different purpose or in a different way
The stocks can be easily converted to cash.
corporation (n) = an organisation or group of organisations
that work together for a particular purpose
and are officially recognised as one
the New Orleans Citywide Development Cor-
poration
count (v) = to be allowed or accepted, or to allow or ac-
cept smth, according to a standard, set of
ideas, or set of rules
Locally produced sales by American firms in
Japan do not count as exports.
decade (n) = a period of 10 years
The 1980s has been a decade of three-party
politics.
generate (v) = to produce or cause smth
The program would generate a lot of new jobs.

226
indicator (n) = smth that can be regarded as a sign of smth
else
All main economic indicators suggest that
trade is improving.
multinational a multinational company has factories, of-
(adj) = fices, and business activities in many differ-
ent countries
a multinational media corporation
ownership (n) = the fact of owning smth
a dispute over the ownership of the land

portion (n) = a part of smth larger, especially a part that is


different from the other parts
The rent on his portion of the apartment was
$500 a month.
remit (v) = to send a payment
Please remit payment by cheque.
subtract (v) = to take a number or an amount from a larger
number or amount
If you subtract 30 from 45, you get 15.
versus (prep) = used when comparing the advantages of two
different things, ideas, etc.
The finance minister must weigh up the ben-
efits of a tax cut versus those of increased
public spending.

1. Read text B and answer the questions below.


1. What do the abbreviations GDP and GNP mean?
2. Which factor should be ignored when you measure GDP?
3. Why is the GNP measure closer to national income than
GDP?
4. How can GDP be converted into GNP?
5. Explain the correlation between the number of foreign cor-
porations and GDP per capita in a country.

2. Decide whether the following statements are True or False


according to text B.
1. There is no difference between domestic and national prod-
uct. ___

227
2. The GDP income is generated within the boundaries of the
country, regardless of the factor of ownership. ___
3. In order to convert GDP into GNP we should add “income
sent abroad” and subtract “income from abroad”. ____
4. The country has a larger GDP per capita than GNP if there
are many foreign workers (external labour) in this country.
___
5. GNP per capita is a more representative indicator of the
country’s living standard than GDP per capita. ___

3. Read the sentences from text B and decide which meaning


(a, b or c) the word in italics has.
1. The booming domestic economy makes investors more opti-
mistic.
a) relating to family relationships and life at home
b) used in people’s homes
c) relating to or happening in one particular country and not
involving any other countries
2. Between 1929 and 1933 America’s national income fell by
more than half.
a) related to a whole nation as opposed to any of its parts
b) owned or controlled by the central government of a coun-
try
c) relating to one particular nation as opposed to other
nations
3. We tend to think of these people as untrustworthy, but that
is not the case.
a) a situation that exists, especially as it affects a particular
person or group
b) an example of a particular situation or of something hap-
pening
c) a set of reasons why something should happen or be done
4. The new law gives local governments a significant measure of
control over their own finances.
a) an action, especially an official one, that is intended to
deal with a particular problem
b) an amount of something good or something that you
want, for example, success or freedom
c) things done to deal with a difficult situation that are not
effective or firm enough
228
5. Organisations which take a positive approach to creative
thinking survive during the crisis.
a) a request from someone, asking you to do something for
them
b) a road, path, etc. that leads to a place, and is the main way
of reaching it
c) a method of doing something or dealing with a problem

4. Read the text below. Use the words to the right of the text
to form a word that fits the context.
Microeconomics
Microeconomics (1) _______ the be- (1) examination
haviour of individual decision making units
in the economy. The two key groups of de-
cision-makers are (2) _______ (or house- (2) consume
holds) and firms (or businesses), introduced
in the circular flow model. Microeconomics
is concerned with how these decision-mak-
ers (3) _______, how they make choices (3) behaviour
and how their (4) _______ in markets de- (4) interact
termine the prices of individual goods and
services (in product markets), and prices of
individual factors of production (in resource
markets). As the circular flow model illus-
trates, consumers (5) ______ what particu- (5) choice
lar goods and services and what quantities of
these they wish to buy, and they also choose
the quantities of factors of production that
they wish to sell to firms. Firms, on the oth-
er hand, choose the quantities of factors of
(6) ______ they wish to buy, and they also (6) produce
choose what particular goods and services
and what quantities of these to produce and
sell to consumers. These (7) _______ deci- (7) count
sions are coordinated through (8) _______ (8) operate
of product and resource markets.
Ellie Tragakes. Economics for the IB Diploma. — Cambridge University Press,
2009. — P. 7.

229
5. Fill in the gaps using the prepositions from the box below.
from  • for • to • on • during • in
by  • with • at • since •  within
1. ___ local government purposes the parish had only existed
____ the boundaries of the former rural district councils.
2. The values recorded for 1990 indicate that manufactured
exports rose ____ value to £8.574 billion, continuing the
steady rise ____ the value of exports ____ 1987.
3. ____ response to the import quotas, Japanese manufacturers
have been rapidly expanding production ____ the US.
4. He would surely agree that the right aim is to have nominal
GDP growing ____ around 5% a year.
5. Many local industrialists rely ____ credit ____ interna-
tional loan agencies, others import essential supplies and the
majority import essential equipment.
6. The British already pay less tax, relative ___ GDP, than the
citizens of the other main EC countries: 39% of GDP com-
pared ___ an average of 44% in Germany, France and Italy.
7. The table compares GDP per head using market exchange
rates ___ those ___ a PPP basis for a selection of countries
in 1992.
8. For the first time ____ nearly four years, gross domestic
product fell ____ the last quarter of 1990.
9. ____ the 1980s, although the population grew ____ more
than 2% a year, real GNP grew ____ nearly 6%, well up from
the 3.5% a year ____ the first three decades of independence.
10. Levels of government expenditure ___ education dropped
____ over 30 per cent of national expenditure and 6 to 7 per
cent of GNP in the mid-1970s ____ 22 per cent and 4 per
cent respectively in 1985.

6. Match the halves of the sentences.


1. California’s treatment of a) output to deviate from its
multi­­national natural or normal level.
2. There is a great deal of mo­ b) countries to be the number
ney to be made from income one priority.

230
3. The model developed so c) residents have to obtain
far suggests that only random foreign currency with pounds,
movements in aggregate de- and so the supply of pounds
mand will cause real aggregate will increase in foreign ex-
change markets.
4. If UK imports and capital d) value (the total value of all
outflows from the UK are paid the shares) of the two compa-
for in foreign currency, then nies.
domestic
5. Another way of looking at e) of living for about 20 per
this conundrum is to compare cent of the population.
the market
6. The harsh measures of the f) firms threatens to provoke
transitory period are expected a global tax war.
to lower the standard
7. Some governments consider g) generated by composers’
inadequate food resources in royalties and fees as well as
the developing the earnings from performing
and recording.

VOCABULARY

1. Look at the following pair of words, spot the difference and


do the task.
ECONOMIC ≠ ECONOMICAL

economic — relating to trade, economical — not using a lot


industry and money of fuel, money, etc.
The country has been in a very What’s the most economical
poor economic state ever since way of heating this building?
the decline of its two major in-
dustries.
Insert the proper word economic or economical.
1. The government’s ______ policies have led us into the worst
recession for years.

231
2. There’s increasing demand for cars which are more _______
on fuel.
3. Awareness that the world-wide _______ situation will be
crisis-ridden in 2009 should help keep a perspective on your
actions.
4. As well as being powerful and flexible, the orbital engine is
also impressively _______ and clean.
5. Many women are equal (in __________ terms) with men as
earners and consumers.
6. “This way is more efficient and more _______ on resources,”
observed Harris.
7. In an interview with the newspaper he complained of disas-
trous government _______ policies which he had been pow-
erless to influence.
8. The agreement covered _______, scientific, technological
and cultural co-operation.
9. To make sure your Toyota continues to give reliable, _______
and safe service, fit only genuine Toyota parts — you’ll find it
less expensive in the long run.
10. Coal- and gas-powered stations are more ________ when
used for a shorter period.

2. Look through the two sets of sentences and decide which


word economic or economical should be inserted to make these
sentences complete.
1. Working in role definitely helps; it’s an _______ and effec-
tive strategy.
2. Green was said to have been a “plain practical shrewd man
of business” whose style was “plain, severe and ________”.
3. Alumasc Aluminium Rainwater Systems are the lightweight
and _______ answer to effective rainwater disposal.
The missing word is _______________
1. Michael Haines has produced a nontechnical guide to the
natural, _______ and social factors which shape the modern
industry.
2. To produce an impact on _______ growth, the benefit would
need to be considerable.
3. This suggests that closures have not stemmed primarily from
an objective of _______ rationalization.
The missing word is _______________

232
3. Match the idiom with its meaning.
1) to sweep smth a) from the beginning, without using
under the carpet anything that already exists
2) to go through b) to talk about your job with those you
the roof work with when not at work
3) to start from c) to hide a problem or try to keep it
scratch secret instead of dealing with it
4) to take the floor d) to have no profit or loss at the end of
especially a business activity
5) to talk shop e) to remove from the job
6) to give the sack f) to rise to a very high level
7) to break even g) to start speaking

4. Use the idiom from exercise 3 to complete the sentence.


1. The Chancellor of the Exchequer will _________ for his
Budget speech at 3.00 p.m.
2. Two workers _________ for fighting in the warehouse.
3. We are in black! Prices _________.
4. The committee is being accused of ___________ to avoid
embarrassment.
5. An individual will not need to __________ where there is
already reliable evidence of competence at work.
6. After paying for our travel costs, we barely __________.
7. From time to time, taking one to lunch or meeting up for a
drink gives you a chance to __________ and learn about the
other’s work and publications.

GRAMMAR

1. Choose which description of the tense (a, b or c) matches


with the sentence.
1. However it is well known that a financial crisis in 1866 seri-
ously affected several minor railways throughout the coun-
try. (Past Simple)
a) past actions which happened one immediately after
another

233
b) past habit or state
c) complete past action not connected to the present with a
stated time reference
2. In the 1960s the US balance on merchandise trade failed to
grow, and then sank to virtually nothing in 1968, while the
amount of investments abroad was rising steadily. (Past Con-
tinuous)
a) background description to event in a description
b) past action in progress interrupted by another past action
c) two or more simultaneous past actions of certain duration
3. Young couples could not afford to buy a house because the
price of property in the village had risen. (Past Perfect)
a) past action which occurred before a stated past time
b) complete past action which had visible results in the past
c) changes which took place in the past

2. Match the time expressions with their tenses.


while  •  yesterday  •  after  •  last week  •  since
ago  •  the moment that  •  before  •  for
in 1998  •  when

Past Simple Past Continuous Past Perfect


________________ ________________ ________________
________________ ________________ ________________
________________ ________________ ________________
________________ ________________ ________________

3. Spell the following verbs.


Verb -ed -ing
to agree
to apply
to develop
to die
to hurry
to permit
to plan
to play

234
Verb -ed -ing
to prefer
to stop
to study
to tie
to try

4. Put the verbs in brackets into the correct past forms.


1. During the 1920s their proportion of the home-pro-
duced income ____________ (to increase), though it
______________ (to dip) in the 1930s owing to the salary
cuts imposed on teachers and civil servants in the wake of
the 1931 financial crisis.
2. In the participating countries, industrial production
__________ (to rise) by 39 per cent between 1948 and 1952.
3. In 1901 there ___________ (to be) less than two million
people over 65 in Britain, but by 1981 this ____________
(to rise) to about eight million.
4. On April 8 the governor of the south-eastern region, Hayri
Kozacioglu, __________ (to estimate) that the total number
of refugees ___________ (to rise) to 400 000.
5. The Conservative government in Britain in 1990 still
____________ (to give) priority to fighting inflation, which
_____________ (to rise) more steeply than in its commer-
cial competitors.
6. During the last three months of the year some 500 000
jobs _____________ (to be lost), and by December over-
all unemployment ___________ (to rise) to 7 600 000, or
6.1 per cent of the labour force, the highest level for three
years.
7. Shares __________ (to soar) by more than £3 billion to
another all-time high yesterday as the Bank of England
indicated that spending ___________ (to rise) in the High
Streets.
8. Over the last decade, the upper disposable income limit
_________ (to rise) by about 50 per cent, but earnings
__________ (to rise) by 135 per cent and prices by 93 per
cent.
235
9. All the while public expenditure __________ (to rise) with
direct and transfer payments together accounting for nearly
50 per cent of GDP by the mid 1970s.
10. Then again, the population of the country as a whole
____________ (to rise) fairly quickly at the time of the
enclosure movement, especially in the industrial villages of
the Midlands, and there ___________ (to be) a demand for
houses.

SKILLS FOCUS

Reading

1. Read the text about perfect competition and write one word
which is missing.
Microeconomics
by Arnold C. Harberger
The strength of microeconomics comes (1) _________ the
simplicity of its underlying structure and its close touch with the
real world. In a nutshell, microeconomics has to (2) ________
with supply and demand, and with the way they interact in
various markets. Microeconomic analysis moves easily and pain-
lessly from one topic to (3) _________ and lies at the center of
most of the recognised subfields of economics. Labor economics,
for example, is built largely on the analysis of the supply and
demand for labor of different types. The field of industrial organ-
isation deals with the different mechanisms by (4) _________
goods and services are sold. International economics worries
about the demand and supply of individual traded commodi-
ties, as well as of a country’s exports and imports taken as a
(5) _________, and the consequent demand for and supply of
foreign exchange. Agricultural economics deals with the demand
and supply of agricultural products and of farmland, farm labor,
and the other factors of production involved in agriculture.
At the root of everything is supply and demand. It is not at
all farfetched to think of (6) _____ as basically human char-
acteristics. (7) _________ human beings are not going to be
totally self-sufficient, they will end up producing certain things

236
that they trade in order to fulfill their demands for other things.
The specialisation of production and the institutions of trade,
commerce, and markets long antedated the science of economics.
Indeed, one (8) _________ fairly say that from the very outset
the science of economics entailed the study of the market forms
that arose quite naturally (and without any help from econo-
mists) out of human behaviour. People specialise in what they
think they can do (9) _________ — or more existentially, in
what heredity, environment, fate, and their own volition have
brought them to do. They trade their services and/or the prod-
ucts of their specialisation for those produced (10) _________
others. Markets evolve to organise this sort of trading, and
money evolves to act as a generalised unit of account and to
make barter unnecessary.
http://www.econlib.org/library/Enc/Microeconomics.html

2. Common macroeconomic policies are fiscal and monetary.


Look through the text and decide how the two columns must
be labelled: fiscal policy or monetary policy.
_______ ________ ______ _______
is the process by is the use of government
definition
which the authority of revenue collection (taxa-
a country controls the tion) and expenditure
supply of money (spending) to influence
the economy
relatively stable prices goals the use of the govern-
and low unemploy- ment budget to influence
ment economic activity
a rate of interest instruments government taxation and
changes in the level and
composition of taxation
and government spend-
ing
open market opera- examples lower mortgage rates,
tions, changing re- lower taxes for lower in-
serve requirements comes
and setting the dis-
count interest rate
3. Read more about macro- and microeconomics in Reading
file: Unit 8.
237
Speaking
A
Business education
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the two
economists: Henry Mintzberg and Paul Danos. They are dis-
cussing the question “Is immigration endangering European
society?” The brief description of the problem is given below:
According to some experts, management is the single most
important invention of the past hundred years. Making business
leadership a more considered pursuit, through basic ideas such
as paying employees for their talents and capital budgeting, has
made companies more competitive and helped to pull millions
out of poverty. The Master of Business Administration (MBA)
is the academic embodiment of this. It was first offered at the
beginning of the 20th century at grand American institutions
such as Harvard and Dartmouth College. Since that time it has
done much to make management more professional.
Today, there are probably 250 000 MBA students studying at
reputable universities — and countless more at less-than-reputa-
ble ones. But as the MBA industry has grown, so have its critics.
Some question whether an MBA really equips business people
with the skills to be better managers. Worse, others question
whether they actually harm the economy; could they be blamed
for recent economic meltdowns?
Your task is to visit http://www.economist.com/debate/over-
view/241 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.
a) Henry Mintzberg is a … He is defending the idea of … His
arguments in favour of the statement are …
b) Paul Danos is a … He is against the idea of … because …
His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.
4. How would you answer the question “Can business be
taught?”

238
B Discuss the following questions with the partner:
1. How do students change when they move on to university?
2. Should s student’s university education be free or should
the student have to get a loan?
3. Do you think students studying for master’s degree
should get paid?
4. Are universities the best systems of educating people?
5. Camus said: “The true university of these days is a collec-
tion of books.” Do you agree?
6. Do you think there are many places that call themselves
a university but are not good enough to be universities?

Writing
Render the following text using the plan:
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.
Что такое макроэкономика
и ее связь с микроэкономикой
Макроэкономика занимается вопросами измерения
и анализа агрегированных показателей экономики, таких,
как валовой внутренний продукт, уровень цен, процентная
ставка, уровень безработицы, денежная масса и др. Опери-
руя этими агрегированными показателями, макроэкономика
занимается изучением рыночного равновесия и экономиче-
ской динамики, выдвигая различные гипотезы о поведении
участников экономики (экономических агентов). Эти пове-
денческие гипотезы, которые играют основополагающую
роль в макроэкономической теории, в современных моделях
обосновываются специально проводимым анализом микро-
экономических оснований. Таким образом, макроэкономика
тесно связана с микроэкономикой.
Макроэкономика охватывает все национальное хозяй-
ство, позволяет выявить внутренние экономические связи,
свойственные ему как единому целому. Национальное
хозяйство — совокупность всех отраслей и сфер экономики
различных регионов страны, объединенных разнообразными
экономическими связями.
239
Макроэкономика — совокупность взаимосвязанных про-
изводителей и потребителей товаров и услуг. В отличие
от микроэкономики, которая изучает мотивацию поведения
производителей и потребителей, а также механизм их взаи-
модействия на товарном рынке и рынках факторов произ-
водства в условиях различных видов конкуренции, макроэ-
кономика представляет собой часть экономической теории,
рассматривающую функционирование экономики в целом.
Таким образом, микроэкономика — взгляд на экономику
снизу, макроэкономика — взгляд на экономику сверху.
Макроэкономика занимается экономикой в националь-
ном масштабе и потому имеет дело с агрегированными
экономическими показателями, такими, как валовый наци-
ональный продукт, национальный доход, вало­вые инвести-
ции, совокупный спрос, совокупное предложение, уровень
и динамика цен и т. п. Исследуя и устанавливая количе-
ственные связи меж­ду макроэкономическими показателями,
макроэкономика не исследует социально-эко­номические
отношения, ограничиваясь количественными характеристи­
ками экономических явлений и процессов и их динамики.
Как раздел экономической теории макроэкономика сложи-
лась в конце 30-х гг. теку­щего столетия в результате появления
работы Дж. М. Кейнса «Общая тео­рия занятости, процента
и денег». В настоящее время макроэкономика является теоре­
тической основой регулирования рыночной экономики в раз-
витых инду­стриальных странах, основой прогнозирования
и планирования националь­ных экономических комплексов.
http://www.coolreferat.com/

Check your progress (4)

1. Match the word with its definition.


1) business cycle a) an official rule or the act of controlling
2) recession (n) b) the total value of all the goods and ser-
vices produced in a country, usually in a
single year
3) GNP c) a number of things that belong or are
dealt with together

240
4) GDP d) a period during which a country’s econ-
omy goes from growth to recession and
back to growth
5) regulation (n) e) a list of all the separate parts of smth
6) bundle (n) f) a period when the economy of a country
is not successful and conditions for busi-
ness are bad
7) breakdown (n) g) the total value of all goods and services
produced in a country, in one year, except
for income received from abroad

2. Use the words from the box to fill in the gaps.


a decade  • contractors • dilapidated
the indicators  • remit • residence •  to subtract
adverse  •  to specify  • spillover •  to convert
to generate
1. The new rules were bound to have an ______ effect on the
general public’s attitude to the society.
2. He will not himself carry out the work but will invite works
_______ to tender for packages of work within the project.
3. The house was badly _______ when they moved in.
4. In due course, attempts were made ______ more precisely
what made British broadcasting unique.
5. The ______ effect of safety demands on costs, coupled with
an economic recession, had effectively resulted in no new
nuclear stations being ordered in the United States for over
_______.
6. The next stage of our enterprise was ________ the little
stable at the end of the cottage into a turbine house.
7. A major effort needs to be made _______ and to use energy
more efficiently.
8. _______ that are traditionally used are the money spent
on health care or the number of health workers per head of
population.
9. Similarly, those who fail to make accurate returns of their
wealth held abroad would be unable to _______ back into
this country the income from the wealth, so making _______
here difficult.

241
10. To avoid double counting, it is necessary ______ building
society deposits in banks and building society holdings of
bank certificates of deposit.

3. Fill in the gaps using the correct preposition (where


necessary).
1. Speaker after speaker congratulated the organisers, expressed
their satisfaction ___ the conference and talked about how
necessary a forum like this was.
2. The Times sent her to Bangladesh to report ___ the floods.
3. Here you can buy ___ duty free prices all the usual items.
4. That is a matter of saving the lives of thousands of people
who suffer ___ rare diseases.
5. The period affects ___ all young people and involves a series
of stages over a number of years, which are influenced ___
social and economic status.
6. They can be bought direct via a stockbroker, or via a man-
aged fund set up ___ the purpose.
7. And do diamonds increase ___ value as the years pass, like
property?
8. The Report discusses employers’ evaluations of young work-
ers relative ___ older ones ___ terms of thirteen “essential
attributes”.
9. ___ the end of 1976 this prospecting received financial sup-
port ___ the European superstate.
10. We need interest rates to drop ___ another three per cent.
11. Subsidies will be halved and the balancing of the budget is
supposed to be achieved ___ limiting central investments
and cutting expenditure ___ the security forces and the army.

4. Find word partners between the two lists of words (A and B).
A B
public effect
landed system
market benefits
heating gentry
side good
social requirements
safety output
total failure

242
5. Choose the correct word.
alternate  • alternative
economic  • economical
1. It must be cheap to do, cheap to find out, _______ in time
as well as money.
2. In a democratic system political parties expect to be
________ in office.
3. More generally, by raising the standard of health of the com-
munity, especially among children, such services would yield
an ________ return outweighing their cost.
4. The _________ of “public limited company” is the abbrevia-
tion “p.l.c.”.
5. Prices were not going up too fast and again this made it
________ for us to visit.
6. I would have no fear about being able to make a safe landing
at an ________ airport.
7. But British and French workers did not have to wait for an
__________ upturn.
8. Because the cost of _________ forms of borrowing has
fallen, the demand curve for bank lending shifts to the left.

6. Choose the proper form of the verb (Present Perfect, Past


Simple, Past Continuous, Past Perfect).
1. It was reported that trade between the two countries
_________ (to increase) from $770 000 in 1988 to
$7 740 000 in the first quarter of 1989.
2. Between 1980 and 1985 interest payments by third world
countries more than _________ (to double) from 9 to 20 per
cent, at the same time as average prices for their commodi-
ties _________ (to fall) by an average of more than 25 per
cent.
3. Europeans __________ (to consume) more in these years,
their physique (taking rough measures such as those of
height) __________ (to improve).
4. However, recent claims that the government _________ (to
reduce) the “tax burden” need to be heavily qualified.
5. Though there were some criticisms of the new technology,
the general consensus ________ (to be) that it __________
(to improve) the quality of the jobs people did.
243
6. These benefits were not, of course, costless, and there
__________ (to be) aspects of the reorganisation which
some managers felt _________ (to decrease) their efficiency.
7. In the first two months since its advent, that process
__________ (to reduce) by 40 per cent.
8. By 1957 this figure _________ (to double) to 4 million and
by 1961 _________ (to treble) to 6 million.

7. Answer the questions.


1. What role does the government play in the economy?
2. What is the business cycle? What are its stages?
3. What is the difference between private and public goods?
4. How do macro- and microeconomic studies differ?
5. How to calculate the two popular macroeconomic indexes:
GDP and GNP?
Unit 9
Economic growth
and development
Learning outcomes
After studying this unit you should be able to:
1) distinguish between economic growth and economic development;
2) explain what sustainable development means;
3) use the active vocabulary of the unit in speaking and writing;
4) read for different purposes (skimming, scanning);
5) use grammar effectively (tenses: types of future).

Lead-in

1. How would you comment on the most cited quotation by Ronald


Reagan: “Entrepreneurs and their small enterprises are responsible
for almost all the economic growth in the United States.”
What role do small enterprises play in the economy?
How do they contribute to the country’s economic growth?

2. Among the measures given below choose those which


characterise A economic growth and B economic development.
GDP  •  GDP per capita  •  level of health care
quality and availability of housing
level of environmental standards
level of literacy and education standards
A B
_______________________ _______________________
_______________________ _______________________
_______________________ _______________________
_______________________ _______________________
_______________________ _______________________

245
TOPICS

Text A
Growth and development
1 The study of economic growth and development is not a
single branch of economics but falls, in fact, into two quite differ-
ent fields. The two fields — growth and development — employ
different methods of analysis and address two distinct types of
inquiry.
2 Development economics is easy to characterise as one of the
three major subfields of economics, along with microeconomics
and macroeconomics. More specifically, development econom-
ics resembles economic history in that it seeks to explain the
changes that occur in economic systems over time.
3 The subject of economic growth is not so easy to charac-
terise. Indeed, it is the most technically demanding field in the
whole of modern economics, impossible to grasp for anyone who
lacks a command of differential calculus. Its focus is the prop-
erties of equilibrium paths, rather than equilibrium states. In
applying economic growth theory, one makes a model of the
economy and puts it into motion, requiring that the time paths
described by the variables be self-sustaining in the sense that
they continue to be related to each other in certain character-
istic ways. Then one can investigate the way economics might
approach and reach these steady-state growth paths from given
starting points. Beautiful and frequently surprising theorems
have emerged from this experience, but as yet there are no really
testable implications nor even definite insights into how econo-
mies grow.
4 Growth theory began with the investigations by Roy Har-
rod in England and Evsey Domar in the United States. Their
independent work, joined in the Harrod-Domar model, is based
on natural rates of growth and warranted rates of growth.
Keynes had shown that new investment has a multiplier effect
on income and that the increased income generates extra savings
to match the extra investment, without which the higher income
level could not be sustained. One may think of this as being
repeated from period to period, remembering that investment,
apart from raising income disproportionately, also generates the
capacity to produce more output. This results in products that
246
cannot be sold unless there is more demand — that is, more con-
sumption and more investment. This is all there is to the model.
It contains one behavioural condition: that people tend to save a
certain proportion of extra income, a tendency that can be mea-
sured. It also contains one technical condition: that investment
generates additional output, a fact that can be established. And
it contains one equilibrium condition: that planned saving must
equal planned investment in every period if the income level of
the period is to be sustained. Given these three conditions, the
model generates a time path of income and even indicates what
will happen if income falls off the path.
5 More complex models have since been built, incorporat-
ing different saving ratios for different groups in the population,
technical conditions for each industry, definite assumptions
about the character of technical progress in the economy, mon-
etary and financial equations, and much more. The new growth
theory of the 1990s was labelled “endogenous growth theory”
because it attempted to explain technical change as the result
of profit-motivated research and development (R&D) expendi-
ture by private firms. This was driven by competition along the
lines of what Schumpeter called product innovations (as distinct
from process innovations). In contrast to the Harrod-Domar
model, which viewed growth as exogenous, or coming from out-
side variables, the endogenous theory emphasises growth from
within the system. This approach enjoyed, and still enjoys, an
enormous vogue, partly because it seemed to offer governments
a new means of promoting economic growth — namely, national
innovation policies designed to stimulate more private and pub-
lic R&D spending.
http://www.britannica.com/EBchecked/topic/178548/economics/236773/
Growth-and-development

Target vocabulary of text A


command of smth knowledge of smth, especially a language,
(n) = or ability to use smth
He’s studied in the US and has a good com-
mand of English.
distinct (adj) = clearly different or belonging to a differ-
ent type
There are four distinct types.

247
emerge from (v) = to come out of a difficult experience
She emerged from the conflict a stronger
person.
endogenous (adj) = used in economics to describe smth that
is inside a particular system, rather than
outside that system
There are those who see the origins of the
crisis as endogenous to the region.
equation (n) = the set of different facts, ideas, or people
that all affect a situation and must be con-
sidered together
The tourist industry forms a crucial part of
the region’s economic equation.
exogenous (adj) = coming from or produced outside an or-
ganisation or system
exogenous factors
grasp (v) = to completely understand a fact or an idea,
especially a complicated one
At that time, we did not fully grasp the sig-
nificance of what had happened.
property (n) = a quality or power that a substance has
the chemical properties of a substance
resemble (v) = to look like or be similar to someone or
smth
After the earthquake, the city resembled a
battlefield.
R&D = abb. research and development
the part of a business that tries to find
ways to improve existing products, and to
develop new ones
All our profits are re-invested in research
and development.
warranted (adj) = needed or deserved
warranted rates of growth

1. a) Use your dictionary to check the correct pronunciation


of the words below.
inquiry, distinct, to characterise, calculus, variables, theo-
rems, to warrant, ratios, endogenous, vogue

248
b) Read text A and do the tasks/answer the questions below.
1. What common characteristic do economic history and devel-
opment economics share?
2. What is the subject of development economics?
3. How do equilibrium states differ from equilibrium paths?
4. What is the endogenous growth theory about?
5. What does the Harrod-Domar model state?

2. Decide whether the following statements are True or False


according to text A.
1. Development economics deals with changes which take place
within a period of time. ___
2. Nowadays economists can clearly define how economies
grow. ____
3. There is no precise difference between growth and develop-
ment. ____

3. Scan through text A and find the words corresponding to


these definitions.
para 1 and 2
1) only one (adj) ____________
2) to use a particular object, method, skill, etc. ____________
in order to achieve smth (v)
3) to happen or exist in a particular place or ____________
situation (v)
para 3
4) needing a lot of ability, effort, or skill (adj) ____________
5) a way of measuring the speed at which an ____________
object is moving at a particular moment (n)
6) to increase until smth is at a particular rate ____________
or level (v)
7) can be proven or tested (adj) ____________
para 4
8) not caused, made, or controlled by people ____________
(adj)
9) more of smth, in addition to the usual or ____________
standard amount or number (adj)
10) continuing for a long time (adj) ____________
11) relating to small exact details or rules that ____________
say how a system should work (adj)

249
para 5
12) smth that you think is true although you ____________
have no definite proof (n)
13) the total amount of money that a govern- ____________
ment, organisation, or person spends during a
particular period of time (n)
14) a new idea, method, or invention (n) ____________

4. Use the words from exercise 3 to fill in the gaps.


1. My calculations were based on the _________ that house
prices would remain steady.
2. The highest rates of unemployment _________ in the inner
urban areas.
3. Prices rose steadily to _________ record levels.
4. He called for the legislation to be delayed on a ________
point.
5. In second year, most students specialise in a ________
branch of economics, attending a course in that area, in
mathematics, and another subject.
6. The package is designed to solve, through symbolic manipu-
lation, problems in differential ____.
7. The United Kingdom and United States can be expected to
________ their ordinary procedures for other measures.
8. This is the only way to achieve _______ growth, based on
net exports and investment demand.
9. To expand production may require additional capacity, giv-
ing rise to _______ investment.
10. In order to secure someone with outstanding qualifications
and experience for this ________ appointment substantial
performance bonus will be negotiated.
11. Many of the new ________ have only been possible because of
the company’s commitment to total quality management (TQM).
12. This theory is ________, though it hasn’t been approved yet.
13. In 1989 direct government ________ on agricultural and
industrial subsidies fell, in dollar terms, by 56% compared
with 1988.
14. The ________ behind the Bacon and Eltis thesis is that only
industrial production can maintain and improve the stan-
dard of living in the country.

250
5. Read the text below. Use the words to the right of the text
to form a word that fits the context.
Economic (1) _____________ is the (1) to grow
amount of production in a country or
region over a certain period of time. While
(2) _________ ministers may keep track of (2) finance
these growth numbers every month, gener-
ally it is the (3) _________ and annual (3) quarter
numbers that attract the most attention.
In (4) ________ to production, measured (4) to add
through the gross domestic product (GDP),
local governments and individuals may use
a different standard to (5) _________ eco- (5) measurement
nomic growth.
If the GDP of a country one year is $100
billion US Dollars (USD) and the next year
is $125 USD billion, then there has been
economic growth of 25%. If, on the other
hand, the GDP was only $75 USD billion,
the growth would be –25%. In most cases,
it is still referred to as growth, even if it is a
(6) _________ of the economy. (6) contract
Most (7) _________ economic growth to (7) considerable
be one of the surest signs of a country’s over-
all health. More commerce means more jobs,
and more jobs mean more (8) _________, (8) to consume
leading to more production. This can be
a very good circle to get into. Like most
things, however, this growth tends to come
and go in cycles.
http://www.wisegeek.com/what-is-economic-growth.htm#did-you-know

6. Fill in the gaps using the prepositions/particles from the


box below.
on  • in • into • over • from
by  • for • to
1. I agree that the criteria tend to fall ___ two sorts.
2. The trouble begins with the consequent changes ____ anti-
trust laws and policy.

251
3. Efficiency can be measured ____ terms of the rate of return
of production, the work content measured ____ time, or the
unit cost of an output.
4. Agreement ____ the actions needed is beginning to emerge
____ these recent meetings of politicians, administrators and
scientists.
5. Work currently ____ progress by K. D. Bennett and J. A.
Fossitt is providing new and exciting insights ____ the his-
tory of the USA.
6. As United Kingdom exports increase, there will be a multi-
plier effect ____ national income which we have not so far
taken ____ account.
7. Johansson calculates that efficiency will increase enough in
this way to allow the demand ___ electricity to be met ____
only 140 TWh.
8. The next step is to make technical progress endogenous
____ the model.
9. Consequently, dependency ratios ____ future decades are
again only best estimates and not real facts.
10. Expenditure ____ research assistants might also save a sig-
nificant degree of time and money ___ the long run.

7. Find word partners between the two lists of words (A and B).
A B
distinct calculus
technically path
differential rate
equilibrium types
testable effect
multiplier demanding
natural implication

8. Give a definition of the word in bold using the words given


in the list below.
market production price
a place a process amount
to buy to make money
to sell goods to sell

252
income barrier trade
money rules goods
to earn tariffs services
to work country exchange
advantage costs poverty
condition money condition
chance to cover extremely
success expenses poor

Text B
The difference between economic development
and economic growth
1 Economic development implies more, particularly improve-
ments in health, education and other aspects of human welfare.
Countries that increase their income but do not also raise life
expectancy, reduce infant mortality, and increase literacy rates
are missing out of some important aspects of development.
2 The economic development of a country is defined as the
development of the economic wealth of the country. Economic
development is aimed at the overall well-being of the citizens of
a country, as they are the ultimate beneficiaries of the develop-
ment of the economy of their country.
3 Economic development is a sustainable boost in the stan-
dards of living of the people of a country. It implies an increase
in the per capita income of every citizen. It also leads to the cre-
ation of more opportunities in the sectors of education, health
care, employment and the conservation of the environment.
4 Economic growth refers to a rise in national or per capita
income and product. If a production of goods and services in
a country rises, by weather means and along with it average
income increases, the country has achieved economic growth.
5 Economic growth can be either positive or negative. Nega-
tive growth can be referred to by saying that the economy is
shrinking. Negative growth is associated with economic reces-
sion and economic depression.
6 Economic growth on the other hand, is a narrower concept
than economic development. It is defined as the increase in the value
of goods and services produced by every sector of the economy. It
is usually expressed in terms of the gross domestic product or GDP
of the country. Economic growth is defined by increases in GDP.

253
7 Whereas, economic development is more of a vague mea-
sure usually incorporating social measures such as literacy rates
or life expectancy as a means of measuring a country’s level of
development.
Economists often tend to use the two terms economic devel-
opment and economic growth interchangeably, as they appear to
be synonymous with each other. Economic growth is defined by
increases in GDP.
8 Economic development is a qualitative measure while eco-
nomic growth is a quantitative measure. Economists have been
trying to identify alternative measures of economic development
which should reflect in a true manner the changes in the stan-
dard of living.
Poverty-weighted index of social welfare:
9 The use of GNP as a method of comparing welfare or as
a method of comparing the development performance of differ-
ent countries can be misleading. This is especially so when dif-
ferent countries have varied distributions of income.
10 The population is grouped into quintiles of four individuals
each. The first quintile represents the bottom 20% of the popula-
tion on the income scale. This group of individuals receives only
5 per cent of the national income; the second quintile receives
9 per cent, and so on.
11 The rate of income growth in each quintile is a measure
of economic welfare growth of that class. The total welfare of
society is measured as the simple weighted sum of the growth of
income in each class and is expressed as under:
12 It means that the GNP would rise by 7.3% even if there is
zero change in the incomes of the 60 per cent population at the
bottom of the income ladder.
13 To remove this anomaly and to make GNP estimates a bet-
ter representative of the society’s welfare, an alternative mea-
sure based on equal weights or poverty-weighted index has been
evolved.
14 Equal-weights index assigns equal weights to growth of
income in each income class. All people are treated equally.
15 The economy has been divided into quintiles; equal-
weight index would give a weight of 0.2 to the growth in income
in each quintile using equal-weight index in our example of 10%

254
income growth of the top two quintiles with bottom three quin-
tiles showing no change.
16 The equal-weight index shows that social welfare has
increased by 4% as compared to 7.3% increase shown earlier.
17 The use of poverty-weighted index shows that there is no
improvement in the social well-being of the bottom 40% of the
population. The GNP growth records 7.3% improvement in the
social welfare.
18 In short, a useful summary of the degree to which eco-
nomic growth is based towards relative improvement of high-
income or low-income groups is the positive or negative diver-
gence between a weighted social welfare index and the actual
growth rate of GNP.
http://www.preservearticles.com/2012042631220/what-is-the-difference-
between-economic-growth-and-economic-development.html

Target vocabulary of text B


beneficiary of (n) = someone who gets advantages from an ac-
tion or change
The rich were the main beneficiaries of the
tax cuts.
boost (v) = to increase or improve smth and make it
more successful
The win boosted the team’s confidence.
depression (n) = a long period during which there is very
little business activity and a lot of people
do not have jobs
the devastating effects of economic depres-
sion
diverge (n) = if similar things diverge, they develop in
different ways and so are no longer similar
Global growth rates are diverging markedly.
evolve (v) = to develop and change gradually over
a long period of time
Businesses need to evolve rapidly.
incorporate (v) = to include smth as part of a group, system,
plan, etc.
Our original proposals were not incorporat-
ed in the new legislation.

255
literacy (n) = the state of being able to read and write
a new adult literacy campaign
misleading (adj) = likely to make someone believe smth that
is not true
The article was misleading, and the newspa-
per has apologised.
remove (v) = to take smth away from, out of, or off the
place where it is
Reference books may not be removed from
the library.
shrink (v) = to become or to make smth smaller in
amount, size, or value
The firm’s staff had shrunk to only four peo-
ple.
vague (adj) = unclear because someone does not give
enough detailed information or does not
say exactly what they mean
The governor gave only a vague outline of
his tax plan.

1. Read text B and answer the questions below.


1. What does development mean in economic terms?
2. Who are final beneficiaries of economic development?
3. What is the difference between economic development and
economic growth?
4. What is the negative economic growth? What other words
are used to describe this negative trend in the economy?
5. What is an alternative measurement of economic develop-
ment?

2. Decide whether the following statements are True or False


according to text B.
1. Increasing GDP is an indicator of economic development.
___
2. The beneficiaries of economic development are mostly gov-
ernments and authorities. ___
3. Life expectancy is a measure of the country’s economic
development. ___
4. Economic development is a quantitative measure. ___

256
3. Scan through text B and find the words corresponding to
these definitions.
para 1—4
1) to suggest that smth is true, without saying ____________
this directly (v)
2) help given, especially by the state or an or- ____________
ganisation, to people who need it, especially
because they do not have enough money (n)
3) considering or including everything (adj) ____________
4) most extreme or important because either ____________
the original or final, or the best or worst (adj)
5) to increase or improve smth and make it ____________
more successful (v)
6) the amount you get when you add together ____________
several quantities and divide this by the total
number of quantities (adj)
para 5—8
7) to become or to make smth smaller in ____________
amount, size, or value (v)
8) to change an amount or quantity into a dif- ____________
ferent form, especially in mathematics (v)
9) not clearly expressed, known, described or ____________
decided (adj)
10) to show or be a sign of a particular situ- ____________
ation (v)
para 9—12
11) the way in which smth exists in different ____________
amounts in different parts of an area or group (n)
12) a system of numbers that is used for measur- ____________
ing the amount, speed, quality, etc. of smth (n)
13) structured in a way that is likely to pro- ____________
duce a particular effect, usually an advantage,
rather than any other (adj)
para 13—15
14) to get rid of smth so that it does not exist ____________
any longer (v)
15) smth that is noticeable because it is differ- ____________
ent from what is usual (n)
16) to develop and change gradually over a ____________
long period of time (v)

257
para 16—18
17) the act of improving smth or the state of ____________
being improved (n)
18) used to emphasise that smth is real or ex- ____________
act (adj)

4. Use the words from exercise 3 to fill in the gaps (the initial
letter is given).
1. Of course the u____________ responsibility for the present
conflict without doubt lies with the aggressor.
2. This national fund pays for w__________ benefits such as
unemployment and sickness pay.
3. The firm’s staff had s__________ to only four people.
4. We need to carry out some i___________ to the system.
5. The drop in consumer spending r_________ concern about
the economy.
6. Share prices were b__________ by reports of the Presi-
dent’s recovery.
7. The o________ result is an increase in population.
8. In a_________ fact (= really), there is little evidence to sup-
port the allegations.
9. The idea e_________ out of work done by British scientists.
10. The table shows the composition of the bottom 10 per cent
of the income d___________ according to type of family.
11. This is an unfair a___________ in our tax structure.
12. The age of the candidates r_________ from 29 to 49 with an
average age of 37.
13. The value of the coffee becomes significantly higher when
e__________ in foreign currency.
14. The system of benefits is w__________ in favour of those
who have children.
15. The term Realism will be used to i_________ both Realism
and Neo-Realism.
16. He finds himself evaluated by the correspondingly v_______
notion of competence.
17. The evidence suggests that income differentials between
households at the top and bottom of the income s__________
narrowed during the war years of 1939-1945.
18. Past attempts to r__________ the old leaders have all failed.

258
5. Fill in the gaps using the prepositions from the box below.
for  • on • in • between
at  • from • to • into • by
1. It was noticeable that county libraries were ___ average,
more “advantaged” within every parameter examined.
2. The British aircraft industry was expected to shrink ___
only a fifth of its existing size, giving the USA an enormous
head start.
3. There is a current account aimed ___ businesses with reg-
ular international transactions that offers normal current
account facilities including overdrafts, regular statements
and chequebooks.
4. Until that comes the housing market will stay stagnant,
stopping a boost ___ confidence and jobs.
5. We have a divergence ___ the political culture and people’s
private political behaviour.
6. As the organisation has expanded, the demand ___ man-
power related information has increased ___ terms of vol-
ume, range and depth.
7. It will require improvements ___ oil-drilling techniques
before they can be exploited.
8. The small firm faces an increase ___ rateable value ___ £250
a year ___ £3000 a year.
9. In countries where the political history or the voting sys-
tem produces a myriad of parties, these are nearly always
grouped ___ government and opposition.
10. Capital spending for water and sewage services would rise
___ more than £100 million ___ the next three years.

6. Read the sentences from text B and decide which meaning


(a, b or c) the word in italics has.
1. Countries that increase their income but do not also raise life
expectancy, reduce infant mortality, and increase literacy rates
are missing out of some important aspects of development.
a) the appearance of someone or something
b) one part of a situation, idea, plan, etc. that has many parts
c) the direction in which something faces

259
2. Economic growth refers to a rise in national or per capita
income and product.
a) to mention or speak about someone or something
b) to tell someone where to find information
c) to be about the thing or person
3. Negative growth can be referred to by saying that the econ-
omy is shrinking.
a) to become smaller, or to make something smaller, through
the effects of heat or water
b) to move back and away from something, especially because
you are frightened
c) to become or to make something smaller in amount, size,
or value
4. It is defined as the increase in the value of goods and services
produced by every sector of the economy.
a) the amount of money that something is worth
b) a good or interesting quality that something has because
it is surprising, different, new, etc.
c) a mathematical quantity shown by a letter of the alphabet
or sign
5. Economists often tend to use the two terms economic devel-
opment and economic growth …
a) to be likely to take place
b) to move or develop in a particular direction
c) to have one particular quality or feature more than others

7. Match the halves of the sentences.


1. Belorussia had the lowest a) expectancy — the age to
literacy which the average person can
expect to live.
2. In the last great outbreak in b) distribution the poorest
1911, 32 000 infants died of di- were not the beneficiaries.
arrhoea and the infant mortality
3. Changes in mortality have c) welfare systems are often
had an effect upon life not adequate for the needs of
most ethnic families.
4. It is now acknowledged that d) rate climbed to 130.
the social
5. Although there was a slight e) rate among all the peoples
shift in income of European Russia.

260
VOCABULARY

1. Translate the following words from English into Russian.


Check your answers with a dictionary.
1) accurate (adj) _________ 5) campaign (n) ______________
2) actual (adj) _________ 6) conserve (v) ______________
3) administration (n) _________ 7) corpus (n) ______________
4) billion (n) _________ 8) data (n) ______________

2. Translate the following words from Russian into English.


Check your answers with a dictionary.
1) аккуратный ___________ 5) компания ____________________
2) актуальный ___________ 6) консервировать ____________________
3) администрация ___________ 7) корпус ____________________
4) биллион ___________ 8) дата ____________________

3. Find partners among the words from the two lists A and B.
Then match the collocation with its definition (list C).
A B C
1) literacy a) growth i. the average amount of money
that workers earn in a particular
industry, area, or economy during
a particular period of time
2) life b) develop- ii. the percentage of people who
ment are able to read and write
3) average c) rate iii. the process in which an econ-
omy grows or changes and be-
comes more advanced, especially
when both economic and social
conditions are improved
4) economic d) income iv. the length of time that a living
thing, especially a human being,
is likely to live
5) economic e) expectancy v. an increase in the economy of
a country or an area, especially
of the value of goods and services
the country or area produces

261
4. Use the collocations from exercise 3 to complete the
sentences.
1. From the mid-1950s to the early 1970s the high levels of
_________ in all sectors increased competition for labour
and allowed the gap to close.
2. The low savings rate and the low _________ among Afri-
cans left the economy heavily dependent for growth on
either Asian enterprise or foreign investment and expertise.
3. Her general conclusion was that “neither primary nor sec-
ondary educational expansion from 1950-60 is positively
related to 1960-70 _________.”
4. Consequently, we have been able to eat a better diet this
century, and this has meant a greatly improved standard of
health and __________.
5. __________ in the private sector is probably about three
times that in the state sector, but no one knows for sure.

5. Look through the sets of the concordance lines and decide


which collocation from exercise 4 is missing.
1 ______________________
… to be correlated with . The report put forward four
premature death and types of explanation of social
lower … class differences in health …
… development. Here, at birth and infant mortality
two social indicators — … rate — will …
… South Africa and Bot­ for their income level. If in-
swana demonstrate very come was the main determi-
low … nant of …
2 ______________________
… the government failed . Whilst competition between
to fully exploit the po- Spain, …
tential for …
… industrialized coun- . Economic growth can be de-
tries of the world expe- fined as an increase in the pro-
rienced over 20 years of ductive capacity of a country
sustained … …
… imperialism played an . However, although trade
important role in Brit- does help commercialisation,
ain’s … …

262
3 ______________________
… GDP between the two, of the US citizen (US $22 thou­­
simply speaking, the … sand) was …
… rapidly growing in- of the world population’s rich-
equality. In 1960, the … est 20% was 30 times higher …
… asked him about sala- , world-wide can be as low as
ries and how women’s … 56% of men …
4 ______________________
Crossett argues that the of the early 19th century re-
… sulted in a shift in power …
… refers to the rift in ma- between Europe and Asia in
terial prosperity and … the years following the Indus-
trial Revolution.
…, is democracy better ? What are the implications
than autocracy for … of your answer …
5 ______________________
… shows that most of the of over 80% and a low mortal-
countries have a high … ity rate of …
… other proxies for hu- , school expenditure and so
man capital such as … forth …
… spent on education, , despite a mid-range mortal-
which accounts for lower ity rate. So …

GRAMMAR
1. Look trough the descriptions of the three tenses and decide
which of them is Future Simple, Future Continuous and
Future Perfect.
1 ______________ 2 ______________ 3 ______________
• action finished • actions which • actions in prog-
before a stated may happen in the ress at a stated
future time future future time
• things we are not • actions which are
yet sure about the result of a rou-
tine

263
2. Use the proper form of the verb in brackets (Future Simple,
Future Continuous and Future Perfect).
1. I think the British people _________ (to pay) for it and the
foreign speculators _______ (to profit) from it.
2. This February the government ________ (to consider) the
issue of oil price increases.
3. Many local people believe that development ________ (to
profit) them.
4. It has been predicted that, by 2025, vehicles on the road
_________ (to increase) by over 100 per cent.
5. I ____________ (to go) to the bank this Friday.
6. Gas-fired power station capacity __________ (to increase)
from about 16% in 2015 to a quarter of total electricity gen-
eration by the year 2020.
7. In keeping with our policy of a sustained level of capital
expenditure irrespective of industry cycles, we __________
(to invest) further in latest generation hardware.
8. Between 2016 and 2018 the number of people experiencing
acute fuelwood deficit or scarcity ___________ (to increase)
from 1395 million to 2986 million.

3. Present Simple and Present Continuous with future meaning.


Read the sentences and match the tense with its description
(a or b).
1. The conference starts at 11 a.m. this Saturday.
a) fixed arrangement in the near future
b) timetables/programmes
2. Mr Belov is having dinner with his partners this evening.
a) fixed arrangement in the near future
b) timetables/programmes
3. The presentation of the new innovative equipment begins at
5 p.m. tomorrow.
a) fixed arrangement in the near future
b) timetables/programmes
4. The council is introducing new employment programmes
next month.
a) fixed arrangement in the near future
b) timetables/programmes
264
4. Fill in the correct present and future forms.
China economy to overtake US by 2019
China (1) ____________ (to overtake) the United States
economically within six years, an official research institute pre-
dicts, and go on to become the world’s most important country
in three decades more, state media said Wednesday.
According to their predictions China’s economy (2) ________
(to be) larger than that of the US by 2019, and China’s “inter-
national status” (3) _____________ (to exceed) that of the US
by 2049, the 100th anniversary of the founding of the People’s
Republic.
China’s stunning economic growth rates (4) ____________
(to move up) till the end of 2020; military spending (5) _________
(to increase) two times by the end of 2040.
Some national analysts believe that decades of economic
reform and openness to foreign investment (6) _____________
(to propel) China from a poor, overwhelmingly agricultural coun-
try to become the world’s second-largest economy behind the US.
International analysts widely expect that China’s economy,
given its high growth rates, (7) ___________ (to overtake) the
US in terms of gross domestic product in the first half of this
century.
But they also see that still the US (8) _________ (to remain)
wealthier on a per capita basis given China’s huge population of
1.3 billion, with that of the US currently at about 315 million.
http://economictimes.indiatimes.com/news/international-business/china-
economy-to-overtake-us-by-2019-state-research/articleshow/17952319.cms

SKILLS FOCUS
Reading

1. Read the article below and choose the correct word to fill in
each gap from A, B, C or D.
Why is productivity the key for economic growth?
The productivity (1) _________ at which labour and capi-
tal are put to work is the primary (2) ________ of per capita
GDP and the wealth of any given country. Study after study
265
has proved that productivity increase is the single largest fac-
tor explaining sustained economic growth and (3) _________
of a country’s wealth. In effect, every time a company increases
its productivity, it generates an economic surplus, which it can
then (4) __________ to consumers in the form of better prod-
ucts and/or lower prices. The company can also distribute this
surplus to employees in the form of higher salaries, or to inves-
tors if increased profits are reinvested.
In its simplest form, wealth — measured as per capita GDP —
can be understood as labour participation times labour produc-
tivity. Labour participation is the (5) _________ of people
employed as a share of the (6) ________ population. Labour
productivity is the amount of value-added output produced per
employee.
The amount of labour — in terms of employees or person-
hours — differs from country to country and can vary over time.
But (7) ________ are usually rather small. For example, in Rus-
sia hours worked per employee are almost the same as — or per-
haps even a bit more than — in the United States. But for each
person employed or person-hour worked, the Russian economy
produces only a third of that of the US economy. This clearly
illustrates that (8) ________ productivity — output per hour
worked and output per ruble of capital invested — is the key to
achieving sustained economic growth.
http://www.inprojects.ru/files/Learn_Russia_executive_summary.pdf

1. A. measure B. front C. level D. degree


2. A. power B. pusher C. holder D. driver
3. A. accumulation B. collection C. gathering D. saving
4. A. share B. distribute C. ensure D. provide
5. A. amount B. quantity C. number D. volume
6. A. total B. common C. weighted D. summed
7. A. contradictions B. misleadings C. controversies D. differences
8. A. climbing B. increasing C. developing D. firming

2. Read the text about how to deal with low productivity rates.
Find the proper heading (a—e) for each initiative (1—5).
a) Develop a viable financial system
b) Improve professional education and training

266
c) Minimise expected decline in workforce
d) Increase competitiveness
e) Improve business processes
Russia today needs a new growth paradigm based on increased
efficiency and productivity. Today’s economic crisis provides
both a compelling opportunity and much needed incentive to
finally address Russia’s productivity challenge for the benefit of
longterm economic sustainability. Policy makers and companies
need to act together to tackle the drivers of low productivity by
implementing the following initiatives:
1. Despite high literacy rates and excellent technical education,
a lack of project management, leadership and specialty skills is evi-
dent in some of the sectors studied. Adjusting curriculums to global
best-practice standards as well as increasing the practical compo-
nent in relevant courses would improve skill levels throughout the
economy.
2. The variation in productivity from industry to industry largely
reflects the level of competition within each sector. Retail and steel,
which have the highest productivity among sectors studied, are the
most competitive of the five, with no government-owned enter-
prises. Electric power is at the other end of the spectrum — it was
a monopoly until recently, and competition in electricity genera-
tion was introduced only in 2008. Policy makers should eliminate
regulatory and administrative barriers and create a level playing
field across industries.
3. A comprehensive infrastructure, including, for example, the
creation of credible rating agencies, and more developed financial
instruments, along with stimulating long-term savings and restruc-
turing the banking system, would enable Russia to pool domestic
and capital resources more effectively as well as increase the effi-
ciency of their allocation.
4. Russian regulatory procedures and processes are often overly
complicated and time-consuming, and exert unnecessary control
over some functions. This creates a barrier to the creation of leaner
business processes. At the same time, Russian companies suffer
from low levels of automation, technology, and project manage-
ment skills, as well as an overabundance of unnecessary functions
and processes. Policy makers should focus on eliminating unneces-
sary regulations. Business leaders should implement best-practice

267
lean processes, build world-class leadership, and strengthen perfor-
mance management.
5. Russia’s high death rate in the working-age population could
be reduced significantly even in the relative short term if appropri-
ate government action is taken. Policies aimed at improving health
care, supporting targeted immigration, and increasing the number
of youth, women, and pensioners in the workforce could limit the
expected decline in the workforce.
http://www.inprojects.ru/files/Lean_Russia_executive_sum-
mary.pdf

3. Read more about the stages of economic growth in Reading


file: Unit 9.

Speaking

1. This activity is based on the materials taken from http://www.


economist.com/. The site presents the debate between the two
economists: David G. Victor and Peter Courtland Agre. They
discuss the question “Is sustainable development possible?”
The brief description of the problem is given below:
Sustainability implies stability. Development implies change.
How can the two be reconciled? And what is the role of chem-
istry in that reconciliation? In a debate linked to the Annual
Nobel Laureate Meeting in Lindau, Germany, which this year
gathers winners of the chemistry prize, we investigate this ques-
tion.
Chemistry has an important role in bringing about any recon-
ciliation. It can produce substitutes for things that now require
expensive and polluting mineral extraction. It can clean up efflu-
ent, including carbon dioxide, that would otherwise contribute
to climate change. And it can help with the efficient capture of
sunlight to make electricity and non-fossil fuels. But will that
be enough? Or is “sustainable development” truly the oxymoron
that it sounds?
Your task is to visit http://www.economist.com/debate/over-
view/148 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.

268
a) David G. Victor is a … He is defending the idea of … His
arguments in favour of the statement are …
b) Peter Courtland Agre is a … He is against the idea of … be­­
cause … His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.

2. Answer the following questions.


1. What comes to mind when you hear the word wealth?
2. Do you think it is fair that so much of the world’s wealth
is in the hands of so few people?
3. Do you think it is fair that individuals can enjoy great
wealth by selling or exploiting their country’s natural resources?
4. Do you think people should be forced to distribute their
wealth to create a fairer society?
5. Do you think the world’s wealthiest nations do enough to
help the poorer nations?
6. Do you think your personality would change if you had
great wealth?

3. Comment on the sayings given below.


Benjamin Franklin said: “Early to bed, early to rise, makes a
man healthy, wealthy and wise.”
Margaret Bonnano said: “Being rich is having money; being
wealthy is having time.”
Henry David Thoreau said: “Wealth is the ability to fully
experience life.”
A. J. Reb Materi said: “So many people spend their health
gaining wealth, and then have to spend their wealth to regain
their health.”

Writing
Render the following text using the plan:
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.

269
Реальные причины «экономических чудес»
Примеры того, как бедные или обнищавшие страны вне-
запно, как по мановению волшебной палочки, обгоняли
более развитые государства, вызывают восхищение, зависть
и острые споры о том, из-за чего страны-лидеры спотыка-
лись, а отстающие вырывались вперед. Успехи богатых неф-
тью ближневосточных стран подобных дискуссий не вызы-
вают, поскольку напоминают истории о людях, неожиданно
нашедших клад. Но как подобное удается странам, не только
лишенным значительных сырьевых ресурсов, но и пережив-
шим катастрофические потрясения? Могут ли другие госу-
дарства позаимствовать их опыт и добиться столь же высо-
ких темпов роста?
В Европе XVII столетия «экономическое чудо» произо-
шло не в Испании или Португалии — обе эти страны под-
падают под категорию удачливых «кладоискателей», —
а в Амстердаме, в Голландии, стране, расположенной ниже
уровня моря и разбогатевшей не благодаря, а вопреки своим
природным условиям. Позднее, после Второй мировой
войны, чудесным образом возродилась из пепла Западная
Германия. Нашего внимания заслуживают и «чудеса», сотво-
ренные некоторыми азиатскими государствами, например
Гонконгом и Сингапуром. Наконец, упомянем и почти забы-
тый «экономический прорыв», который совершила Шотлан-
дия: из него можно извлечь особенно полезные уроки.
Что объединяет все эти варианты «экономического
чуда»? Голландия стала первой республикой в Европе, отли-
чавшейся как религиозной терпимостью (и это в то время,
когда по всему континенту процветала дискриминация по
религиозному признаку), так и надежными гарантиями прав
собственности, что создавало возможности для относительно
беспрепятственной торговли и финансовых инноваций.
Но было бы неправильно утверждать, что в роли «чудо­
творцев» выступили сами голландцы. Благодаря открытости
новосозданной республики в Амстердам потянулись обла-
давшие обширными связями и хорошим образованием имми-
гранты — купцы и «менялы» (банкиры из северной Италии);
среди них выделялись евреи и гугеноты, подвергавшиеся
дискриминации в других странах Европы. Они способство-

270
вали превращению Амстердама в мировую финансовую и
торговую столицу. Там возникла первая в мире фондовая
биржа, где французы, венецианцы, флорентийцы, генуэзцы,
немцы, поляки, венгры, испанцы, русские, турки, армяне
и индусы торговали не только акциями предприятий, но и
весьма «продвинутыми» вторичными финансовыми инстру-
ментами.
Немалая часть капиталов, обращавшихся в Амстердаме,
принадлежала чужеземцам или жителям города, имевшим
иностранные корни. «Глобализация» существовала уже в
XVII веке, хотя тогда никто этого понятия, естественно, не
употреблял. Основное различие между той эпохой и сегод-
няшним днем заключалось, конечно, в скорости инфор-
мационных потоков. Доказывая странную идею о том, что
расцвет Амстердама был связан с религией — с «протестант-
ской этикой», Макс Вебер не удосужился проанализировать
характер процессов миграции в этот город. Хотя теория
Вебера настолько вошла в обиход, что стала уже чем-то само
собой разумеющимся, она неприменима ни к Амстердаму,
ни к любому другому процветающему торговому городу или
государству. «Экономическое чудо» в Амстердаме XVII века
сотворили именно образованные и предприимчивые имми-
гранты, имевшие торговых партнеров по всему миру. Те же
факторы обусловили и «экономическое чудо» в других стра-
нах.
http://www.polit.ru/
Unit 10
Economics and globalization
Learning outcomes
After studying this unit you should be able to:
1) explain the role of international economic organisations;
2) distinguish between positive and negative effects of globalization;
3) identify the country’s position in world economic ratings;
4) use the active vocabulary of the unit in speaking and writing;
5) read for different purposes (skimming, scanning);
6) use grammar effectively (gerund and infinitive).

Lead-in
Answer the following questions using the prompts given in
the form of the quotation.
1 What is the main strength of economic globalization?
“Internationalisation is like creating a round-toed shoe that
fits people with all types of feet. It is not as comfortable as a
perfectly fitted shoe and doesn’t fit snugly, but can be worn by
many people.”
David DeBry, Globalizing Instructional Materials: Guidelines
for Higher Education, TechTrends (December 2007)
2 What do individuals feel about globalization?
“Despite different cultures, middle-class youth all over the
world seem to live their lives as if in a parallel universe. They
get up in the morning, put on their Levi’s and Nikes, grab their
caps and backpacks, and Sony personal CD players and head for
school.”
Naomi Klein, author (born 1970), No Logo: Taking Aim at the
Brand Bullies (1999)
3 What must be kept in mind before going global?
“Think globally, act locally.”
Akio Morita, co-founder of Sony (1921—1999)
272
4 What does the future hold for global economics?
“People have accused me of being in favour of globalization.
This is equivalent to accusing me of being in favour of the sun
rising in the morning.”
Clare Short, politician (born 1946)

TOPICS

Text A
Globalization economy
1 The world of today is gradually getting more unified socio-
economically and politically. “Economic globalization” or “glo-
balization” in every sense of the term is encompassing the whole
world and we see an increasing integration of the world produc-
tion, consumption and the financial markets with a concurrent
homogenization of culture worldwide.
2 Globalization of the world economy or economic globaliza-
tion has been especially pronounced after World War II and the
Great Depression of the 1930s in the USA. Technically, global-
ization on the economic front refers to the integration of prod-
uct prices, labour wages, interest rates and rates of profit toward
developed country standards. The rise in the volume of trade
between the developed and the developing countries, increase
in cross-border transactions, rise in immigration and transfer of
technology are some of the key issues of globalization.
3 Although some thought about the ill effects of globalization
like erosion of sovereignty, the emergence of cross-culture, the
accommodation and assimilation of a large number of immigrants
to the developed countries of Europe and the USA, inequal-
ity in the worldwide distribution of income and environmental
degradation persistence, globalization has some desirable fall-
outs which would have been very difficult to achieve otherwise.
Reduction of barriers to different countries, both economically
and politically, have ensured companies worldwide can reap the
advantages of economies of scale by hiring in cheap labour and
raw materials which are not produced domestically. China is
one such example which has reduced its tariff rate to about 13%
at present after its admission to the World Trade Organisation

273
(WTO) in 2001. The list of protected goods which was 300 at
that time has also been cut down. Globalization has led to an
increase in production capacity of different companies across
the world which now caters to a world consumer base. Large
quantities of flow of goods and services from the developed
to the developing countries and vice versa have made Indian
textiles and Chinese electronic goods more popular across the
world. Although Japan experienced the largest gains from trade
in the post globalization period, it is currently facing a slow-
down along with its once favoured trading partner, the USA.
This has also indirectly led to the success of economies within
South and South-East Asia who have scaled up their regional
co-operation amongst themselves resulting in higher trade vol-
umes. Economic globalization has the concomitant effect of the
gains of comparative advantage which leads countries to pro-
duce goods they are most efficient in terms of lowest production
costs which leads, in turn, to increased volumes of world output.
The creation of Multinational Companies (MNCs) or Transna-
tional Companies (TNCs) is one debatable aspect of the global-
ization. While big companies of the developed world opening
shops in the less developed countries have allowed transfers of
improved technologies it has even led to exploitation of workers
of the third world. Globalization of the world economy has had
a major effect in transferring jobs to destinations in South and
South East Asia where wage rates are less than half of those in
the developed world.
4 Transfer of technology has facilitated the opening of vari-
ous turnkey projects in the less developed countries of Asia and
Africa. The improved technical skills which come with these
technologies help the domestic workers in the long run who can
acquire these in the future and develop and manage the sophis-
ticated equipments independently. While countries such as
India and China have experienced increased growth rates, rising
standards of living and a general reduction of poverty, the gap
between the have-nots and the have-lots has grown exponen-
tially. Per capita urban incomes were 2.2 times higher than in
rural households in 1990 which increased to 2.6 in 1999 and fur-
ther to 2.8 in 2000. This has mainly been ascribed to rural unem-

274
ployed not being able to find jobs owing to their lack of techni-
cal skills and education. Globalization has the horrific dimension
of the world getting more polarized with the developed or rich
nations using international organisations and world legislations
to impose Trade Agreements and tax normalization laws in the
developing world. It may also lead to a cultural colonization for
the third world economies. Notably, the North American Free
Trade Agreement (NAFTA) and the South Asian Free Trade
Agreement (SAFTA) has been counterproductive on many occa-
sions.
5 Creation of Export Processing Zones (EPZ’s) and Special
Economic Zones (SEZ’s) with huge inflow of Foreign Direct
Investment needs to be assessed with respect to specific coun-
tries and domestic economic policies which are gradually being
too much dependent on the situation prevailing in foreign coun-
tries also need to be corrected.
6 More industrialization and movement of goods and services
across the world is emitting huge quantities of greenhouse gases
which is causing environmental degradation. With globaliza-
tion, ecological concerns such as climatic changes, global warm-
ing and excessive fishing of oceans can be addressed jointly and
effectively by all the nations. Not surprisingly, economic and
social integration can promote international peace and harmony
among nations.
http://www.economywatch.com/world_economy/world-economic-indicators/
global-economy/globalization-economy.html

Target vocabulary of text A


admission (n) = permission given to someone to enter
a building or place, or to become a member
of a school, club, etc.
How much do they charge for admission?
barrier (n) = a rule, problem, etc. that prevents people
from doing smth, or limits what they can
do
the removal of trade barriers
co-operation (n) = when you work with someone to achieve
smth that you both want
political co-operation with Britain

275
immigration (n) = the process of entering another country in
order to live there permanently
He called for a common European policy on
immigration.
impose (v) = if someone in authority imposes a rule, pun-
ishment, tax, etc., they force people to ac-
cept it
The court can impose a fine.
integration (n) = when people become part of a group or so-
ciety and are accepted by them
The family unit is supported by its integra-
tion into a wider social network.
MNC = (abb.) multinational company (corpora-
tion)
An MNC will pay a lot to buy Indian compa-
nies so it can have a presence in Asia.
poverty (n) = the condition of being extremely poor
Helping to alleviate poverty in developing
countries also helps to reduce environmental
destruction.
sovereignty (n) = the power of a country to control its own
government
Talks are being held about who should have
sovereignty over the island.
TNC = (abb.) transnational company (corpora-
tion)
a world-known TNC
transfer (v) = to move someone or smth from one place,
vehicle, person or group to another
The aim is to transfer power to self-govern-
ing regional councils.
unified (adj) = brought together, combined
a unified EU import market

1. a) Use your dictionary to check the correct pronunciation


of the words below.
socio-economic, encompassing, concurrent, homogenization,
technically, transactions, sovereignty, barriers, to cater, textiles,
concomitant, dimension, polarized, legislation

276
b) Read text A and answer the questions below.
1. What does the term economic globalization mean?
2. How does globalization change word trade, immigration and
technology transfers?
3. What are the ill effects of globalization? How can they be
overcome?
4. What does China’s example teach the rest of the world eco-
nomic community?
5. What role do MNC’s and TNC’s play in the world market?

2. Decide whether the following statements are True or False


according to text A.
1. Globalization increases the volume of world trade. ___
2. Economies of scale and globalization have no direct depen-
dence. ___
3. Multinational companies negatively affect developing coun-
tries. ____
4. Developed nations via world trade agreements make the rest
of the world more dependent on them. ____
5. Globalization has no effect on environment. ___

3. Scan through text A and find the words corresponding to


these definitions.
para 1 and 2
1) to completely cover or surround smth (v) ____________
2) existing or happening at the same time (adj) ____________
3) a business deal or action, such as buying or ____________
selling smth (n)
para 3
4) when smth begins to be known or noticed ____________
(n)
5) the process of becoming an accepted part of ____________
a country or group (n)
6) the results of a particular event, especially ____________
when they are unexpected (n)
7) a reduction in activity or speed (n) ____________
8) existing or happening together, especially as ____________
a result of smth (adj)
9) a situation in which you treat someone un- ____________
fairly by asking them to do things for you, but
give them very little in return (n)

277
para 4
10) ready to be used immediately (adj) ____________
11) to believe that smth or someone has a par- ____________
ticular quality (v)
12) divided into two completely opposing ____________
groups (adj)
para 5 and 6
13) to send out a beam, noise, smell or gas (v) ____________
14) too much (adj) ____________

4. Use the words from exercise 3 to fill in the gaps. (Change the
form of the words so they could fit in the sentences.)
1. The European Union should remain flexible enough to
_______ more countries quickly.
2. The bank charges a fixed rate for each _________.
3. The houses ________ about 100 square metres.
4. The political ________ of the affair cost him his job.
5. More and more manufacturers are offering to tailor-make a
_________ system from their own components.
6. The exhibition reflected _________ developments abroad.
7. The debate is becoming _________ and there seems to be no
middle ground.
8. China’s ________ as an economic power was predictable.
9. Historical writers have often stressed the greed and economic
___________, as well as the politics, which motivated much
missionary work in the early Middle Ages.
10. The alarm ________ infra-red rays which are used to detect
any intruder.
11. The rest of the economy has been slower to cut investment
mainly because the _________ hit the service sector only in
the second half of last year.
12. Under the new educational regulations any increase in stu-
dents meant a __________ increase in funding.
13. Feminist analysis has shown in detail that women’s bodies
bear cultural meanings that are quite different from those
_________ to men’s bodies.

278
14. __________ respect for authority still permeates Japan’s
institutions.

5. Fill in the gaps using the prepositions/particles from the box


below (where necessary).
by  • to • in •  on  • upon
with  • from • at
1. Reducing inflation was, until 1989, the government’s great-
est achievement ___ the economic front.
2. Foundation Studies is one of the means of admission ___ the
degree and diploma programmes of the faculty.
3. Formerly, East German companies had strong vertical and
horizontal integration ___ activities separate ___ the core
business, and large numbers of employees.
4. First and foremost was the rise ___ the price of oil and its
products which provoked both more efficient usage and
switching ___ other, cheaper fuels.
5. Altogether, the 1980s have seen reduced inequality ___
income distribution between urban and rural activities.
6. The value of your investment will depend ___ prevailing
market conditions including but not exclusively the level of
the FT-SE 100 Index ___ that time.
7. A great deal of research has been carried out ___ respect to
the effects of ageing ___ physical and mental capacities.
8. The wages of farm workers are thus determined ___ the con-
ditions prevailing ___ the local labour market, rather than
that for agricultural products.

6. Find word partners between the two lists of words (A and B).
A B
economies of world
comparative versa
the third agreement
vice scale
turnkey capita
trade project
per advantage

279
7. Write the collocation from exercise 6 which corresponds with
the definition given on the right.
1) ______________ used to describe the average amount of
smth in a particular place, calculated ac-
cording to the number of people who live
there
2) ______________ used to say that the opposite of a situa-
tion you have just described is also true
3) ______________ the reduction of production costs that is
a result of making and selling goods in
large quantities, for example, the ability
to buy large amounts of materials at re-
duced prices
4) ______________ the countries of Africa, South America
and Asia which have less developed in-
dustries
5) ______________ the project ready to be used immediately
6) ______________ the idea that countries should only ex-
port the goods that they are able to pro-
duce more efficiently than other coun-
tries and import the goods that other
countries are able to produce more effi-
ciently than them
7) ______________ a formal agreement between two or more
countries about improving trade with
each other, for example by removing im-
port taxes

8. Read the sentences from text B and decide which meaning


(a, b or c) the word in italics has.
1. Technically, globalization on the economic front refers to the
integration of product prices, labour wages, interest rates
and rates of profit toward developed country standards.
a) moral principles about what kind of behaviour or atti-
tudes are acceptable
b) a fixed official rule for measuring weight, purity, value, etc.
c) the level that is considered to be acceptable, or the level
that someone or something has achieved

280
2. China is one such example which has reduced its tariff rate
to about 13% at present after its admission to the World
Trade Organisation (WTO) in 2001.
a) a statement in which you admit that something is true or
that you have done something wrong
b) permission given to someone to enter a building or place,
or to become a member of an organisation, club, etc.
c) the process of taking someone into a hospital for treat-
ment, tests, or care
3. The rise in the volume of trade between the developed and
the developing countries, …
a) the total amount of something, especially when it is large
or increasing
b) a measurement of the amount of space that a substance or
object fills, or the amount of space in a container
c) all the copies of a particular magazine printed in one par-
ticular year
4. Reduction of barriers to different countries, both economi-
cally and politically, have ensured companies worldwide can
reap the advantages of economies of scale …
a) a physical object that keeps two areas, people, etc. apart
b) a type of fence or gate that prevents people from moving
in a particular direction
c) a rule, problem, etc. that prevents people from doing
something, or limits what they can do
5. … using international organisations and world legislations to
impose Trade Agreements and tax normalization laws in the
developing world
a) to force someone to have the same ideas, beliefs, etc. as you
b) if someone in authority imposes a rule, punishment, tax,
etc., they force people to accept it
c) to have a bad effect on something or someone and to cause
problems for them
Text B
Top ten economies of the world
1 Key factors determine a country’s economic ranking includ-
ing the business environment, tax rates, and the general ease of
operations within that country.

281
2 The world’s top ten economies can be determined by exam-
ining factors such as growth prospects, infrastructure, educa-
tional levels of the citizens, and governmental policies and insti-
tutions.
3 Perhaps the most authoritative ranking is the Global Com-
petitiveness Report. It is produced in conjunction with the
World Economic Forum (WEF), and captures both the percep-
tions of thousands of business leaders and statistical analysis by
academics at universities and think tanks worldwide. Indeed, it
includes the WEF’s Global Competitiveness Index, developed
by Professor Martin at Columbia University, and the Business
Competitiveness Index, developed by Professor Porter at the
Harvard Business School.
4 According to the Global Competitiveness Index 2007-2008,
the top ten economies of the world are: the United States, Swit-
zerland, Denmark, Sweden, Germany, Finland, Singapore, Japan,
the United Kingdom, the Netherlands.
5 It is interesting to note that seven out of the top ten econo-
mies are from Europe. These include a number of small but well-
run economies, such as Switzerland, Denmark and Finland. Sin-
gapore has a similar profile and is often dubbed the “Switzerland
of Asia”.
6 Some of the largest economies in the world, however, such
as China, France, Italy, Spain and Canada do not make the top
ten list by competitiveness.
7 The Chinese economy still has many elements of state con-
trol and lacks some crucial legislative frameworks such as intel-
lectual property protection. France continues to be victimized
by powerful unions while Italy has been called the “Sick Man
of Europe” after growth stalled in 1999. Spain is suffering from
some fundamental economic problems such as its vast trade defi-
cit, lower competitiveness and higher inflation.
8 Canada has made economic improvement one of its top
priorities. It has benefited from global growth and the NAFTA
free trade agreement, but maintained high levels of taxation and
regulation, and hence has not made the list.
9 One of the major characteristics of the world’s top econo-
mies is the presence of organisations with sustained financial

282
success. The quality of management at various levels has been
high in all these countries, as has the level of education. There
has also been a lot of innovation in the field of technology. All
these factors have contributed substantially to the standings of
the countries that are in the list of the top ten economies of the
world. This is particularly true in the case of countries like Swit-
zerland, Sweden, Finland, Denmark, and Singapore.
http://www.economywatch.com/economies-in-top/top-ten-economies.html

Target vocabulary of text B


academic (n) = someone who teaches at a college, or who
studies as part of their job; scientist or re-
searcher
This in reality is only partially true, in that
many college students and academics were
also involved in the project.
authoritative an authoritative book, account, etc. is re-
(adj) = spected because the person who wrote it
knows a lot about the subject
the most authoritative work on English sur-
names
capture (v) = to represent or describe smth very accu-
rately
to capture both the perceptions of business
leaders and academic analysis
index (n) = a collection of information
the Business Competitiveness Index
infrastructure the basic systems and structures that a
(n) = country or organisation needs in order to
work properly, for example roads, railways,
banks, etc.
Some countries lack a suitable economic in-
frastructure.
intellectual prop- someone’s idea, invention, creation, etc.,
erty = which can be protected by law from being
copied by someone else
intellectual property protection
legislative (adj) = concerned with making laws
The new assemblies will have no legislative
power.

283
profile (n) = a short description that gives important de-
tails about a person, a group of people, or
a place
a job profile
stall (v) = to stop making progress or developing
While his career has stalled, hers has taken off.
standing (n) = someone’s rank or position in a system, or-
ganisation, society, etc., based on what oth-
er people think of them
Barb’s work helped to improve her standing
with her colleagues.
sustained (adj) = continuing for a long time
a period of sustained economic development
think tank = a group of people with experience or knowl-
edge of a particular subject, who work to
produce ideas and give advice
a leading member of a Tory think tank

1. a) Use your dictionary to check the correct pronunciation


of the words below.
to determine, to examine, authoritative, to stall, deficit, prior-
ity, characteristic, forum, conjunction, profile

b) Read text B and answer the questions below.


1. What factors determine a country’s position in economic
ratings?
2. Why is the Global Competitiveness Report the most trusted
ranking?
3. How do the Global Competitiveness Index and the Business
Competitive Index differ?
4. What are the examples of the most successful economies
around the globe?
5. Why are such large countries as China and Canada excluded
from the list of the most successful economies?

2. Decide whether the following statements are True or False


according to text B.
1. Small-economy countries are not included into economic
ranking. ___

284
2. Most countries from the list of successful economies come
from Europe. ___
3. China lacks state control and has a rigid control over intel-
lectual property protection. ___
4. France is one of the top ten economies of the world. ___
5. Financial success of national organisations is a key factor
which determines the country’s ranking. ___

3. Match the word with its definition.


1) conjunction a) the structure of a society, a legal or
political system, etc.
2) deficit b) a position or level, for example in
a competition
3) framework c) smth that is very important and must
be dealt with before other things
4) perception d) working, happening, or being used
with someone or smth else
5) priority e) a belief or opinion, often held by many
people and based on how things seem
6) ranking f) the difference between the amount
of smth that you have and the higher
amount that you need

4. Use the words from exercise 3 to fill in the gaps.


1. The US balance of payments was in ________.
2. The city’s housing costs were enough to earn it a _________
of 66th nationally.
3. We have to act within the existing legal _________.
4. Banks normally give ___________ to large businesses when
deciding on loans
5. We have to change the public’s __________ that money is
being wasted.
6. He has introduced training programmes in ______ with
such management institutions as Ashridge Management
College.

285
5. Read the sentences from text B and decide which meaning
(a, b or c) the word in italics has.
1. Key factors determine a country’s economic ranking includ-
ing the business environment, tax rates, and the general ease
of operations within that country.
a) the number of times something happens, or the number of
examples of something within a certain period
b) a charge or payment that is set according to a standard
scale
c) used when you are stating one definite fact in a situation
that is uncertain or unsatisfactory
2. It is produced in conjunction with the World Economic
Forum (WEF), and captures both the perceptions of thou-
sands of business leaders and statistical analysis …
a) to succeed in getting something when you are competing
with other people
b) to take something into your possession, especially by force
c) to represent or describe something very accurately
3. According to the Global Competitiveness Index 2007-2008,
the top ten economies of the world are …
a) an alphabetical list of names, subjects, etc. at the back of
a book, with the numbers of the pages where they can be found
b) a collection of information stored on a computer or on a
set of cards, in alphabetical order
c) a system by which prices, costs, etc. can be compared to
those of a previous date
4. Singapore has a similar profile and is often dubbed the “Swit-
zerland of Asia”.
a) a short description of someone’s life, work, character, etc.
b) something that is noticed by many people or gets a lot of
attention
c) an edge or shape of something seen against a background
5. … Italy has been called the “Sick Man of Europe” after
growth stalled in 1999.
a) when something stops working suddenly and without you
intending it to happen
b) to delay taking action or avoid giving an answer in order
to have more time to make a decision or get an advantage
c) to stop making progress or developing

286
6. Fill in the gaps using the prepositions/particles from the box
below.
in  • by • at •  of  • across
from  • to
1. Nurses are demanding higher rates ___ pay.
2. They only pay tax ___ a rate of 5%.
3. The research scientist now expects to find outstanding qual-
ity and ease ___ use in technical software.
4. Decisions about data collection should be determined ___
the need for an informed society as well as for the concerns
of government.
5. According ___ the Health and Safety Executive it costs
British industry more than £2 billion a year in absenteeism.
6. Mail order is suffering ___ the public’s current reluctance to
part with cash ___ non-essential goods.
7. This integration of production ___ national borders tends
to increase the overall volume of world trade because a good
changes hands ___ various levels of production and not just
___ the final stage.
8. It has contributed to the decline ___ direct portfolio invest-
ment as opposed to indirect investment through tax exempt
institutions.

7. Give a definition of the word in bold using the words given


in the list below.
tax competition control
money situation ability
government organisation power
to pay successful to organise
success innovation country
to achieve new area
want idea land
the best invention people
leader analysis developed
person examination rich
to direct to understand successful
to control scientist well-being

287
VOCABULARY

1. Translate the following words into Russian. Check your


answers with a dictionary.
1) decade (n) ________ 5) figure (n) ________
2) Dutch (adj) ________ 6) fraction (n) ________
3) dramatic (adj) ________ 7) intelligent (adj) ________
4) expertise (n) ________ 8) original (adj) ________

2. Translate the following words from Russian into English.


Check your answers with a dictionary.
1) декада ________ 5) фигура ________
2) датский ________ 6) фракция ________
3) драматичный ________ 7) интеллигентный ________
4) экспертиза ________ 8) оригинальный ________

3. Write nationalities of people living in the countries listed


below.
Country Nationality Currency
Argentina
China
Japan
Korea
Russia
Spain
Sweden
Switzerland
the Netherlands
the USA
Vietnam

288
4. Write the full name of the international organisation and
match it with its description.
1) WTO W_________ a) an agreement reached on 6 Janu-
T_________ ary 2004; it created a free trade area
O_________ of 1.6 billion people in Bangladesh,
Bhutan, India, Maldives, Nepal,
Pakistan and Sri Lanka aiming at
reducing customs duties of all trad-
ed goods to zero by the year 2016
2) NAFTA N_________ b) an area within which goods may
A_________ be landed, handled, manufactured
F_________ or reconfigured, and reexported
T_________ without the intervention of the cus-
A_________ toms authorities
3) SAFTA S_________ c) the title of an association of
A_________ emerging national economies: Bra-
F_________ zil, Russia, India, China, and South
T_________ Africa
A_________
4) EPZ E_________ d) an official organisation that deals
P_________ with agreements for buying and
Z_________ selling goods and services between
countries
5) SEZ S_________ e) a geographical region that has
E_________ economic and other laws that are
Z_________ more free-market-oriented than a
country’s typical or national laws
6) BRICS B_________ f) an agreement made in 1994 be-
R _________ tween the US, Canada, and Mexico
I _________ that allows them to trade with each
C_________ other without import taxes, etc.
S_________

GRAMMAR
1. Write what each verb is followed by: infinitive or -ing form.
1) avoid + _______ 4) consider + ____ 7) plan + ________
2) agree + _______ 5) decide + ______ 8) postpone + ____
3) anticipate + ___ 6) expect + ______ 9) risk + _________

289
2. Use the proper verb form to fill in the gaps.
1. If business continues to boom at the same rate, they will
anticipate ______ (to move) to bigger premises by the end
of the summer.
2. As an alternative, the investor might consider ______ (to
invest) in CD manufacturing.
3. Second, if money has to be raised to pay for public goods,
society may wish to avoid _______ (to tax) those whose
incomes are already low.
4. I should be grateful if you could postpone _________ (to
make) a decision on this licence application until after that
date.
5. Normally you should expect _________ (to see) percentages
shown alongside the original number.
6. No merchant will imagine that you will agree ________ (to
pay) the first price he suggests.
7. For the government it is always easier to stick to the tried
and true policies than to risk _______ (to do) something
different.
8. If the government decides ________ (to cut) its expendi-
ture, the line will shift downwards.
9. Chairman Lee Iacocca yesterday said the proposed sell-off
was part of Chrysler’s plan _______ (to become) the world’s
lowest-cost and highest-quality car manufacturer.

3. Rephrase the following using the infinitive or the -ing form


as in the example.
Example: You have to The bank wants you to pay off your
pay off your short-term short-term debts.
debts.
1. Firms have to pay Shareholders want _____________
interest and dividends. ____________________________
2. I saw him sign a con- I remember __________________
tract. ____________________________
3. They have to speak Their colleagues want ___________
English to their col- ____________________________
leagues.
4. They mustn’t provide I don’t want __________________
confident information. ____________________________

290
5. Partners visited us I remember __________________
before Christmas. ____________________________

4. Choose the proper verb form after the expressions in italics.


1. The board are looking forward to hear / hearing your sugges-
tions.
2. Mr. Shulov was the last coming / to come to work.
3. Soon you’ll get used to changing / change delivery schedules.
4. The commission came only finding / to find the ex-president
had ruined the flourishing business.
5. For obvious reasons, few people were likely to admit to
being / be radicals.
6. For the government being / to be so short-sighted was unfor-
givable.

SKILLS FOCUS

Reading
1. Read the text and write one word which is missing.
Going backwards
The world is less connected than it was in 2007.
How integrated countries are with the rest of the world var-
ies more than you might expect. And the world is less integrated
in 2012 (1) ________ it was back in 2007. These are the con-
clusions of the latest DHL Global Connectedness Index, which
found that the Netherlands is the (2) _________ globalized of
140 countries, just ahead of Singapore; landlocked Burundi is
the least.
The index measures both the depth of a country’s connected-
ness (i.e., how (3) __________ of its economy is internation-
alised) and its breadth (how many countries it connects with).
The economic crisis of 2008 made connections both shallower
and narrower. The depth measure has rebounded (4) ________
2009, and is now 10% higher than it was in 2005 — though it
remains below what it was in 2007. But the breadth of connect-
edness has continued to slip, and is now 4% lower than in 2005.

291
At first, (5) _________ the economic crisis took hold, both
trade and capital flows became less globalized, (6) _________
since 2009 trade has bounced back whereas capital flows have
continued to become less globalized, says DHL. This seems to
reflect a fall in the number of places into which companies from
any given country are willing to put their foreign (7) _________
investment.
Even the Netherlands could benefit a lot by becoming more
globalised, says Pankaj Ghemawat of IESE Business School,
(8) ____________ oversees the index. Mr Ghemawat conducts
surveys of popular views of globalization. He finds that people
consistently assume that the world is (9) __________ more
interconnected than it really is. This is why they underestimate
the gains that could be made (10) _________ further globaliza-
tion, he argues. Intriguingly, no group overestimates global con-
nectedness more than company bosses. Perhaps this is why their
efforts to expand abroad so often stumble.
http://www.economist.com/news/business/21568753-world-less-connected-
it-was-2007-going-backwards?zid=293&ah=e50f636873b42369614615ba3c16
df4a

2. Read the article below and choose the correct word to fill in
each gap from A, B, C or D.

The Single European Act and 1992


The European Community was (1) _________ by the origi-
nal six members in 1957. Its chief features were two: there would
be a free trade area inside the Community, and there would
be Community-wide programmes financed by fiscal contribu-
tions from member-governments. The largest Community pro-
gramme was the Common Agricultural Policy (CAP), a system
of administered high prices for agricultural (2) _________. A
more modest programme was the Structural Funds, designed to
(3) _________ subsidies for social infrastructure, especially in
poorer areas of the Community.
Over the following 30 years, the Community was enlarged.
The original six — West Germany, France, Holland, Belgium,
Luxembourg, and Italy — (4) _________ by Denmark, Ireland,
the UK, Greece, Spain, and Portugal. By 1990, therefore, there
were 12 members.
292
Community enlargement was not accompanied by any change
in the fundamental structure of the Community. Member-states
continued to set national (5) __________. The dreamers and
the Eurocrats were always pressing for closer integration, for
example by harmonizing industrial (6) __________ or national
tax rates, but this was usually thwarted for two reasons. First,
since each country had a different way of doing things, it was
impossibly cumbersome to negotiate the single set of regulations
which would apply to all member-states. Second, of course, it
was political dynamite. Nobody wanted to (7) __________
somebody else’s procedures and policy.
In the mid-1980s there was a real breakthrough, and it is
important to understand why it occurred. In most western
countries the 1980s was a decade in which the pendulum swung
against (8) __________ government and extensive regula-
tion of the economy. The emphasis was increasingly on market
(9) ______________, competition, and deregulation. This new
ap­proach influenced not merely the domestic policies adopted
in particular countries but also the spirit in which international
negotiations were conducted.
David Begg. Economics. — 3rd ed. — McGraw-Hill Book Company, 1991. —
P. 619.

1. A. found B. estab- C. stated D. proclaim­­ed


lished
2. A. inputs B. industries
C. manufactures D. commodi-
ties
3. A. provide B. insure C. ensure D. assure
4. A. were B. were C. were con- D. were made
united joined nected
5. A. politics B. strategies C. policies D. manoeuvers
6. A. standards B. boundaries C. machinery D. zones
7. A. stand B. vote C. adapt D. adopt
8. A. big B. extensive C. intensive D. regulatory
9. A. forces B. powers C. strengths D. divers

3. Read more about the fastest growing economies in the world


in Reading file: Unit 10.

293
Speaking
This activity is based on the materials taken from http://www.
economist.com/. The site presents the debate between the two
economists: Daniel Hannan and Douglas Alexander. They are
discussing the question “Should Britain leave the European
Union?” The brief description of the problem is given below:
Britain has long had ambivalent feelings towards the Euro-
pean club it joined in 1973. Sceptical of grand projects like the
single currency, it has directed its diplomatic efforts towards
freeing up trade and expanding the membership of the European
Union. But it has also sought to retain influence within the EU.
That changed at a summit of European leaders on December
8th, when David Cameron, the British prime minister, refused to
agree to a fiscal compact designed to safeguard the euro’s future.
MPs from his largely eurosceptic Conservative Party were
delighted. Some now want Britain to leave the EU altogether
and, like Norway or Switzerland, have a limited trading relation-
ship with the club. Polls suggest that almost half of British vot-
ers agree. But opponents argue that a medium-sized power like
Britain can only exert international influence through the EU.
Your task is to visit http://www.economist.com/debate/over-
view/220 and do the following:
1. Summarise the viewpoints of the debate participants.
Use the speech patterns given below.
a) Daniel Hannan is a … He is defending the idea of … His
arguments in favour of the statement are …
b) Douglas Alexander is a … He is against the idea of …
because … His arguments are …
2. Speak about the results of the debate.
3. Tell your partner about your own viewpoint on the prob-
lem discussed.
4. How would you answer the question “Can business be
taught?”

2. Discuss the following questions with the partner.


1. What is globalization?
2. What are the good things and bad things about globaliza-
tion?
3. Do you think it’s possible to ignore globalization?
294
4. Do you think globalization will make us all the same in the
future?
5. Which countries do you think like or hate globalization
most?
6. Could globalization have happened without the Internet?
7. Can you measure globalization?
8. Do you think globalization will reduce or increase the pov-
erty gap?

Writing
Render the following text using the plan:
1 State the central idea of the article.
2 Give a summary of the article.
3 State the main problem discussed in the article.
4 Point out the facts that turned out to be new for you.
5 Express your own point of view on the problem discussed.

Глобализация является спорным вопросом для бизнеса


и правительства во всем мире. Мы узнаем о глобализа-
ции в основном через ее последствия. Это немного похоже
на электричество — мы не видим его, но мы, конечно, видим,
что оно делает.
Глобализация может быть описана как процесс, посред-
ством которого люди мира объединяются в единое сообще-
ство и функционируют вместе. Этот процесс представляет
собой сочетание экономических, технологических, соци-
ально-культурных и политических сил. Это движение людей,
товаров, капитала и идей из-за увеличения экономической
интеграции.
Глобализация является спорным вопросом в основ-
ном потому, что различные группы интерпретируют ее
по-разному. Для противников глобализации это угрожаю-
щее слово. Они видят ее как погоню крупных транснацио-
нальных корпораций, доминирующих в мире за все более
высокие прибыли. Многие группы находятся под давле-
нием страха, что глобализация угрожает окружающей среде,
а также национальным культурам — они предсказывают,
что она сделает богатые страны богаче, а развивающиеся
страны — беднее. Но сторонники глобализации придержи-

295
ваются другой точки зрения. Они считают, что увеличение
свободной торговли между странами будет залогом процве-
тания и экономического роста для всех стран и предприятий.
Так, глобализация, вероятно, станет горячей темой двад-
цать первого века. Что же касается ее преимуществ, то можно
назвать следующие:
1) возможность познакомиться с культурами разных на­­
родов;
2) разнообразие выбора для потребителей: когда они могут
купить в местных магазинах и супермаркетах не только оте-
чественные товары, но и иностранные;
3) транснациональные корпорации создают дополни-
тельные рабочие места для местного населения, это выгодно
для этих крупных корпораций, так как они могут перенести
трудоемкие части их производственного процесса в страны
с относительно большой численностью рабочей силы в целях
минимизации своих издержек;
4) жесткая конкуренция на местном рынке между оте-
чественными и зарубежными производителями приводит
к производству высококачественной продукции.
Недостатками глобализации являются:
1) загрязнение окружающей среды (одну особенность
следует признать — развитые страны пытаются расположить
вредные для окружающей среды фабрики и заводы не в их
собственных странах, а в развивающихся странах);
2) глобализация уничтожает культурную идентичность,
например, европейцы обычно стараются навязать свои обы-
чаи и традиции азиатским народам;
3) многонациональные корпорации предпочитают исполь-
зовать дешевую рабочую силу в развивающихся странах,
например в Азии, и в то же время они обеспечивают своих
работников плохими, а иногда и ужасными условиями труда;
4) для отечественных производителей трудно конкуриро-
вать с транснациональными корпорациями, особенно если
это новая отрасль промышленности;
5) не в последнюю очередь важно то, что мы фактически
не знаем, к чему глобализация может привести, мы не пони-
маем ее последствий.
http://engmaster.ru/topic/4777

296
Check your progress (5)

1. Match the word with its definition.


1) emerge from (v) a) a long period during which there is
very little business activity and a lot of
people do not have jobs
2) equation (n) b) when people become part of a group
or society and are accepted by them
3) depression (n) c) to come out of a difficult experience
4) shrink (v) d) someone’s rank or position in a sys-
tem, organisation, society, etc., based on
what other people think of them
5) integration (n) e) the set of different facts, ideas, or peo-
ple that all affect a situation and must be
considered together
6) sovereignty (n) f) to become or to make smth smaller in
amount, size, or value
7) infrastructure (n) g) the power of a country to control its
own government
8) standing (n) h) the basic systems and structures that
a country or organisation needs in order
to work properly

2. Use the words from the box to fill in the gaps. Change the
form of the word where necessary.
to boost  •  to incorporate  •  to diverge
distinct  •  property  • sustained •  think tank
barrier  •  to impose  •  to transfer
1. Traditionally, local government provided services for
_________ owners — paved streets, lighting, water, sewer-
age and police — and so the main local government tax has
always been a rate levied on property values.
2. It has never before been more important _________
informed legal advice into corporate decision making.
3. “The UK housing market looks set for a __________ and
significant recovery in 1993,” says the report.

297
4. In European countries, it took the working class years and
years before they fully realised the fact that they formed
a ____________ and, under existing conditions, a perma-
nent class of modern society.
5. Lack of investment in skills and innovation limits the poten-
tial of many __________ their levels of pay and job satisfac-
tion.
6. The alternative might be to arrange with your bank manager
_________ these funds into a separate account in your sis-
ter’s name.
7. In open, borderless capital markets, it is hard for borrowing
costs _________ very far.
8. The third member of the team is Michael Simmonds, a lead-
ing light in right-wing _________ the Adam Smith Insti-
tute.
9. Other Andean countries, spotting new opportunities in free
trade, have agreed to get rid of most trade _________ by
1992.
10. The Government can encourage firms to train more, but for
the Government _________ taxes on companies to insist
that they train more does not take into account the effects,
demands and needs of different industries.

3. Fill in the gaps using the correct preposition (where


necessary).
1. This discussion of Yugoslav monetary policy is concluded
with a summary given in Table 8.4, of the changes ___ the
cost of living and the money supply ___ the period 1977-87.
2. In such circumstances, the multiplier effect ___ equilibrium
of a fiscal policy of changing is given by this.
3. It has yet to be of proven value, but studies are currently
___ progress.
4. But the numbers of accidents on local roads within the resi-
dential neighbourhoods are ___ average less than one quar-
ter ___ the total in the area.
5. Under Mrs. Thatcher a major improvement ___ parliamen-
tary control of the executive was introduced ___ the cre-
ation of the select committee system in 1979.

298
6. Mr. Bishko says sales volumes need to rise ___ a fifth or a
quarter for the US operation to break even, and more stores
will be needed before it makes a satisfactory profit.
7. These changes have brought about a reduction of inequality
___ education throughout the region.
8. It is, I think, commonly supposed that there is a division
of responsibility ___ respect ___ these two main aspects of
mediation.
9. We shall assume that output is determined ___ the minimum
of supply and demand, so that with excess supply ___ both
markets, the quantities traded in each will be determined
___ demand.

4. Find word partners between the two lists of words (A and B).
A B
multiplier calculus
differential rate
technically expectancy
literacy effect
life advantage
income demanding
comparative distribution

5. a) Translate the following words from English into Russian.


accurate, actual, administration, billion, campaign, data,
decade, dramatic, expertise, figure, fraction, intelligent, original

b) Translate the following from Russian into English.


аккуратный, актуальный, администрация, компания, дата,
декада, экспертиза, интеллигентный, оригинальный

6. Choose the proper form of the verb (Future Simple, Future


Continuous and Future Perfect).
1. For example, they recognise that in the recovery phase of the
cycle, the demand for money ___________ (to increase /
constantly) to finance the greater volume of transactions.
2. I have to make sure that whatever happens by next Saturday
night we _________ (to do) all we can.

299
3. The congress _________ (to determine) the future of the
Communist Party.
4. In 2015 the top three maybe _________ (to take) 35% of
the European market he says, by 2020 he believes this share
__________ (to rise) to 75%.
5. Downland Housing Association __________ (to make)
their selection interviews during the first week in May.
6. I believe that a new distribution business unit _________
(to integrate) all its worldwide direct sales operations.

7. Use the proper verb form to fill in the gaps.


1. We’re considering __________ (to sell) the house.
2. The bank has agreed __________ (to lend) me £5000.
3. I try to avoid _________ (to go) shopping on Saturdays.
4. They anticipate ___________ (to have) several applicants
for the job.
5. In the end, we decided _________ (to go) to the office.
6. They’ve decided ___________ (to postpone) taking a credit
for a while.

8. Answer the questions.


1. What is development economics about?
2. What is the difference between economic growth and eco-
nomic development?
3. How can economic development be measured?
4. What effect does globalization have on the world economy?
5. What are the examples of the most successful economies
around the globe?
Part II
Workbook
Unit 1
What is Economics about?
Text A

1. Match the term with its definition.


1) abundance a) to have or provide smth that is needed or
(n) wanted
2) alternative b) the study of society and the way people
(n) live
3) goods (n) c) to make smth or bring smth into existence
4) needs and d) the things that a person must have in or-
wants der to have a satisfactory life
5) produce (v) e) not easy to find or get
6) satisfy (v) f) when there is more than enough of smth
7) scarce (adj) g) everything that is produced in the economy
8) services (n) h) a system or organisation that provides for
a basic public need
9) social sci- i) smth that is different from smth else, es-
ences pecially from what is usual, and offering the
possibility of choice

2. Use the terms from exercise 1 to fill in the gaps.


1. Although in economic theory all __________ are consid-
ered tangible, in reality certain classes, such as information,
may only exist in intangible forms. For example, an apple is
a tangible object, while news belongs to an intangible class
of __________ and can be perceived only by means of an
instrument such as print, broadcast, or computer.
2. The company has intensified the production process. We
are now ___________ the same quantity of goods with far
fewer workers.
302
3. Land suitable for cultivation is increasingly becoming a
scarce commodity worldwide. Food-importing countries
with constraints on land and water, large populations, boom-
ing economies are seeking for land abroad to __________
the demand for food and biofuel crops.
4. One of the surprising features of modern economic growth is
that economies which have natural recourses in __________
tended to grow slower than economies without substantial
natural resources.
5. __________ are intangible and insubstantial: they cannot
be touched, gripped, handled, looked at, smelled, tasted or
heard. Thus, there is neither potential nor need for transport,
storage or stocking of __________.
6. Some drawbacks of the present system make the production
process ineffective. Is there a viable __________ to it?
7. __________ is the field of study concerned with society
and human behaviours. This term is commonly used as an
umbrella term to refer to a plurality of fields outside of the
natural sciences.
8. Allocation of __________ resources is a reality for health
care professionals and organisations. Resource allocation
issues can be particularly challenging for rural communities,
where resources are not enough to meet all needs and fewer
alternatives exist to resolve conflicts between competing
needs.
9. A __________ is something you have to have, something
you can’t do without. A good example is food.
A __________ is something you would like to have. It is not
absolutely necessary, but it would be a good thing to have. A
good example is music.

3. Find the following words and word combinations in the text


Defining economics.
общественные науки, удовлетворять потребности и жела-
ния, изобилие, редкость, важное понятие в экономике,
доступные ресурсы, разрешить конфликт, важный вывод
(следствие), делать выбор, избежать трат, использовать
эффективно, с социальной точки зрения, с целью определить

303
4. Use the words from the box to complete the sentences. Do
not forget to change the word form to fit the sentence properly.
abundance  • available • objectives • perspective
consequence  • alternative •  to resolve
to produce  •  to satisfy  •  goods and services
scarce  • waste
1. The factory __________ an incredible 100 cars per hour.
2. If payment is not received, legal action will be our only
__________.
3. One quality the team possessed in __________ was fighting
spirit.
4. There was fierce competition for the __________ resources.
5. Funds are __________ to assist teachers who want to attend
the conference.
6. The crisis was __________ by negotiations.
7. Many believe that state aid is a __________ of taxpayers’
money.
8. We have to look at everything from an international
__________.
9. Managers should set specific performance __________ for
their teams.
10. The program is designed __________ the needs of adult
learners.
11. There will be tax increases on a range of __________.
12. Many believe that poverty is a direct __________ of over-
population.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 satisfy
2 — abundance
3 — scarcity
4 produce
5 allocate —
6 performance —

304
6. Choose the proper form of the word to complete the sentence.
Use the words from exercise 5.
1. Finance officials expressed __________ with the recovery of
the dollar.
Have you __________ all the requirements for the general
degree?
None of the solutions was entirely __________.
2. Rich countries have money supply in __________.
An __________ supply of fresh water is obvious in this part
of the world.
3. There was fierce competition for the ______________
resources.
The __________ of employment opportunities unpleasantly
surprised us.
4. The new model will go into __________ next year.
The economy’s __________ capacity is very high.
How did you manage __________ a meal so quickly?
5. They __________ 3% of the advertising budget to newspa-
per ads.
The program is financed with a $5 billion annual __________.
6. The regulator failed __________ his duty to seek an enforce-
ment order.
The Fund’s past __________ does not necessarily indicate
how it will perform in the future.

7. Choose the correct word.


1. Let’s look at the questions from an economic standpoint /
idea.
2. There is a well-off / a trade-off between doing the job accu-
rately and doing it quickly.
3. The judges’ decision provoked discussions / controversy.
4. They were debating the saying / the proposition that “all peo-
ple are created equal”.
5. The aim of the inquiry / the request was to determine what
had caused the accident.
6. What we are seeing increasingly is a society of private influ-
ence / affluence and public squalor.
7. They are seeking to realise the maximum financial gain /
income.

305
8. The number of crimes that occur per se / per capita is
decreasing nowadays.
9. Analysts expect the pound to come under pressure / weight.
10. The pervasive influence / affluence of television is felt every-
where nowadays.
11. It is a legal requirement / demand that you have insurance
for your car.
12. He was virtually / truly unknown before running for office.
13. In a poverty-stricken / prosperous country like this, no one
should go hungry.
14. We are lacking / missing three members of staff due to illness.

8. Fill in the gaps using the words from the box.


abundance  • alternative • scarcity
economise  • virtually • predict
administration  • agreement
misconceptions  • distribution
The importance of economics
(1) ________ everyone agrees on the importance of econom-
ics, but there is far less (2) _______ on just what economics
is. Among the many (3) _________ of economics is that it is
something that tells you how to make money or run a business
or (4) _________ the ups and downs of the stockmarket. But
economics is not personal finance or business (5) _________,
and predicting the ups and downs of the stock market has yet to
be reduced to a set of dependable principles. To know what eco-
nomics is, we must first know what an economy is. Perhaps most
of us think of an economy as a system for the production and
(6) __________ of the goods and services we use in everyday
life. That is true as far as it goes, but it does not go far enough.
The Garden of Eden was a system for the production and distri-
bution of goods and services, but it was not an economy, because
everything was available in unlimited (7) __________. Without
(8) _________, there is no need to (9) _________ and therefore
no economics. A distinguished British economist named Lionel
Robbins gave the classic definition of economics: economics is the
study of the use of scarce resources which have (10) __________
uses.

306
Text B

1. Match the term with its definition.


1) real income a) the part of society, especially universities,
that is connected with studying and think-
ing, or the activity or job of studying
2) the middle b) inability to afford an adequate standard of
class (n) consumption
3) credit card c) the money that is used for a particular
purpose, especially by a government, organ-
isation, or group
4) academia (n) d) this is found by taking money income and
deflating by a suitable price index
5) spending (n) e) the social group that consists of well-ed-
ucated people, such as doctors, lawyers, and
teachers, who are neither very rich nor very
poor
6) output (n) f) the activity of buying and selling products
and services
7) commerce (n) g) a small plastic card that can be used to buy
goods or services and then pay for them at
a later time
8) poverty (n) h) the amount of goods and services, or waste
products, that are produced by a particular
economy, industry, company, or worker

2. Use the terms from exercise 1 to fill in the gaps.


1. While business refers to the value-creating activities of an
organisation for profit, _______ means the whole system of
an economy that constitutes an environment for business.
The system includes legal, economic, political, social, cul-
tural, and technological systems that are in operation in any
country.
2. Absolute ________ or destitution refers to the one who
lacks basic human needs, which commonly includes clean
and fresh water, nutrition, health care, education, clothing
and shelter.
3. _______ is the community of students and scholars engaged
in higher education and research.
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4. In February 2009, The Economist announced that over half
the world’s population now belongs to _________, as a
result of rapid growth in emerging countries.
5. Online merchants rely on electronic payments, and it would
hurt their businesses if they did not accept ________.
6. According to a report by the Confederation of British Indus-
try, factory ________ has risen in much of Britain over the
past three months.
7. Real _________ is the money earned by a person, company,
government, etc. over a particular period of time that is cal-
culated by taking into account the effect of inflation on what
can actually be bought with that money
8. Net _________ on Britain’s infrastructure last year was
£2.6 billion.

3. Find the following words and word combinations in the text


Scarcity and importance of economics.
ограничивать наш выбор, реальный доход на душу насе-
ления, уровень жизни, жить расточительно, сводить «концы
с концами», подразумевать, требования, по существу (практи-
чески), успешный или испытывающий нужду, стране не хва-
тает рыночных механизмов, можно закупить в других странах,
материальное благополучие, торговый баланс, компромисс
(уступка), противоречия, утверждение (высказывание)

4. Use the words from the box to complete the sentences.


literacy  • commodity  •  self-interest
emphasis  •  framework  • activities
betterment  • distribution • expansion
1. The future trade agenda can provide an important ______
for restoring sustainable growth.
2. Governor O’Malley yesterday described the _________ of
Maryland’s infrastructure as an investment for future gen-
erations.
3. The industry underwent a period of rapid ________.
4. We handle the ______ of the product in the US and Mexico.
5. Water is a very scarce _________ in the region.

308
6. Some financial companies argue, perhaps out of _________,
that the standards are dangerous.
7. We invest primarily in companies which have their principal
business _________ in the Pacific Basin.
8. At 62%, India’s adult _________ rate is a reminder of the
country’s status as a developing nation.
9. I think we should put as much _________ on preventing
disease as we do on curing it.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 represent
2 accept —
3 justifiable
4 — employer/employee
5 reduce
6 authority

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. A ________ is someone who has been chosen to speak, vote,
or make decisions for someone else.
The pollsters asked a ________ sample of New York resi-
dents for their opinions.
A delegation was in Japan last week ________ the industry
in high-level trade talks.
There has been a decline in union ____________ in the auto
industry.
2. The buyer may refuse ___________ the goods if they do not
comply with the contract.
On ________ of the proposal, a draft agreement will be sent
to both parties.
They declared some generally _______ principles of fairness
and justice.
3. There is no ________ for holding her in jail.
Ministers must appear before parliament and ____________
their actions.
Are these experiments morally _________?
309
4. The shoe factory is the largest ________ in this area.
Someone who is paid to work for someone else is called
_________.
The call centre _________ over 100 people.
A self-__________ person is someone working for them-
selves and not employed by a company.
5. The industry’s workers have been subjected to ________
hours and the potential for layoffs.
The company promised they would make no staff ________
for at least two years.
The governor announced a new plan _______ crime.
6. The Executive Committee can delegate _______ to the
Chairperson.
The Board of Directors ________ a share buy-back program
for up to 60 million shares of the company.
Critics claim his management has become too ______.
He has a commanding presence and an __________ voice.

7. Choose the correct word.


1. American consumers prefer white eggs; alternatively / con-
versely, British buyers like brown eggs.
2. Relatively / Closely speaking, land prices are still pretty
cheap here.
3. In all, more than 650 people completed / finished the ques-
tionnaire.
4. Minding / Regarding your recent inquiry, I have enclosed a
copy of our new brochure.
5. Alternatively / Apparently the company is losing a lot of money.
6. She’s served on innumerable / multiple committees.
7. Exchange rate mechanism / machinery is a system for con-
trolling the exchange rate between the money of one country
and that of another.
8. America is a nation with a high standard / level of living.
9. The aim of the inquiry was to determine / solve what had
caused the accident.

8. Translate the following sentences from Russian into English.


1. Экономика — это хозяйство в широком смысле этого
слова, т.е. совокупность всех средств, предметов, вещей, суб-

310
станций материального и духовного мира, используемых
людьми в целях обеспечения условий жизни, удовлетворе-
ния потребностей.
2. Экономику надо воспринимать как созданную и исполь-
зуемую человеком систему жизнеобеспечения, воспроизве-
дения жизни людей, поддержания условий существования.
3. Экономика также это наука об использовании разно­
образных ресурсов в целях обеспечения жизненных потреб-
ностей людей и общества, об отношениях, возникающих
между людьми в процессе хозяйствования.
4. Некоторые специалисты характеризуют экономику
как отношения, возникающие между людьми в связи с про-
цессами производства, распределения, обмена, потребления
товаров. Так что в целом экономика — это хозяйство, наука
о хозяйстве и хозяйствовании и человеческих отношениях
в процессе хозяйствования.
5. Экономическая наука зародилась намного позже, чем
сама экономика. В течение многих тысячелетий экономиче-
ской истории люди хозяйствовали, опираясь на передавае-
мый из поколения в поколение опыт.
Unit 2
Basic economic questions
Text A

1. Match the term with its definition.


1) capital (n) a) a process by which two or more things
affect each other
2) custom (n) b) new machines, equipment, and ways
of doing things that are based on modern
knowledge about science and computers
3) distribute (v) c) if several things of the same type vary,
they are all different from each other
4) exert (v) d) all the people who work for a company
or in a country
5) interaction (n) e) an amount of money that you can use to
start a business or to make more money
6) labour (n) f) to use your power, influence, etc. in order
to make smth happen
7) profit (n) g) the amount of wealth, comfort, and other
things that a particular person, group, coun-
try, etc. has
8) standard of h) the money that you gain by selling things
living or doing business, after your costs have been
paid
9) technology (n) i) a habit or tradition
10) vary (v) j) to share things among a group of people,
especially in a planned way

2. Use the terms from exercise 1 to fill in the gaps.


1. There are two ways for the company to make a ________:
either by raising the prices or by reducing the production
costs.

312
2. Welfare of the state is often shown by the _________ of its
citizens — the higher it is, the more developed the country is
considered.
3. Financial _______ is used by entrepreneurs and managers to
purchase the factors of production.
4. Many producers ________ their goods directly to house-
holds in this area.
5. The market is always characterised as an arrangement for
_________ between buyers and sellers.
6. In the traditional economy with almost no surplus people
live lives of subsistence and it is ________ that decides what
jobs they are engaged in.
7. A well-funded national organisation would be able to ______
more influence in the parliament.
8. _______ must be interpreted in a very broad way as it
includes not only available machinery but also all know how
about production methods.
9. The concentration of large numbers of workers within very
large production units allowed the process of production to
be more effective due to the division of ________.
10. The preferences of consumers _______ greatly and it should
be the task of the marketing campaign to study them.

3. Find the following words and word combinations in the text


Three basic economic questions.
независимо от формы, уровень экономического развития,
сделать выбор, факторы производства, относительно, равное
количество, медицинские услуги, распределяться, решает
эти вопросы, рыночная экономика, неограниченное коли-
чество вариантов, обычаи страны, на рынке, получить при-
быль, экономить на стоимости рабочей силы, для каждого
гражданина, уровень жизни, принести пользу всей стране

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
population  •  to force  •  to motivate  • individual
benefit  • marketplace • society •  to handle
factors of production  • relatively
government  •  to determine

313
1. The scale of the _______ intervention is a rather controver-
sial issue.
2. While the potential _______ of genetic engineering is sub-
stantial, the potential dangers may be equivalent.
3. The methods which were used to ________ the crisis were
approved by the board.
4. The ________ include land with all natural resources,
labour — managerial and professional, and capital such as
machinery, buildings, technology, and information.
5. The prices for goods and services and individuals ability to
pay for them _________ who will get these products.
6. Higher taxes may _______ people to work; however, they
can have a disincentive effect.
7. A company with a small share of the market will eventually
become marginal in the _______ and thereby exceedingly
vulnerable.
8. The important question to answer in economics is how the
_______ allocates scarce resources between competing
demands.
9. Many of the world’s poorest countries are trapped in a cycle
of debt thus making their ______ suffer.
10. In the market decisions are made voluntarily; nobody is
_______ to buy anything.
11. The sales have experienced a ________ slight decline in
comparison with the previous year.
12. The willingness of _______ to supply their services to the
labour market is dependent on the wage rate.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 benefit
2 tax —
3 vary
4 — solvent
5 regulate
6 limit

314
6. Choose the proper form of the word to complete the sentence.
Use the words from exercise 5.
1. The use of solar power will _______ the mankind.
It is extremely _________ to use state-of-the-art equipment.
Unemployment ________ are paid to people without a job.
2. There are _________ ways to solve the problem.
The _______ of options made the solution easy to be found.
The type of economic system _______ from country to
country.
3. The governor made a controversial decision to raise _____.
By _______ companies and individuals the government
raises funds to make transfer payments.
4. A truly market economy hardly exists in the world since
governments set ______ to control the economy.
There has always been a controversy between scarce
resources and people’s ______ wants.
The economist has _______ a choice having abolished the
most part of components in the model.
5. Safety _______ may prevent producers from the most pro-
ductive process because the latter are often quite dangerous.
They attended to practical problems of ______ policy, but
took largely for granted the analytic side.
Government agencies ________ and control the provision
of some essential services.
6. If you are_______, you have enough money to pay your bills
and other debts.
An increase in fuel costs may seriously harm the company’s
future _______.

7. Choose the correct word.


1. You would better ask the bank manager for advice / advise
about the type of deposit.
2. The company checks / controls every new document very
carefully.
3. Do these cars confirm / conform to the new safety regula-
tions?
4. The population didn’t approve of the government’s econo­
mic / economical policy.

315
5. The company increased produce / productivity by 15% in this
department.
6. The price / prize list has been included in the attached file.
7. The income / salary from the investment accounted for sev-
eral thousands last year.
8. If an individual pays too much tax they get a discount /
rebate.
9. How will the increased demand affect / effect the sales?
10. Before applying for the job, he studied economics / economy
at the university.
11. The cost of life / living has gone up again.
12. The company expects prices to rise / raise by minimum 5%.
13. Consumers can hardly say / tell the difference between the
two products.
14. Contrary to / Contracting to the expectations the sales went
down last month.
15. They imposed restrictions / regulations on the sales of certain
electronic goods.

8. Fill in the gaps using the words from the box.


control  • determine • regulate • attributed
interact  • restricted • taxes • underpin
allocated  • handling
The market economy
In such an economy decisions on how resources are to be
(1) __________ are usually taken by millions of households and
thousands of firms. The key point is that they (2) ___________
as buyers and sellers in the market for goods and services. Prices
and the operation of the price system (3) ______ this interac-
tion; in turn prices act to (4) _______ the likely market value
of particular resources.
Economics as a subject has its origin in the notion that
prices and the market mechanism are the “best” way of
(5) ______________ economic problems. This notion can be
particularly (6) __________ to the Scottish economist Adam
Smith, who is remembered for his reference to an “invisible
hand” (the price system) that brings together private and social
interests in an harmonious way.

316
The government has a very (7) ________ part to play. For
example, in Smith’s view, it should (8) ________ national
defence, act against monopolies, issue money, raise (9) ________
and so on whilst protecting the rights of the private sector. It
certainly should not try to influence the dealings of individuals
in the market or to (10) _________ the workings of that market.
(Collin Bamford, Keith Brunskill, Gordon Cain, Sue Grant, Stephen Munday,
Stephen Walton. Economics. AS Level and A Level. — Cambridge University Press.)

Text B
1. Match the term with its definition.
1) axis (axes, pl.) (n) a) imagined or suggested but not neces-
sarily real or true
2) desirable (adj) b) a line at the side or bottom of a graph
3) unit (n) c) to make marks to show the position,
movement or development of smth,
usually in the form of lines or curves
between a series of points on a map or
piece of paper
4) plot (v) d) the decision to allocate smth, or the
act of allocating it
5) complicated (adj) e) smth that is desirable is worth having
or doing
6) curve (n) f) a line on a graph that gradually bends
and represents a change in the amount
or level of smth
7) disposal (n) g) involving a lot of different parts, in
a way that is difficult to understand
8) alternative (n) h) a measure used to express an amount
or quantity
9) assign (v) i) to intentionally become involved in
a difficult situation in order to improve
it or prevent it from getting worse
10) hypothetical j) a family or group of people who live
(adj) together in a house
11) allocation (n) k) smth you can choose to do or use in-
stead of smth else
12) household (n) l) to give a particular time, value, place,
etc. to smth
13) intervene (v) m) available for someone to use

317
2. Use the terms from exercise 1 to fill in the gaps. Change the
word form where necessary.
1. When confronted with any chart, it is important to look
carefully at the vertical ________.
2. The true cost of any choice we make between _________ is
called opportunity cost.
3. The production possibility _______ is usually concave.
4. Remember, the values on this sheet are _________.
5. In the beginning analyse carefully the data _________ on
the graph.
6. Workers have a fixed total amount of facilities at their
__________.
7. The organisation should prevent socially unacceptable
actions or outcomes in markets and direct market activity
towards socially __________ ends.
8. The company specialises in producing a range of products
from ________ utensils to polyester clothing.
9. By transferring workers from one industry to the other, the
economy can produce more _________ of one good but sac-
rificing the other.
10. This example looks like a simplified representation of
the planned economy but in reality planning is a very
__________ process.

3. Find the following words and word combinations in text B.


распределение ресурсов, распределение доходов, пред-
назначение имеющихся ресурсов, конкурирующие аль-
тернативы, делать выбор, граница производственных воз-
можностей, уровень производства, производственная
эффективность, гипотетическая экономика, в своем распоря-
жении, отмечено на оси, определенные комбинации, в свою
очередь, домохозяйства получают, вмешиваться в экономику

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
available  • output • circular • commodity
to define  • efficiency •  to join
combination  •  to intervene  • flow

318
1. The law of diminishing returns says that each additional
worker adds less to total ________ than the previous addi-
tional worker added.
2. How many goods and services an economy is capable of pro-
ducing is determined by ________ resources.
3. The various _______ of goods produced are shown on the
vertical axis.
4. The creation of capital goods can be _______ as any produc-
tion not for current consumption.
5. In the command economy the government ________ in its
operation.
6. The analytical department should control the ________ of
output and take immediate measures if necessary.
7. The point on the graph where two lines ________ is known
as intersection of these two lines.
8. You can be provided with the possibility of construction of
diagrams, for example, column-like (bar charts) or ________
(pie charts).
9. More _________ and productivity can be achieved through
the division of labour and specialisation in the manufactur-
ing process.
10. If a _________ price goes up, consumers will try to use less
of this product.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 refer —
2 produce
3 relative
4 decision
5 distribution

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. Developing countries have a tendency to a very unequal
________ of wealth.
It is clear that a reorganisation is necessary on the ______
side of this industry.
319
Most of manufacturers ______ their products through sepa-
rate wholesale companies.
2. Imposing tariffs and quotas can affect the international
______ between countries.
Unemployment benefits, welfare payments, retirement pen-
sions _______ to transfer payments.
This example is about ________ poverty in some developing
countries.
3. The _______ process was organised in a short period of
time.
The _______ in the factory increased due to new technolo-
gies.
The poor should be allocated more of what is ________.
The report of the minister concerned the country’s ________
capacity.
4. To acquire more information about it you can ________ to
the textbook on economics.
His speech contained a number of ________ to the tax
reform.
5. The _________ to raise taxes was disapproved of by the
public.
Quite ________ measures should be taken immediately to
solve this problem.
The government _________ to implement the plan in a
short-term period.

7. Choose the correct word.


1. They raised taxes on the assumption / presumption that it
would help control spending.
2. Rapid government reforms managed to avoid / prevent a dis-
turbance taking place.
3. The minister spoke briefly / shortly about the need for eco-
nomic reform.
4. Environmental health officers regularly control / inspect the
premises and equipment.
5. The plan was appropriate in theory; however / moreover in
practice it occurred extremely difficult to implement.
6. Every citizen has the right to a decent work / job with good
pay.

320
7. When inflation went out of control, paper money became
worthless / priceless.
8. The principal / principle products of the country are steel
and metal.
9. The government’s responsibility is, among others, to ensure
social security / defence.
10. It appeared to be quite urgent to do / make a decision.
11. The main economic issue is how to allocate / distribute
resources among competing uses.
12. The economy considers growth first and second / foremost as
its main objective.

8. Translate the following sentences from Russian into English.


1. Для любой экономики проблема выбора важна для
определения границы производственных возможностей.
Все возможные комбинации, достижимые и недостижимые,
можно показать на кривой производственных возможностей.
2. Кривая, которая проходит через точки A, B, C, D, пока-
зывает, что если в гипотетической экономике с двумя видами
товара производится максимальное количество единиц
одного товара, то выпуск другого товара будет равен нулю.
3. В экономической системе производители, потребители
и правительство ежедневно принимают решения, руковод-
ствуясь системой цен. Именно взаимодействие этих трех
групп заставляет экономику функционировать.
4. Правительства всегда в какой-то степени участвовали
в принятии экономических решений. Они предоставляют
трансфертные платежи, обеспечивают вложения в инфра-
структуру, социальные программы, направленные на под-
держку уязвимых слоев населения.
5. Адам Смит, «отец современной экономики», считал, что
благосостояние нации зависит от способности этой нации
производить товары. В свою очередь, стоимость этих това-
ров зависит от стоимости факторов производства — земли,
труда, капитала.
6. Можно с уверенностью утверждать, что в реальности
рыночная и плановая экономические системы вряд ли суще-
ствуют в чистом виде. В большинстве стран преобладает сме-
шанный тип экономики, где процесс распределения ресурсов
контролируется и частным, и государственным секторами.

321
Unit 3
Positive and normative economics
Text A

1. Match the term with its definition.


1) concerned with (adj,a) extent or range of smth (view, re-
never before a noun) search)
2) option (n) b) to react favourably
3) scope (n) c) to explain smth more clearly so
that it is easier to understand
4) determine (v) d) dealing with particular subject
5) respond (to) (v) e) detailed, covering or involving
many aspects
6) clarify (v) f) to prove that smth is present using
scientific methods
7) course of action g) smth that may be or is chosen;
choice
8) comprehensive (adj) h) to follow
9) detect (v) i) to conclude or ascertain, as after
reasoning, observation
10) pursue (v) j) the things that you choose to do in
a particular situation

2. Use the terms from exercise 1 to fill in the gaps.


1. Making decisions requires comparing the costs and benefits
of alternative _______.
2. Most of our time, including the meeting between the two
delegations, was ________ economic cooperation.
3. When economists talk about incentives, they are thinking
that people _________ costs and benefits.

322
4. Our services are designed to help our clients understand
their markets, assess risks and ________ the uncertainties
inherent in any development initiative, business strategy or
public policy initiative.
5. The limitations are the inherent design or methodology
parameters that can restrict the ______ of the research find-
ings and are outside the control of the researcher.
6. Everyone knows this is false: the Bank is ______ a loose
monetary policy to help growth.
7. So if it’s true that the plan is not going to add to the deficit,
that leaves only one _______.
8. With a naked eye one can ________ in the graph two large
anomalies in the economic history of the US — the Great
Depression from 1929 to 1933 and the Second World War
from 1941 to 1945.
9. On April 16th, it published a ________ report on the fuel
savings and emissions from electric vehicles.
10. It is too soon to _________ whether the advertisement has
been successful.

3. Find the following words and word combinations in the text


Positive and normative economics.
реагировать на изменения, облагать налогом, решить мно-
гие проблемы, нерешенные вопросы, всестороннее исследо-
вание, делать соответствующее заявление, по сравнению с,
прояснить набор возможных вариантов, предлагать профес-
сиональный совет, возможные последствия, отличать одно
от другого.

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to attempt  •  to distinguish  • advice
claim  • unresolved •  to impose
resolution  •  to devote  • available
distinct  • widespread • scope
1. India’s government has recently _______ a set of reforms
that included cutting fuel subsidies.
2. Mr. Brown has attempted to cast doubt on Ms. Warren’s
________ of American-Indian blood.

323
3. The issue of whether the rescue fund should be used to
shoulder the existing bad debts of Irish and Spanish banks
was left ______.
4. Several hearings were _______ to criticism of the railroad.
5. Technological progress could lead to ______ job loss among
low-skill labourers.
6. Part of the confusion in the recent “US is different” editorial
articles is a failure _______ systemic financial crises from
more minor ones and from regular business cycles.
7. The alternatives to this approach fall into two ______ and
equally unsatisfactory categories.
8. Children in need of legal help require specialist _______.
9. Politically driven deadlines have always _______ task-ori-
ented imperatives on managers.
10. The _______ of conflict between different policies depends
upon mutual adjustment.
11. This came under heavy fire for implying that small firms set
up without planning permission should only have enforce-
ment orders issued against them if alternative premises were
_______.
12. Globalization refers to the increasingly global ________ of
a range of phenomena and issues.

5. Complete the table using the proper word form.


Verb Noun Adjective
explain
comprehensive
implication
resolve
concerned
clarify
6. Choose the proper form of the words from the table above to
complete the sentences.
1. Some traders voice ________ about such on-and-off closure
of security gates.
This case _______ an improved plan for underground service
distribution schemes for housing estates; that is, the layout
of the gas, sewerage and water pipes and electricity cables.
324
2. However, these are the very subjects that need ________
and agreement.
At the outset, however, it is important to ________ the dis-
tinction between marginal and average rates of tax.
3. This relatively smooth response to the second oil shock has
been interpreted as a united, collective effort to _______
the severe crisis of the mid-1970s which had exposed Japan’s
energy vulnerability and her fragile political consensus.
Problems in this case which require _______ can lie in the
need to provide sufficient specialised training.
4. That, at least, is the clear _______ of yesterday’s statement
from Eurotunnel — indicating that the bankers believe their
own forecast does not provide an appropriate basis for fur-
ther finance.
In practice effectiveness must _________ a degree of effi-
ciency.
Priced at 102 p, they are to be redeemed in April, 2000, at
100 p — _________ a capital loss of rather less than 0.25 p.c.
per annum.
5. But corruption is only a partial ________ of some of the key
strategic decisions taken by the governments.
There was no thing in the world for an ________ proposi-
tion to state.
This is probably ________ by the largely commodity-based
nature of many hardware businesses.
6. We have explored only some of the areas but it should be suf-
ficient to establish the need for more _______ research into
the issue.
_________ means being able to understand what you hear
and therefore being able to respond appropriately to stimuli
you receive.
Without understanding the origins we shall make little prog-
ress in trying to ________ the present, or indeed, any other
aspect of the situation.

7. Render the text.


Позитивная экономическая теория — это раздел эконо-
мического анализа, рассматривающий реальные экономиче-
ские процессы, происходящие в действительности явления,

325
поэтому требуется большое количество институциональной
и статистической информации. Позитивная экономическая
теория отличается от нормативной экономической теории
(normative economics), рассматривающей тенденции разви-
тия экономики. Позитивная экономическая теория также
анализирует реальные экономические процессы, учитывая
определенные институциональные условия, как, например,
существование монополистической компании, или же сти-
мулирующие факторы, как, например, максимизация при-
были. При анализе тех явлений, которые могут произойти,
исходя из определенных предпосылок, позитивная экономи-
ческая теория использует модели, симулирующие и упро-
щающие представления о реальной деятельности. Экономи-
ческая политика должна базироваться как на позитивной,
так и на нормативной экономической теории. Нормативная
экономика помогает определить цели политики, а знание
позитивной экономики необходимо для тех, кто эту поли-
тику осуществляет на практике, поскольку любая экономи-
ческая политика обречена на провал, если она не в состоянии
добиться ощутимых результатов. Нормативная экономика —
экономический анализ, включающий суждения о том, что
следует делать, в противоположность простому теоретизи-
рованию.
Text B

1. Match the term with its definition.


1) assume (v) a) the effect that a person, event, or situa-
tion has on someone or smth
2) eliminate (v) b) a part of smth
3) impact (n) c) the process of deliberately getting in-
volved in smth without a right to do it
4) isolate(v) d) to think that smth is likely to be true,
although you have no proof
5) portion (n) e) to remove smth from smth, or get rid of
smth
6) interference (n) f) to separate someone or smth from other
people or things

326
2. Use the terms from exercise 1 to fill in the gaps.
1. In evaluating this approach, it is possible to __________
key elements which underpin a rational budgetary approach.
2. The sale will recoup a small _________ of the money stolen
from company pension funds by the publisher.
3. Other important variables which qualify the impact of these
relations of production upon the lives of these groups include
the availability of land, whether there is population pressure
under the existing production technology, and the degree of
_______ by the state (by way of taxes, conscription, price
fixing, rural development projects and so on).
4. We cannot __________ that these interpretations will be
made in the same way in all cultures.
5. Discussion concerning the potential _________ of scale
economies, in terms of restructuring, does not finish with
consideration of the peripheral economies alone.
6. It seems almost impossible to entirely ___________ guilt on
either side.

3. Find the following words and word combinations in the text


Ceteris paribus.
при прочих равных условиях, постоянный и неизменный,
получать доход, равный чему-либо, влиять на что-либо, рынок
труда, изучить влияние чего-либо на что-либо, предполагая,
убрать ненужное вмешательство, создавать модели и теории

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
tool  •  to construct  •  to assume
unchanging  • interference
1. _________ that the equilibrium condition continues to
hold, we can derive, using the same approach as before, the
change in employment.
2. Both schools of thought held the view that the universe was
essentially ________ with time.
3. It is also presented as an effective ______ in ensuring a
level supply of milk as the number of active dairy farmers in
Europe continues to decline.

327
4. Do you, however, feel you cannot progress with your work
due to _________, such as fear?
5. The Government’s plans ________ a new road bridge over
the highway have been welcomed by the Council.

5. Fill in the gaps using the words from the box.


econometric  • examining • negatively
assumption  • construction • models
The specification, estimation, and testing of econometric
models is closely linked to the _______ of economic theories.
While this statement holds for a number of rather obvious rea-
sons, there is at least one link which can be interpreted very
differently, depending upon whether one is a theorist or an
empiricist. This link is the ceteris paribus assumption, which is
common to both ________ (or statistical) and theoretical eco-
nomic models, but which is in some respects much more crucial
for econometric modelling than for the construction and inter-
pretation of economic theories. In order to see the link between
the use of the ceteris paribus _________ in economic theory
and econometrics, it is useful to start by ________ the approach
taken by most theorists when constructing economic theories.
Beliefs are first simplified into some parsimonious set of postu-
lates and hypotheses. The simplest theories possible are then
built up around these postulates and hypotheses, where by sim-
plest theories possible, we mean that _________ are presented
which are sufficiently simplistic enough to both convey and
contain the essentials of the theory, as well as maintain enough
generality as to be realistic. The latter of these two require-
ments (that of sufficient generality) is closely linked with the
notion of ceteris paribus, the Latin expression for “other things
being equal”. One of the simplest theories which makes use of a
ceteris paribus assumption is the Law of Demand (i.e. quantity
demanded depends __________ on price ceteris paribus, etc.).
Unit 4
Free and economic good
Text A
1. Match the term with its definition
1) distinction a) item of consumption (such as air) that
(n) is useful to people, is naturally in abundant
supply, and needs no conscious effort to ob-
tain it
2) arise (v) b) to stop doing smth that you do regularly
3) give up (v) c) a consumable item that is useful to people
but scarce in relation to its demand, so that
human effort is required to obtain it
4) sacrifice (v) d) a difference between two things
5) free good e) the right or opportunity to have or use
smth that will bring you benefits
6) economic f) to exist or start developing because of smth
good
7) occur (v) g) to get smth that you want or need, espe-
cially by going through a process that is dif-
ficult
8) deplete (v) h) to give up smth important or valuable so
that you or other people can do or have smth
else
9) access (n) i) an idea of smth that exists
10) obtain (v) j) to reduce the amount of smth or the num-
ber of things
11) concept (n) k) to happen, especially unexpectedly

2. Use the terms from exercise 1 to fill in the gaps.


1. Last year’s Occupy movement has influenced public opin-
ion of the World Trade Organisation (WTO) for the worse, but

329
as Russia’s imminent accession shows, the WTO remains a firm
force for global __________ good.
2. Aside from those who were involved in intellectual and
political movements it was an open question how far mental
health experts would be received into the bosom of the target
population. Many potential customers might feel more com-
fortable where agencies were not aiming at supervision of their
minds. If the help available was to be a ___________ good then,
in the USA, there would be a considerable amount of stigma
attached to recipients of it. If it were to be successful the men-
tal health movement would have to move away from any strong
association with welfare. The mental health centres, from which
so much was expected for the future, were designed to become
self-funding from fees and diverse agency support. (D. Milton
Keynes Tomlinson. Utopia, Community Care and Retreat. — Open
Univ. Press, 1991. — P. 5—83.)
3. It is important that an individual should consider that the
objectives of the organisation (and consequently his own efforts
and actions within the organisation) are compatible with his
various needs. Some personal needs will be more important than
others and an individual will be prepared to ________ some of
his objectives for his own greater benefit (e.g. an individual may
be prepared to _________ some of his time in order to do a job
which earns extra money). (Organisational Analysis. — London:
BPP Management Education Ltd, 1990.)
4. The availability of funds under this facility is conditional
on appropriate policies being followed by the borrower. Supple-
mentary financing providing about 8 per cent of funds, this facil-
ity, established in 1977, is intended to assist countries with lon-
ger-term problems in their balance of payments, and for which
the normal facilities of the Fund are not adequate. As with the
extended facility the Fund lays down conditions for borrowing.
Enlarged ________ resources by far the most important supple-
ment to the Funds resources has been the enlarged _________
facility, available since March 1981. (I. Partington. Applied
Economics in Banking and Finance. — New York: OUP, 1989. —
P. 322—457.)
5. In the USA, the particularly distinctive features of union-
ism which distinguish it from that found in most continental

330
European countries include “job consciousness and job control,
business unionism, an overwhelming emphasis upon economic
struggle and collective bargaining, as opposed to broad political
reform of the society and the economy” (Kassalow, 1969, p. 6.)
The important _________ of “business unionism” relates to
the securing of pragmatic, job-related goals in the form of improve-
ments in the economic and social conditions of members, rather
than concern with social reorganisation. (R. Bean. Comparative
Industrial Relations: An Introduction to Cross-National Perspec-
tives. — London: Routledge & Kegan Paul plc, 1992. — P. 1—109.)
6. The existence of a vertical hierarchy _________ from the
need for supervision, and this raises issues about the design of orga­
nisational structures and the role of incentives. (Joseph E. Stiglitz
and Anthony B. Atkinson. Lectures on Public Economics. — Maiden-
head: McGraw-Hill Book Company, 1980. — P. 200—316.)
7. The Montreal Protocol on Substances that _________ the
Ozone Layer was concluded in 1987, and 46 countries, including
most of the big polluters, have now signed. (David Beg, Stanley
Fischer, Rudiger Dornbusch. Economics. — Maidenhead: McGraw-
Hill Book Company, 1991.)
8. A clear __________ should be made between a self-
employed businessman trading either as a sole trader or in part-
nership, and the director of a limited company, whether that
company is a public limited company, close investment holding
company or another kind. A self-employed trader can add back
a non-allowable expense in his Schedule D tax computation and
that is the end of the matter. Not so a director, who is a separate
legal entity from the company, even if it is 100% owned by him.
9. Although Hispanics will make up 40 per cent of the state’s
working-age population by 2020, just 12 per cent of them are pro-
jected to have bachelor’s degrees by then, up from 10 per cent
in 2006. Moreover, their fields of academic concentration are
not where the most economically fertile growth will probably
____________. At California State University in 2008, just
1.7 per cent of master’s degree students in computer science were
Mexican-Americans, as were just 3.6% of students in engineering
master’s programs. (In Defense of Cassandra: There are reasons to
be worried about America’s relative decline. David Frum, Newsweek
Web Exclusives, Jan 31, 2012.)

331
3. Find the following words and word combinations in the text
Free and economic good.
издержки неиспользованных возможностей, отказаться
(от чего-либо)/поступиться, вместо/в пользу (кого-либо,
чего-либо), в чьем-либо распоряжении, предпочтительная
альтернатива, сумма денег, руководствуясь представлением
(о чем-либо), в широком смысле, бесплатные блага, эконо-
мическое благо, ограниченные ресурсы, при определенных
обстоятельствах, пахотная земля, растет численность, здра-
воохранение, поступления от налогов, ресурсы с открытым
доступом

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to rise  •  to require  •  to arise  •  economy
sacrifice  •  to result  •  to compete
to prefer  •  increasing  •  to drive  •  to rely
1. Energy crops might become increasingly costly in a world
where the opportunity cost of land is _______ along with
population and consumption levels.
2. While water is increasingly recognised as an economic good
among academics and in international fora, it still is usually
considered in terms of the quantities _______ to satisfy spe-
cific needs without regard to cost or value.
3. It makes a big difference whether the new fiscal rectitude in
the United States _______ from domestic leaders making
difficult decisions themselves or from international pressures
imposing these decisions.
4. The _______ perspective emphasises opportunity costs and
resource use, not nominal dollar amounts.
5. The ideology would be populist; the message would begin
with a critique of the elites that allowed the benefit of the
many to be _______ to that of the few and a critique of the
money politics, especially in Washington, that overwhelm-
ingly benefits the wealthy.
6. Experts say some of the challenges in higher education
_______ from too many students entering the doors without
basic maths and English skills.
332
7. Data and evidence are the basis for choosing between two
_______ theories (Messick, 1989).
8. The critics have either failed to specify their _______ alter-
native to private property rights or, to the extent that they
have specified an alternative, they have failed to explain how
it will solve the problem they have called attention to with-
out resulting in something equally bad or worse.
9. But so long as Brazil relies on exports of oil, copper, iron ore,
and other commodities, it will become _______ vulnerable
to violent swings in commodity prices and to the coming
slowdown of China.
10. So much of Brazil’s consumer boom has been _______ by
income from commodity sales that the domestic market will
not provide much of a cushion in the event of such a slowdown.
11. The United States still has many advantages: the strongest
armed forces in the world; a powerful network of allies and
partners; a continued lead in research and development; the
world’s best higher education system, innovation, and high-
tech manufacturing; melting-pot demographics and mod-
erate, balanced population growth; a transparent political
system and _______ rule of law, which help attract foreign
investment; and abundant natural resources, a vibrant civil
society, and vast experience in global leadership.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 occurrence
2 competition
3 prefer
4 — similar
5 categorization
6 overuse

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. We have relied too much on the end of the cold war in our
analysis of ethnic conflicts. Because ethnic groups and ethnic
conflicts have been around for centuries, we cannot explain
333
either their _______ or their management merely in terms
of some structural readjustment that took place ten years
ago.
Moreover, the fields of academic concentration are not where
the most economically fertile growth will probably _______.
2. On the East Coast, many talented engineers gravitate to
finance, which offers salaries that start-ups cannot _______
with.
“Now when you’re looking for a job you’re competing in a
world where the _______ isn’t just the guy down the street,
but the guy sitting in a café in Hong Kong or Mumbai,” says
Bill Vick, a Dallas-based executive recruiter who started
BoomersNextStep.com in an effort to help Baby Boomers
who want to stay in the workforce.
3. By custom, the governors do not speak publicly about their
votes or _______.
With the Watergate scandal soon to destroy Nixon’s presi-
dency, health care was surely a topic he _______ to talk about.
4. Due to the technical _______ of oil and gas projects world-
wide, and the environmental conditions on Sakhalin Island
compared to other parts of Russia, Sakhalin II waste streams
and waste generation quantities have been relatively predict-
able.
Also included in this are customs and investigation services
from other countries, commercial organisations, research and
scientific institutes, universities and _______ organisations.
5. We give an ESRR to companies that have some degree of
risk in their projects (as reflected by their _______ as A, B,
or F1) and that have passed their first reporting period.
Finally, we have what is loosely _______ as intangible assets.
6. The claim is often made that more effective use of pricing
and various water charges can remedy or completely solve
problems of water scarcity, shortage or _______.
The president will make some assurances that he’s not going
to _______ his authority.

7. Choose the correct word.


1. Government regulations sometimes apply / impose new re­­
strictions.

334
2. A decrease in complement / input prices makes the produc-
tion less expensive.
3. We prefer / assume that the consumer always decides that
one good is better than, worse than, or as good as another.
4. Calculate the marginal / opportunity cost of the man’s labour,
that is, the money that he could earn by working elsewhere.
5. The number / A number of problems were solved when a new
company was set up.
6. Almost the same number / quantity of coffee was exported.
7. The substitution effect / affect leads consumers to buy less of
the goods whose price has increased.
8. An increase in income results in a rise of the quantity
demanded, provided / providing the goods are normal.
9. In a partially planned economy such as Japan’s, the govern-
ment often encourages industry and helps it with subsidies /
subsidiaries.
10. In order to consume / earn, we need income.
11. As a rule, resources in individualised countries are used
effectively enough to make a solid basis for economic rise /
growth.

8. Fill in the gaps using the words from the box.


increase  •  point  • interest •  setting
argument  •  production  •  growth  •  cost
meet  • earn •  invested
The Fed, quantitative easing and oil prices
Is the ultra-lax monetary policy of US Federal Reserve behind
high oil prices?
The “Yes” camp argues that low (1) ________ rates — and
recently QE, followed by QE2 and “QE Infinity” — depress the
value of the dollar, pushing up oil prices.
The “No” camp says the link through the exchange rate is
flawed as the oil market has seen high prices irrespective of the
dollar’s strength. Both sides, nonetheless, agree that lower inter-
est rates spur economic (2) _________, and thus, oil demand.
But there is a third (3) _________.
I recently sat down with a senior official from a medium-sized
OPEC country, with decades of experience in the oil market,

335
who offered an interesting (4) __________ of view about the
role of the Fed in (5) __________ oil prices. He explained that
his country already has significant foreign exchange reserves,
mostly (6) __________ in low yielding US Treasuries, and cur-
rent oil prices were high enough to both (7) __________ bud-
getary needs and further inflate the reserves.
“I know the US and the Europeans would like us to
(8) ____________ production,” he told me. “But what is the
point? We would (9) __________ more money; money we do
not need. And US interest rates are so low that we earn nothing
from our extra (10) __________. It is better for us to keep pro-
duction unchanged and keep the money underground.”
In short, the opportunity (11) __________ of not producing
oil has fallen dramatically. Thus, policy makers feel little pres-
sure to increase production to lower oil prices …
(By Javier Blas in London, FT.com)

Text B

1. Match the term with its definition.


1) labour (n) a) someone who uses money to start busi-
nesses and make business deals
2) rent (n) b) goods such as machines or buildings
that are made for the purpose of produc-
ing other goods
3) refer (v) c) the people who work for a company or
in a country
4) capital goods d) the money that someone pays regularly
to use a room, house, etc. that belongs to
someone else
5) effort (n) e) to describe smth, or to be about smth
6) entrepreneur (n) f) an attempt to do smth, especially when
this involves a lot of hard work or deter-
mination
7) run (v) g) money that you receive as payment
from the organisation you work for, usu-
ally paid to you every month
8) salary (n) h) to organise or be in charge of an activ-
ity, business, organisation, or country

336
2. Use the terms from exercise 1 to fill in the gaps.
1. Many people belong to a pension scheme _________ by
their employers.
2. Wages for unskilled _________ are very low.
3. Line management roles _________ to those positions which
are directly concerned with the operational aspects of the
business.
4. I pay the _________ at the beginning of every month.
5. Parker’s annual _________ is just under $48 000.
6. They made no _________ to include us in the negotiations.
7. The world’s highest auction price for a work of art, the
30.2 m paid for Van Gogh’s Irises, was achieved after the
auctioneers, Sotheby’s, had advanced half the money to Alan
Bond, the Australian _________, it was revealed yesterday.
8. On the export side the volume of cars shot up 27 per cent
in the three months to November, compared with the previ-
ous three months though other consumer, intermediate and
_______ showed much more modest increases of 5.5 per
cent, 4 per cent and 9 per cent, respectively.

3. Find the following words and word combinations in the text


The factors of production.
основные элементы производства, широкие категории,
наряду с, оказывать содействие, строительный рабочий,
капитал в форме материальных активов, портовая акватория,
изыскивать новые возможности, руководить предприятием,
оплата снабжения ресурсами, процесс производства,
процентный доход, дотация, вознаграждение (гонорар),
ресурсы капитала, предпринимательство, прибыль

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
output  •  factor  • extent • production
policy  • labour • standard •  to increase
A country must experience economic growth if it is to pro-
duce a greater (1) __________ of goods and services. Providing
such output growth is greater than its population growth rate
the country’s per capita income, i.e. the (2) __________ of liv-

337
ing, should rise. The reader might wonder what (3) __________
cause a country to experience economic growth. To a large
(4) _______ it is dependent upon the quantity and quality of a
country’s factors of (5) __________ — land (soil, climatic con-
ditions, mineral wealth), (6) __________ (workforce size, skills
and health), capital (plant and machinery, buildings, railways,
etc.) and enterprise (inventive, innovative and organisational
abilities). Variations in the endowment and rate at which some
of these factor inputs can be (7) __________ influence each
country’s economic growth rate. Political stability plus appro-
priate tax and expenditure (8) __________ are also essential for
stable economic growth.
(James Leslie. International Finance and Developing Countries. — Harlow:
Longman Group UK Ltd, 1987. — P. 11—118.)

5. Complete the table using the proper word form.


Verb Noun Adjective
1 contribute
2 electricity
3 special
4 – entrepreneurship
5 capitalise
6 successful

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. New staff recruited locally that are not trained in the com-
pany’s methods cannot make a full and effective ________
to the running of the business straight away.
Certainly the surplus was used to create a new scheme for
the present ________ members and to the maximum ben-
efit of the new sponsoring company, which in the pensioners
view certainly caused a great lack of security to the fund.
2. Surely it is possible for British Rail to commit the 100 mil-
lion that is needed to ________ the main line.
It was believed that this intervention would be aided if the
state had control of certain key industries (e.g. coal, rail-

338
ways, gas, _________ distribution), which were crucial to
post-war economic recovery and which were in such a run-
down state that it was unlikely that sufficient private capital
would materialise to rejuvenate them.
3. Two areas of public relations ________ already well defined
and established here are financial public relations and indus-
trial relations practice.
In the “rational” decision-making model, the policy-maker
first ________ the objectives that he is trying to achieve,
second musters all the evidence necessary for an analysis
of alternative ways of achieving these objectives and, third,
chooses the most cost-effective means of achieving these
objectives.
4. However, suffering from badly-burned fingers, the venture
capital industry has moved away from the riskier ________
start-ups to investing more in developing companies and
MBOs.
There are so many students involved that a centre for
________ has been formed to offer advice and put them in
contact with venture capitalists.
5. Obviously, such credit facilities help to increase the supply of
________ goods to LDCs, thus aiding their economic devel-
opment programmes.
Eurorail, British Rail’s partner in devising private sector par-
ticipation in the Channel Tunnel rail-link with London, also
aims to ________ on the Government’s encouragement of
private sector involvement in developing the UK rail system.
6. I think the question is what degree of ________ we can look
forward to.
The more ________ it is, the more we are going to be able
to offer subscribers, and that in itself should make it even
more ________.

7. Choose the correct word.


1. At this stage / period we must introduce another complica-
tion.
2. The model we used above was very simple / simply in that
the manager, in effect, had only to toss the coin to determine
the outcome.

339
3. But of course managers manage; they do / take decisions and
control factors of production.
4. Moreover, it is difficult for anyone but the manager to have
available all the information he or she has taken into account /
accountancy at the point of decision, and hence it is difficult
to monitor the manager.
5. The randomness of the environment / area has an important
influence.
6. To see the impact of this, let us consider / considerate two
examples.
7. In the first, suppose the firm is undertaking / overtaking
a particular project.
8. There is a 0.5 profitability / probability of success for the
project available naturally.
(Michael Waterson. Regulation of the Firm and Natural Monopoly. — Oxford:
Basil Blackwell Ltd, 1988. — P. 1—83.)

8. Translate the following text from Russian into English.


Основные факторы производства
Фактор производства — особо важный элемент или объ-
ект, который оказывает решающее воздействие на возмож-
ность и результативность производства. Таких факторов,
которые используются для производства продукта, очень
много.
Маржиналистская теория выделяет 4 группы факто-
ров производства: земля, труд, капитал, предприниматель-
ская деятельность. Земля — естественный фактор. Она не
является результатом человеческой деятельности. Капитал
выступает в виде совокупности благ, используемых в произ-
водстве товаров и услуг. Это инструменты, машины, обору-
дование и т.д. Труд представлен физической и интеллекту-
альной деятельностью, направленной на изготовление благ
и оказание услуг. Предпринимательская деятельность —
спе­­ци­фический фактор производства. Она предполагает
использование инициативы, смекалки и риска в организации
производства.
Факторы обладают взаимозаменяемостью. Она обуслов-
лена разнообразными потребительскими свойствами про-
дукта. В результате возможно производство любого продукта

340
или блага при использовании различных факторов в разно-
образных сочетаниях и пропорциях. Взаимозаменяемость
также обусловлена и ограниченностью ресурсов, с одной
стороны, и эффективностью их использования, с другой.
Иваньков А. Е. Экономическая теория. — 2008.
Unit 5
The role of the market
Text A
1. Match the term with its definition.
1) conversely (adv) a) to become smaller or shorter, or to
make smth do this
2) devote (v) b) an arrangement in which your em-
ployer will pay for the things you need
to buy while doing your job
3) reconcile (v) c) to do and complete a business activity
4) contract (v) d) used to introduce smth that is differ-
ent to smth you have just said
5) ensure (v) e) to use time, energy, etc. for a particu-
lar purpose
6) expense account f) to make two different ideas, beliefs, or
situations agree or able to exist together
7) stall (n) g) a small shop with an open front or a
table from which goods are sold
8) transact (v) h) to make certain that smth is done or
happens

2. Use the terms from exercise 1 to fill in the gaps.


1. As well as linking branches of a company, WANs offer the
opportunity to ____________ business electronically with
other companies.
2. Recently, Steve gave up his joinery business to set up a small
security firm, hoping for more time to ____________ to the
much-needed rescue.
3. _____________, we know that less effective managers have
enormous difficulties in dealing with power because they are
not really motivated by it.

342
4. Unemployment is rising, with the industrial sector expected
to _____ by 20 per cent this year.
5. In the end, it may not prove impossible to ________ Euro-
sceptics and Euro-enthusiasts.
6. Please check your policy schedule and certificate of insur-
ance at the back of your policy to _____ the details we hold
are correct.
7. Economic reform has so far meant that Poles can gaze in
wonderment at now well-stocked meat _________ they
have no money to buy from.
8. As the recession cuts into company budgets, from _________
and salaries to training and research and development, dona-
tions to good causes are also being reappraised.

3. Find the following words and word combinations in the text


The role of the market.
рынок ценных бумаг; вести дела (осуществлять бизнес) по
телефону; условное выражение (оборот речи); выравнивание
цен; примирять (согласовывать); давать обществу возмож-
ность решить проблемы; учитывая (при условии); в пользу
кого-либо еще; продавать с выгодой; студент, работающий
за прилавком; работа в течение неполного рабочего дня;
работа, не требующая специальных навыков; цены управ-
ляют нашими решениями; покрывать издержки, связанные
с функционированием кафе; повысило бы цену на говядину;
вынудило повысить цену; перераспределять ресурсы

4. Use the phrases from the box to complete the sentences.


part-time jobs  •  to cover the cost of
shorthand expression  •  to take the job
unskilled job  •  the price system
to bring together  •  expense account
1. The purpose of the meeting was ______ young scientists,
businessmen and journal publishers.
2. The term which gives a ________ to this in the sociology of
policing is “common sense”.
3. Top dealers are inviting big clients into their offices, butter-
ing them up with _______ lunches, putting them into new
ways of investment, just as a good stockbroker might.
343
4. Many working women were stuck in low-paid ________
without job protection, sick pay or maternity leave.
5. For every ________ we advertise, we get hundreds of appli-
cants, those who are not trained or educated enough to per-
form at high organisational levels.
6. Stop asking, “How can we generate more revenue _________
our expensive worldwide sales and marketing organisa-
tions?”
7. Should we ________ in Paris and disrupt the family or stay
where we are and continue to enjoy that community?
8. By driving a wedge between the selling price and the pur-
chase price, they prevent ________ achieving the equality
of marginal costs and marginal benefits.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 definition
2 adjust
3 transact —
4 reconcile
5 profit
6 contact

6. Choose the proper form of the word from exercise 5 to


complete the sentence.
1. There are many ________ of the word “feminism”.
I’ll now try ________ the term “popular culture”.
We need to record sufficient data to enable _______ conclu-
sions to be reached.
2. Once we make _________ for inflation, the fall in interest
rates is quite small.
If your employment status changes, your tax code will be
________ accordingly.
The height of the steering wheel is ________.
3. Last year the sale __________ in conditions of the greatest
secrecy.
Each __________ at the foreign exchange counter seems to
take forever.
344
4. The treaty has brought a new spirit of _________ on both
sides.
Bevan tried ____ British socialism with a wider interna-
tional vision.
The ____ body can take even unpopular strategic decisions
within the company.
5. Banks therefore hold a range of assets of varying degrees of
_________ and liquidity.
They sold their house at a healthy _________.
It might _________ you to learn about the company before
your interview.
Over the years it has developed into a highly _________
business.
6. If oil prices pushed up to $40 for even a couple of months,
__________ in the American economy could be severe.
The economy _________ by 2.5% since last year.
Extra staff training is offering mutual benefits for a health
authority and nursing homes involved in a policy of
____________ beds for long-stay elderly patients.

7. Choose the correct word.


1. In the village market, the malls / the stalls are piled high with
local vegetables.
2. In some matters / cases the development officer found it eas-
ier to substitute support workers for a home help.
3. In our department most deals / businesses are transacted
over the phone.
4. The hospital tries to assure / ensure that people are seen
quickly.
5. Think / Suppose you lost your job tomorrow, what would you
do?
6. “Can you give me a ride to work tomorrow?” — “Sure /
Of course.”
7. Taken / Given that the patients have some disabilities, we
still try to enable them to be as independent as possible.
8. There are certain costs and benefits which are not taken into
account by the price plan / system.
9. It goes / runs at a profit and is one of the most self contained
parts of the British Rail Network.

345
10. It will hard / hardly get prices moving upwards again and
will do little to encourage first-time buyers to step into the
market.
11. All have been inspected and found to offer / to suggest high
standards of cleanliness and at least an adequate range of
equipment.

8. Fill in the gaps using the words from the box.


freedom  • rises • determine •  competitive
convinced  •  relies  • emphasises
output  • imposed • characterised •  power
realm  • contrast
A mixed economy — private vs. public ownership
The American free enterprise system (1) ________ pri-
vate ownership. Private businesses produce most goods and
services, and almost two-thirds of the nation’s total economic
(2) ________ goes to individuals for personal use (the remain-
ing one-third is bought by government and business). The
consumer role is so great, in fact, that the nation is sometimes
(3) _______ as having a “consumer economy”.
This emphasis on private ownership arises, in part, from
American beliefs about personal (4) ________. From the time
the nation was created, Americans have feared excessive govern-
ment (5) _______, and they have sought to limit government’s
authority over individuals — including its role in the economic
(6) _________. In addition, Americans generally believe that an
economy characterised by private ownership is likely to operate
more efficiently than one with substantial government owner-
ship.
Why? When economic forces are unfettered, Americans
believe, supply and demand (7) _________ the prices of goods
and services. Prices, in turn, tell businesses what to produce; if
people want more of a particular good than the economy is pro-
ducing, the price of the good (8) _________. That catches the
attention of new or other companies that, sensing an opportu-
nity to earn profits, start producing more of that good. On the
other hand, if people want less of the good, prices fall and less
(9) ________ producers either go out of business or start pro-

346
ducing different goods. Such a system is called a market econ-
omy. A socialist economy, in (10) ________, is characterised by
more government ownership and central planning. Most Ameri-
cans are (11) _________ that socialist economies are inherently
less efficient because government, which (12) ________ on tax
revenues, is far less likely than private businesses to heed price
signals or to feel the discipline (13) ________ by market forces.
http://economics.about.com/od/howtheuseconomyworks/a/mixed_economy.
htm

Text B

1. Match the term with its definition.


1) better off (adj) a) control or instructions
2) differ (v) b) a process of discovering the facts
3) direction (n) c) interest in what will help you and not
what will help other people
4) inquiry (n) d) richer or in a better situation
5) public good e) when someone has a lot of money or
valuable possessions
6) wealth (n) f) to encourage smth to happen or de-
velop
7) promote (v) g) to be different
8) self-interest (n) h) products the government is best posi-
tioned to utilize as compared to the pri-
vate marketplace

2. Use the terms from exercise 1 to fill in the gaps.


1. By contrast, rational man is an egotist, who maximises his
own ________ and has “only limited concern” for the wel-
fare of others.
2. Behind this basic structure, teams were found to ________
on a number of variables.
3. The ________ we are, the more energy rich foods we eat:
meat, cheese and chocolate.
4. General agreement to minimise trade and currency restric-
tions, although not possible at first, was also considered to be
another essential step in this ________.

347
5. The latest problem to befall Mr. Gorbachov’s struggle to
_______ peristroika, or restructuring, has arisen in the vast
Soviet agricultural community.
6. Perhaps inevitably, with such _______ and diversity an
oligarchy of local tradesman emerged, organised into a mer-
chant guild.
7. I’ve been making ________ into the cost of a round-the-
world ticket.
8. A _________ is a good that, even if consumed by one per-
son, can still be consumed by other people.

3. Find the following words and word combinations in the text


The invisible hand.
правительство не вмешивается; преследовать собствен-
ные интересы; помощь правительства; материал был поло-
жен в основу; в интересах общества; предположим, что …;
изобретать новый товар; делать общество богаче; создавать
новые рабочие места; центральное руководство; стало осно-
вой классической экономической школы; основатель науки
экономики; расширить границы производственных возмож-
ностей; разумные решения

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to intervene  •  to pursue  •  to solve
to remain  • publication •  to transfer
inquiry  •  to invent  •  basis
coherent  •  sensible
1. But our system is defective because it lacks ________ prin-
ciples for reviewing the substance of decisions.
2. He was the author of 70 major scientific ________.
3. They had no sanctioned power to _________ in the affairs
of their members, but only to represent them to outsiders.
4. The only _________ course of action is to decide which is
the more likely and try the treatment for that problem first.
5. We’re getting a lot of _________ about our new London-
Rio service.
6. We have set up a team of senior business people to
__________ the idea of a new British Quality Award.
348
7. This would include workers employed in tourism for a holi-
day period, and construction workers who are employed on
a contractual __________.
8. In some circumstances we may wish to _________ unbal-
anced problems.
9. Alexander Graham Bell _________ the telephone in 1876.
10. Contracts of employment may contain an implied term
which gives the employer the right to __________ employ-
ees to other locations.
11. Most commentators expect the basic rate of tax to _________
at 25%.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 pursue
2 invent
3 direction
4 intervention
5 solve
6 movement

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5. Change the form of the words
where necessary.
1. People are having to move to other areas in _________ of
work.
The boy was provided with an interpreter, _________ to the
Individuals with Disabilities Act.
Students should _________ their own interests, as well as
do their school work.
2. The first safety razor _________ by company founder King
C. Gillette in 1903.
He is very _________, always dreaming up new gadgets for
the home.
The world changed rapidly after the _________ of the tele-
phone.

349
3. Under Thompson’s _________, the college has developed an
international reputation.
Experienced users have _________ access to the main data
files.
I want _________ my efforts more towards my own proj-
ects.
4. I hadn’t seen him since 1980, and he had aged a lot in the
_________ years.
The Central Bank _________ in the currency markets today
to try to stabilize the exchange rate.
Repeated _________ on the currency markets have failed to
prevent the value of the currency falling.
5. This approach is slightly linear, but the puzzles appear to be
_________ in any order, and in a variety of ways.
There are no simple _________ to the problem of overpopu-
lation.
This strategy could cause more problems than it _________.
6. The company _________ its sales center downtown.
The company is constantly improving the system, making it
a _________ target.
Whatever the outcome, ____________ and control of
graphical information is here to stay.

7. Translate the sentences from Russian into English.


1. Как заметил Адам Смит, удивительным явлением в
экономике, основанной на частной собственности и сво-
боде сделок, является то, что рыночные цены подчиняют
действия корыстолюбцев целям процветания общества или
нации в целом.
2. Предприниматель, «ведомый лишь собственной выго-
дой», направляется, тем не менее, «невидимой рукой»
рыночных цен к цели (а именно, экономическому процве-
танию страны), которая совсем не входила в его намерения.
3. Цены содержат в себе информацию о потребительских
предпочтениях, издержках и факторах, связанных со вре-
менем, месторасположением и иными обстоятельствами,
учесть которые не в состоянии ни отдельный человек, ни
целый плановый орган.

350
4. Всего лишь одна-единственная обобщающая цифра —
рыночная цена — предоставляет производителям полный
объем информации, необходимый для приведения своих
личных действий в соответствие с действиями и предпочте-
ниями других.
5. Рыночная цена направляет и стимулирует и произ-
водителей, и поставщиков ресурсов к производству вещей,
ценимых наиболее высоко в сравнении с издержками их про-
изводства.
6. Фермеры, строители, мебельщики и многие другие про-
изводители будут добиваться наилучшей комбинации ресур-
сов и наиболее эффективной организации производства,
поскольку более низкие издержки означают более высокие
прибыли.
7. В интересах каждого производителя снижать издержки
и повышать качество. Конкуренция практически принуж-
дает их к этому. Производителям с высокими издержками
будет трудно выжить на рынке. Потребители, стремящиеся
тратить свои деньги с наибольшей выгодой, позаботятся об
этом.
8. «Невидимая рука» рыночного процесса работает
настолько автоматически, что большинство людей и не заду-
мывается об этом. Они просто принимают как должное, что
товары производятся примерно в тех количествах, в каких
потребители хотят их приобрести.
9. «Невидимая рука» создает порядок, гармонию и раз-
нообразие. Процесс этот, однако, идет столь подспудно, что
мало кто понимает его суть, и лишь немногие воздают ему
должное. Тем не менее, он является решающим для эконо-
мического благосостояния общества.
http://www.nsu.ru/education/genecon/work/appendix/adam_smith.htm
Unit 6
Demand and supply
Text A

1. Match the term with its definition.


1) inferior good a) opposite in relation to smth else
2) postpone (v) b) a need for smth to be sold or sup-
plied
3) complementary c) a good of which less is consumed
good (rather than more) when the consum-
er’s income increases.
4) normal good d) a good for which demand increases
when income increases, all other
things being equal
5) substitute (n) e) a term used in economics to de-
scribe the total amount of goods or
services that are demanded at any
given point in time
6) demand (n) f) to move into a different position
7) shift (v) g) someone or smth that is used in-
stead of another person or thing
8) quantity demanded h) when you expect smth to happen
9) inversely (adv) i) a good with a negative cross elastic-
ity of demand, in contrast to a substi-
tute good
10) expectation (n) j) to arrange for smth to happen at a
later time

2. Use the terms from exercise 1 to fill in the gaps.


1. Regional differences in the proportion of health care resource
needs appear _______ related to government health care
expenditure.

352
2. Private initiative is increasingly recognised as an effective
and innovative engine of economic growth. That is why there
is strong _______ for its services throughout the developing
world.
3. The demand for gas is liable to be reduced by an improve-
ment in electric lighting; and in the same way a fall in the
price of a particular kind of tea may cause it to be substi-
tuted for an _______.
4. In December the company for the third time increased its
forecasts for the full year from 7.4% to 8.7% growth (at the
beginning of the year it was predicted to be only 3.7%),
which corresponded to our ________.
5. The manager rented more apartments as the price went
down. He achieved this because of the inversely proportional
relationship of price to ________. Changing technologies
have shifted the demand curve for basic telephone service to
lower rental prices to $1300 in order to increase the quantity
of apartments demanded.
6. The authorities had to _______ economic and development
issues due to disturbing the political situation but now, when
the situation has changed to the best, there appeared much
more optimistic perspectives.
7. Other factors worth to note here are expenditures of the
state budget and seasonal factor whose profile is subject to
_______ during a year.
8. Let us take an example. In case of a food product and some
drink with it, both foods are usually bought together to make
the meal a good one. In case the person wants to eat more of
the product, he would want to get more of the _______ that
is the drink here.
9. Most durable goods are considered _________, in that sales
increase during periods of increased economic activity and
decline during recessions.
10. A rise in bus fares or petrol prices would make people use
the underground more, thus the quantity of tube travel
demanded would increase at each possible price, making
buses and private cars _______ for the tube.

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3. Find the following words and word combinations in the text
Demand.
количество товара или услуги; совершать законную
сделку; полные отношения; цены, взимаемые за товар; объем
спроса; управляется законом спроса; определяющий фак-
тор; при прочих равных условиях; количество покупателей;
кривая спроса; в пользу товара; доход потребителя; сдвиг
вправо/влево; заменители; в одном направлении; дополняю-
щие товары; не связаны друг с другом; ожидания изменения
цен в будущем

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to switch away  •  likely to fall  •  complementary good
to take advantage  •  in brief  • demand
inferior good  •  to drive  •  demand curve
definition  •  substitute good
1. The _______ shows the amounts of a good or a service buy-
ers would purchase at different prices.
2. _______ are typically cheap but low-quality goods which
people would prefer not to buy if they could afford to spend
a little more.
3. An increase in the price of sweets will lead to an increase in
the price of chocolate demanded at each possible chocolate
price, as people ______ from sweets towards chocolate.
4. Technological advances that make many innovations pos-
sible affect _______ for related goods.
5. Technological innovations, which enable the new product to
be available at a much lower price, stimulates the demand for
_______, but reduce the demand for ________.
6. ________, most goods are normal goods.
7. The emphasis on health and fitness can increase the demand
for sports facilities, and the demand for cigarettes is
________.
8. The company sees a renewed opportunity for growth and is
determined _______ of better global economic conditions
and increased customer demand.

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9. We need a clear ________ of the concept of quantity
demanded.
10. Economists want to find out what economic forces ________
the law of demand.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 expect
2 complementary
3 shift —
4 relate
5 possess
6 determinant

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. It is important to see how two issues ______.
Demand represents the ________ between quantity of a
good and all possible prices charged for that good.
Goods that are not _______to each other are called inde-
pendent goods.
2. Thus, we ______ growth on the market to slow down, while
prices’ dynamics will be getting more predictable.
It was the downfall of the company’s all great _______.
The price’s behaviour conforms to the ________ pattern.
3. Now we will consider what _______ can shift the demand
curve.
There are several ________ factors of demand among which
are tastes and preferences of consumers.
It is necessary to ________ the difference between demand
and quantity demanded.
4. ________ instincts drive people to buy more.
The more desires you _______, the more difficult it is to
implement them.
Societies have made the production, ________, trade in and
consumption of some harmful goods illegal.

355
5. For any two substitute goods a decrease in the price of one
good will produce a ______ to the left in the demand for the
other good.
An increase in income will ________ the demand curve to
the right when the good is normal.
6. Many customers will reduce consumption of our product if
the price of the ________ is raised.
Thus the two factors _______ each other and are not alter-
natives or competitors.
In the case of ______ goods, the price of one good and the
demand for the other one change in opposite directions (as
one increases, the other decreases).

7. Choose the correct word.


1. The demand curve sows the relation between price and de­­
mand / quantity demanded, ceteris paribus.
2. The law of demand says that when people want more of
something, its price rises / raises.
3. When a company stops making a product, it isn’t accessible /
available any more.
4. Expecting price reductions, consumers will delay / postpone
their purchases for the future.
5. Briefly / Shortly before the recession began, there was a wave
of increasing unemployment.
6. There is always the opportunity / possibility that the govern-
ment will reverse its decision.
7. As inflation spiraled out of control, paper money suddenly
became worthless / priceless.
8. The government raised taxes on the assumption / presump-
tion that it could help to control spending.
9. Rapid government reforms managed to avoid / prevent a
revolution taking place.
10. The government plans to control / inspect the price of meat
to make sure it doesn’t go up too much.
11. The plan was good in theory. However/Moreover, in practice
it was extremely difficult to implement.
12. For any two complementary / substitute goods, a decrease in
the price of one good will produce a leftward shift in the
demand for the other good.

356
8. Fill in the gaps using words from the box.
quantity  •  profits  •  shortages  •  law  •  purchases
number  •  supply  •  monopoly  •  outputs  •  profit
Supply and demand
The backbone of any economy is producers. They are rep-
resented by enterprises or firms. The aim of producers is to
(1) _______ goods and services, seek (2) _______, and compete
successfully with one another. To create the goods and services
they sell, producers transform inputs into (3) _________. Three
factors of production are needed to make goods and services.
They are labour, capital, and natural resources.
Every economy faces the problem of what, how and for whom
to produce. In market economies the problem is solved by the
market thanks to the (4) _________ of supply and demand.
The law states that the imbalances in the market between the
(5) ___________ of the goods that buyers want to purchase and
the quantity that producers want to sell tend to be corrected by
changes in prices.
Other things being equal, people tend to increase their
(6) _________ of a good or service when its price goes down,
and to cut back on purchases when prices go up.
Producers tend to respond to a rise in price by increasing
their output. Together, changes in supply and demand act to
correct temporary (7) __________ or surpluses. When there is
a shortage, producers see a chance to increase the supply and to
make an extra (8) ________.
Whenever people who are willing to sell a commodity con-
tact people willing to buy it, a market for that commodity is
created. In a perfect market, buyers and sellers are numerous and
competition is completely free. In some markets there may only
be one seller or a very limited (9) ______of sellers to offer goods
and services. Such a situation is called a (10) “_________”.
Text B

1. Match the term with its definition.


1) beneficial (adj) a) smth that will help you to succeed
2) withhold (v) b) producing a profit or a useful result

357
3) supply (n) c) things that cause problems or danger
4) item (n) d) helpful or useful
5) switch (to) (v) e) a single thing, especially one thing in
a list, group, or set of things
6) profitable (adj) f) to change from one thing to another
7) advantage (n) g) to not give someone the information,
money, etc. that they want
8) elimination (n) h) an amount of smth that is ready to
be used
9) slope (v) i) to be high at one end and low at the
other
10) treat (v) j) the removal or destruction of smth
11) productive (adj) k) to consider smth in a particular way
12) adverse (adj) l) producing or achieving a lot

2. Use the terms from exercise 1 to fill in the gaps. Change the
form of the words where necessary.
1. Firms reduce their use of oil-intensive products which are
now more expensive and _______ to fuel-efficient produc-
tion, while households try to use gas-fired central heating
and buy smaller cars.
2. If an economy can produce goods at a lower cost than other
countries or has resources others do not have then the coun-
try has absolute __________.
3. The supply curve ______ up showing the positive relation
between price and quantity supplied, holding other things
constant.
4. Cheaper raw materials, or technical advances in packaging of
the product, would change the “other things” relevant to the
_______ of this product.
5. _________ weather conditions may reduce wheat output,
increase the price of wheat, and reduce the consumption of
this product.
6. Countries are prepared to work together cooperatively to
deal with this problem in a way that allows them to develop
the science and technology in a _______ way.
7. Plans of measures to be taken are developed with the view
of making management decisions, business process optimisa-
tion and ________ of drawbacks.

358
8. The development of the _______ forces and the organisa-
tion of production corresponding to them are very important
at the moment.
9. Regretfully, both the companies _______ the management
of the crisis as a separate activity from the important task of
human development.
10. For the company it would be _______ to sell more at such
lucrative prices.
11. In the hypothetical economy workers can produce either 25
_________ of films or the same amount of food.
12. Tax agents calculate, _______ and transfer the tax from a
tax payer not later than one month from the date of comple-
tion of the tax period or date of money payment.

3. Find the following words and word combinations in the text


Supply and demand.
более точно и формально; общее количество товара или
услуги; имеющийся в наличии для продажи; по данной цене;
объем предложения; закон предложения; другими словами;
имеющие уклон вверх; теоретические примеры; рассматри-
ваемый товар; издержки производства; улучшенные техно-
логии; в ответ на; ожидать, что цена поднимется; следова-
тельно/отсюда; введение нового налога; противоположный
эффект; неожиданные события; оказывать влияние на; при-
водить к; поставки нефти

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to result in  •  to have an impact on  •  input supplies
agricultural output  •  supply shocks
the law of supply  •  production cost
to impose taxes  • subsidy • hence
quantity supplied

1. The term “________” makes sense only in relation to a par-


ticular price of a product.
2. ______ says that for virtually any good or service the higher
the price is, the larger the quantity that will be offered for
sale is.

359
3. By _______ the government can control overall supply and
demand in the market.
4. Among ________ there are the raw materials needed for
production, the cost of electricity and the rent the company
pays.
5. Consumers express their wants through their purchases of
goods and services they desire at the prices they are willing
to pay. Thus, they _______ what will be produced in a mar-
ket economy.
6. In agriculture diminishing returns mean that, with fixed
size of plant and equipment, adding variable inputs leads to
smaller and smaller additions to _______.
7. Each firm in the industry produces such a small part of the
total industry output that it cannot noticeably affect the
market price. But the ease of entry of new firms into the
industry ______ an increased supply.
8. When the supply of raw materials or components is dis-
rupted, _______ occur. The price of goods rises, so do manu-
facturers’ variable costs.
9. If the cost of ________ is increasing, it becomes less profit-
able for firms to produce goods and services.
10. The government pays ________ to farmers to produce par-
ticular crops.
11. The company has introduced new technology to the system
of product distribution, _______ better service for each of
the company’s customers.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 produce
2 profitable
3 resource
4 impose
5 subsidy
6 beneficial

360
6. Choose the proper form of the word to complete the sentences
1. I think we have reached an agreement which not only _____
management but also labour.
Business expansion will have a positive impact on the com-
pany development: the capital market is the most ________
for construction companies.
According to the balance sheet of the company, its _______
rose by 12% last year.
2. As a result, there will be fewer hospitals but the authorities
will _______ them adequately.
The design of new goods and the process of coating them
with brighter packaging will require the best and most
________entrepreneurs.
The _______ necessary for production must be delivered as
soon as possible.
3. The _______ of a new tax or the increase of an existing tax
represents an increase in production costs.
If the government decides __________ a tax on a good, the
price of the good is highly likely to increase.
4. The elimination of a ________or a decrease in a subsidy will
give rise to a leftward shift in the supply curve.
Governments typically ________ companies which relocate
inside the zones, making them particularly attractive for
manufacturing and exporting companies.
5. By transferring workers from one industry to the other, the
economy ______ more of one good at the expense of yield-
ing less of the other good.
The general equilibrium theory helps understand the com-
plete pattern of consumption, ________, and exchange in
the whole economy.
In any market for _______ and services, consumers try to
get maximum satisfaction from their purchase.
During its most ______ period, the company used different
ways of making more efficient use of agricultural land.
6. He firmly believes that the process of liberalising entrepre-
neurial initiatives from excessive government regulation
should be mutually _______ both for the state and for busi-
ness.

361
Privatisation has already helped China’s economic growth
and other countries like Turkey are also looking ______
from increased efficiency and better access to capital.
We are talking about cutting millions and even billions of
tons, so it would make more sense to talk in total costs and
total _______.

7. Choose the correct word.


1. People prefer to shop in supermarkets because they find a
wide range / amount of goods there.
2. A fallen tree during the storm can disrupt / damage the elec-
tricity supply to thousands of houses.
3. Governments get most of their money through borrowing /
taxation.
4. All machines need maintenance / replacement so that they
keep working well.
5. The things that farmers grow in their fields are called tim-
ber / crops.
6. The price of a product is a factor / labour which influences
our decision to buy it.
7. A company’s total income / revenue is all the money it
receives from sales.
8. Some people calculate / assume how much they spend every
week.
9. The use or satisfaction consumers get from something they
buy is called purchase / utility.
10. Profit / Benefit motivation is what drives businessmen in the
market economy.
11. When the government puts a tax / ban on a commodity, peo-
ple are not allowed to buy or own it.
12. Production costs are the amount of money companies spend /
waste to make a product.

8. Translate the following sentences from Russian into English.


1. Любой предприниматель, поставляя товар на рынок,
прежде всего сталкивается с проблемой спроса на данный
товар. Спрос определяется потребностью потребителей при-
обрести товар, выраженной в их покупательной способности.

362
2. И шкала спроса, и кривая спроса дают нам возможность
определить, как зависит величина спроса от уровня цен. Эта
зависимость, которая является обратной, формулируется в
виде закона спроса: при прочих равных условиях величина
спроса на товар или услугу находится в обратной зависимо-
сти от цены этого товара.
3. Возможность производства любого товара связана в
первую очередь с получением прибыли. Это значит, что пред-
приниматель должен сначала установить, что его затраты на
производство будут ниже, чем существующие на рынке цены
на товар.
4. Кривая предложения показывает, что рост цены сопро-
вождается ростом величины предложения. При этом кривая
предложения имеет, в отличие от кривой спроса, положи-
тельный наклон, что свидетельствует о прямой зависимости
между величиной предложения и ценой товара.
5. Изменение величины предложения иллюстрируется
движением по точкам кривой предложения: вверх, если цена
растет, и вниз, если цена падает.
6. В реальной жизни предложение изменяется не только
под влиянием изменения цены производимого товара. Суще-
ствует и ряд других факторов, влияющих на предложение,
таких, как цены на ресурсы, введение технологии производ-
ства, установление или отмена налогов и дотаций, цены на
другие товары, ожидания изменения цен, рост числа произ-
водителей.
Unit 7
Government in the economy
Text A

1. Match the term with its definition.


1) social secu- a) connected with the law
rity (n)
2) exert (v) b) to introduce a new law, rule, tax, etc.; to or-
der that a rule, punishment, etc. be used
3) interest (n) c) a system in which people pay money regu-
larly to the government when they are work-
ing and receive payments from the government
when they are unable to work, especially when
they are sick or too old to work
4) impose (v) d) use official authority to demand and collect
a payment, tax, etc.
5) legal (adj) e) to use power or influence to affect someone
or smth
6) regulation f) the extra money that you pay back when
(n) you borrow money or that you receive when
you invest money
7) GNP g) to appear important or threatening and like-
ly to happen soon
8) levy (v) h) an official rule made by a government or
some other authority
9) loom (v) i) the total value of all the goods and services
produced by a country in one year, including
the total income from foreign countries

2. Use the terms from exercise 1 to fill in the gaps.


1. The unions were always able to _________ their control
over the industry by threatening to stop production, and
364
the proprietors were never brave enough to withstand sig-
nificant financial losses.
2. That dissatisfaction with the weakness of the national gov-
ernment led to proposals to augment its authority by grant-
ing it the power to _________ taxes and duties, conduct
foreign relations, raise, operate, and pay an Army and Navy,
borrow money, and regulate interstate and foreign com-
merce.
3. The concern which is widely shared in Israel as part of a
complex calculation is of an Iranian retaliation that might
spark regional conflict and send oil prices soaring, at a time
when the world economy is already struggling and US presi-
dential elections _________.
4. Carefully plan absences from the work force. When you’re
deciding how much time to take off to care for a newborn or
an ailing parent, your __________ benefit is probably not
uppermost in your mind — but it’s worth considering. That’s
because years in which you earn nothing can count against
you when your benefit is calculated.
5. A ________ rule is seen as an order to be complied with by
everyone.
6. If you’re carrying a balance on your card and working hard
to pay it off, these deals can save you lots in _________ pay-
ments.
7. The production and distribution of scarce goods in a society
require political authority that may legitimately _________
taxes.
8. Under the new __________ spending on weapons will be
strictly controlled.
9. As _________ per capita continues to grow, however, the
relationship quickly turns around and further increases in
wealth become associated with increased levels of environ-
mental protection activity.

3. Find the following words and word combinations in the text


What do governments do?
устанавливать правила; осуществлять платеж; посо-
бие социального обеспечения; процентная ставка; валовой
национальный продукт; нормы и правила; правовая основа;
собственность на имущество; объявлять вне закона; жилые

365
районы; разрешение на производство строительных работ;
правила техники безопасности; мошенничество в деловой
сфере; установить цены путем монополистического сговора;
дотация; пособие по безработице; пенсионное пособие; про-
центные платежи; облагать налогами; взимать налог; налог на
доходы; налог на добавленную стоимость; стоимость недви-
жимости; цикл деловой активности; уровень инфляции; рас-
пределение ресурсов; негативный подоходный налог; оказы-
вать сильное влияние

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to fix  • benefit •  to set  •  to impose
to apply  • regulation •  to exert
to loom  • security
1. A few years ago the prospect of war ________ large.
2. The new ________ will come into force on January 1.
3. Their prices are ________ until the end of the year.
4. A social ________ cheque is a transfer payment.
5. Applications for unemployment ________ dropped last
month.
6. A well-funded national organisation would be able to
________ more influence in Parliament.
7. Governments at all levels regulate economic behaviour,
________ detailed rules for the operation of businesses.
8. A new tax was ________ on fuel.
9. The discount no longer ________ to him, because he’s over
eighteen.

5. Complete the table using the proper word form.


Adverb Noun Adjective
1 appropriateness
2 legitimisation
3 stably
4 safe
5 privately
6 individual

366
6. Choose the proper form of the word to complete the sentence.
Use the words from exercise 5.
1. The government has been accused of not responding
________ to the needs of the homeless.
Is now an ________ time to make a speech?
He questioned the ________ of their methods.
2. Traditionally this ________ emerges from the collective will
of the citizens as defined by membership in a nation state.
Is his business strictly ________?
She can now ________ claim to be the best in the world.
3. The situation in the country has remained relatively
________ for a few months now.
The country is now enjoying a period of relative ________
and prosperity.
The announced readings suggest again that even ________
high oil prices do not guarantee further growth in oil & gas
receipts on the back of strength of the ruble.
4. My savings are invested ________.
Make sure to keep your credit card ________.
Crime has increased and many people are concerned about
public ________.
5. Their children were educated ________.
Senior defense officials held ________ talks.
They don’t want their ________ invaded by reporters.
6. The mayor has been meeting with city council members
________.
The prosecutor refused to comment on ________ cases.
The school’s reputation was ruined by the bad behaviour of
a few ________.

7. Choose the correct word.


1. The principal and his assistants should form the decision-
making group of the significant executive decisions with spe-
cial reference to school: general policy, rules and restrictions /
regulations, work performance standards, and evaluation tools.
2. Specifically, urban planning and public health should promote
access to healthy foods, good air quality, protection from
excessive noise, good water and sanitation, physical activity,

367
housing quality, access to employment facilities, community
and road safety, and the reduction of property / poverty.
3. Some affiliates publicly objected in early February after the
national headquarters tried to implement a new policy that
would have prohibited / provided the local chapters from
financing programs by organisations under government
investigation.
4. The new budget report showed that interest / interesting
payments fell by $62 billion this year even as the debt was
soaring.
5. Both public and private investment is needed, including sig-
nificant government spending / purchasing on research and
development aimed at developing new and cheaper low-car-
bon technologies.
6. Taxes rose / raised at national level are usually supplemented
by local taxes assessed on property values.
7. The business cycle consists of fluctuations / hesitations of
total production and the rate of inflation.
8. The national government may reduce taxes in a recession in
the hope that people will increase / decrease spending and
thus raise the GDP.
9. When inflation is high, the central bank may reduce the rate /
level of money growth with the aim of reducing inflation.
10. As a proportion of national wealth, defence expenditure /
spending rose from three per cent in the early 1930s to eigh-
teen per cent in 1939.

8. Fill in the gaps using the words from the box.


tough  • growth • households
gross  •  increase  • pressure
private  • boom •  spending
intersection  • fell
The role of government spending
by Motoko Rich
As Congress continues to wrangle over a debt reduction bill
that will inevitably cut government (1) ________, Friday’s esti-
mates of second-quarter (2) ________ domestic product pro-
vided a sobering look at how a decline in public spending and
investment can restrain growth.
368
G. D. P. grew at an annual rate of just 1.3 per cent in the
second quarter, according to the Commerce Department, well
below consensus forecasts. First-quarter (3 ) ________ was
revised down sharply to just 0.4 per cent from an earlier estimate
of 1.9 per cent.
The astonishingly slow growth rate from April through June
was due in large part to sluggish consumer spending and an
(4) ________ in imports, which subtract from growth numbers.
But dwindling government spending also held back growth.
While federal government spending increased by 2.2 per cent
in the second quarter, that was all because of a jump in mili-
tary spending. State and local government spending, which has
been a crimp on growth throughout most of the official recovery,
(5) ________ by 3.4 per cent.
The figures will inevitably put further (6) ________ on Con-
gress as it tries to come up with a plan and figure out just how
many billions of dollars can be shaved out of the government’s
budget.
“A weak economy will only make the (7) _________ deci-
sions on the budget even more difficult,” Nariman Behravesh,
chief economist at IHS Global Insight, wrote in a research note
Friday, “and the case for fiscal austerity in the near-term even
weaker.”
On the other hand, said Steve Blitz, a senior economist for
ITG Investment Research, policy makers have to decide whether
to continue to pump up the economy through government
spending or figure out a way to spur the (8) ________ sector.
“We are probably at as important an (9) _________ of policy
and the economy as we were in late 2008 and early 2009 when
the economy was collapsing,” Mr. Blitz said.
Mr. Blitz favours reforming tax policy and aggressively pur-
suing foreign markets for American goods. But, he said, the only
real prescription is to wait. With so many (10) _________ still
working off the debt accumulated during the (11) ________
years, he said, “that’s just going to take time to work out, and
you can’t cheat the process.”
http://www.nytimes.com

369
Text B

1. Match the term with its definition.


1) public good a) the value of a company if each of its parts
were independent, publicly traded entities
2) private good b) someone, who enjoys the benefits of a
public good without bearing the cost
3) private market c) the fact of two things happening at the
value same time by chance, in a surprising way
4) free rider d) an item whose consumption is not de-
cided by the individual consumer but by
the society as a whole, and which is fi-
nanced by taxation
5) externality (n) e) market value
6) coincidence (n) f) to become involved in a situation in or-
der to try to stop or change it
7) market price g) a type of item necessary to be purchased
in order to be used, such as food, and in so
doing, will prevent another consumer from
taking part in consuming that same prod-
uct or item
8) intervene (v) h) term used by Adam Smith to describe
the natural force that guides free-market
capitalism through competition for scarce
resources
9) invisible hand i) the side effect on an individual or entity
due to the actions of another individual or
entity

2. Use the terms from exercise 1 to fill in the gaps. Do not


forget to change the word form if necessary to fit the sentence
properly.
1. Trade liberalisation benefits the majority of consumers with-
out their lobbying for it. This may tip policy in the direction
of protection, for which there are fewer ________.
2. Companies often consider the ________ of targets when
evaluating a possible takeover.
3. The production of energy in a nuclear power plant benefits
the owners of the power plant, but creates ________ in the

370
form of radioactive waste for the environment and its inhab-
itants.
4. It might have been planned or it might have been pure
________.
5. The prime minister has pledged not to ________ militarily
in neighbouring countries.
6. ________ is determined dynamically by buyers and sellers
in an open market.
7. Once ________ are available, no one can be stopped from
consuming them for free. An example is the protection pro-
vided by police, fire departments, and the military.
8. In some cases, even things like roads and airports can be
provided by the private sector more efficiently than by the
government. Indeed, once ________ become public ones,
economic efficiency suffers. Why? Because it almost always
costs the government more to do these jobs.
9. The interaction of market participants, leading to exchange
of goods and services, enables each participant to be better
off than when simply producing for himself/herself. In a free
market, no regulation of any type is needed to ensure that
the mutually beneficial exchange of goods and services took
place, since the “__________” guides market participants to
trade in the most mutually beneficial manner.

3. Find the following words and word combinations in the text


What should governments do?
вмешательство в экономику государства; преследовать
собственные интересы; невидимая рука; представлять инте-
ресы общества; нарушение рыночного механизма; функци-
онирование экономики; товары индивидуального потребле-
ния; товары и услуги, предоставляемые для общественного
потребления; оборона страны; государственная безопас-
ность; вооруженные силы; лицо, получающее экономические
блага бесплатно; на коммерческой основе; государственное
предприятие; загрязняющий сброс; побочный эффект; обвет-
шалый; внешние последствия экономической деятельности,
продукции или услуг (экзогенный фактор); обоснованность
(правомерность)

371
4. Use the words from the box to complete the sentences. Do
not forget to change the word form to fit the sentence properly.
to intervene  •  interest  •  to bear  •  invisibility
to fail  •  to vary  •  light  • facility •  to pollute
1. The level of unemployment ________ with economic condi-
tions and other circumstances.
2. Market ________ may occur due to unexpected disruptive
events such as wars or natural disasters, or due to economic
barriers such as trade restrictions or monopolies.
3. The library media program needs to help students learn to be
planful as they pursue ________ of their own.
4. We do not need further government ________.
5. There are two sides to economics: the ________ hand of
market competition, to be sure, making us faster, keener,
safer, but also the helping hand of the community in the form
of government to restrain ourselves when the competition
starts costing more than it benefits.
6. A free rider enjoys the benefits of a public good without
________ the cost.
7. ________ pollution makes it difficult to see the stars.
8. As for direct public access to the water, practically nonexistent
today, the plan proposes to construct new public piers where
folks can fish, launch small boats or simply relax. Cafes or other
small eating ________ might be placed on one or all of the piers.
9. Residents in a number of coastal cities are banding together to
oppose new shrimp farming operations as they are being built,
adding the virus to old complaints of ________ discharges.
5. Complete the table using the proper word form.
Adverb Noun Adjective
1 efficiently
2 simultaneity
3 certain
4 increased
5 commercially
6 accordance –
7 coincidental

372
6. Choose the proper form of the word to complete the sentence.
Use the words from exercise 5.
1. The new technology is aimed at improving ________ and
customer service.
This process makes ________ use of limited resources.
That was a very ________ organised event.
2. The game will be broadcast ________ on TV and radio.
There is ________ in the relationship between online finan-
cial reporting and online continuous auditing. On the one
hand, the adoption of online financial reporting will probably
drive the demand for external online continuous auditing.
There were several ________ attacks by the rebels.
3. There is no ________ that the president’s removal would
end the civil war.
________, the early years are crucial to a child’s develop-
ment.
The show appeals to an audience of a ________ age.
4. The population has ________ from 1.2 million to 1.8 mil-
lion.
It is becoming ________ clear that this problem will not be
easily solved.
Passive smoking can lead to an ________ risk of lung cancer.
5. She is developing the ________ side of the organisation.
His invention was not ________ successful.
________ in Greece is down to almost nothing because of all
the economic and political uncertainty.
6. We acted in ________ with my parents’ wishes.
The cost of materials rose sharply last year. ________, we
were forced to increase our prices.
7. ________, they had both studied in Paris.
An official said the timing of the Prime Minister’s visit was
________.
By ________, I met the person we’d been discussing the
next day.

7. Choose the correct word.


1. The Islamic banks have lent / land TRY 5 billion to consum-
ers, about a quarter as much as the commercial banks.

373
2. The math is easy: the federal budget over the next decade
cannot be made to square without rising / raising a lot more
money.
3. Federal debt held by the public will grow from about two-
thirds of gross domestic production / product today to
roughly 100 per cent in a decade and twice that much by
2040.
4. For 30 years, any proposal to raise taxes had to overcome
an unshakable belief that higher taxes inevitably led to less
gross / growth.
5. Republicans can not insist / consist on protecting tax breaks
for millionaires at the expense of our economy.
6. Getting to an agreement / argument to cut defense spending
may not be easy, however. Many Republicans are still hawk-
ish and want to fully support US troops abroad.
7. In this sense, conservatives’ views on political Islam coin-
cide / aside with those of liberal secularists.
8. Students can attend to only a limited amount of informa-
tion at a time, their selection and perception of information
is intervened / influenced by past experiences.
9. More information is taken in if it is received subsequently /
simultaneously in two modalities, vision and hearing, for
example, rather than in a single modality.

8. Translate the following sentences from Russian into English.


От правительства России требуется концентрация уси-
лий на решение целого ряда задач, я их назову.
Первая задача — это, конечно, обеспечение макроэконо-
мической стабильности, что означает проведение жесткой,
долгосрочной, предсказуемой бюджетной политики, сниже-
ние инфляции, повышение эффективности государственных
расходов.
Второе — это форсированное развитие инфраструктуры в
ключевых сферах, снятие ограничений, которые блокируют
деловую активность.
Третье — совершенствование рынка труда, формирование
условий для географической и профессиональной мобильно-
сти населения.

374
Четвертое — улучшение делового климата, обеспечение
доступа к кредитным ресурсам, наращивание частного дол-
госрочного инвестиционного ресурса.
Пятое — это использование конкурентных преимуществ
в сфере человеческого капитала, в том числе формирование
условий для динамичного развития образования и здравоох-
ранения в нашей стране.
Шестое — это сбалансированное региональное развитие,
совершенствование межбюджетных отношений, конкурен-
ция между территориями за рабочую силу и инвестицион-
ные ресурсы.
И, наконец, седьмое — это усиление международных
позиций российской экономики, в том числе адаптация к
условиям ВТО, повышение уровня интеграции российских
фирм в международной цепочке создания добавленной сто-
имости, улучшение структуры нашего экспорта.
И, конечно, необходимо сохранять лидирующую роль в
интеграционных процессах на постсоветском пространстве.
Одновременно нам нужно ускорить интеграцию в рамках
наших взаимоотношений в АТЭС, работы с Евросоюзом и
деятельности по присоединению к ОЭСР.
Из выступления Д. Медведева на форуме им. Гайдара в 2013 г.
Unit 8
Micro- and macroeconomics
Text A

1. Match the term with its definition.


1) aggregate (v) a) to plan or invent a new way of doing
smth
2) bundle (n) b) to persuade someone to do smth, espe-
cially smth that does not seem wise
3) devise (v) c) a balance between different people,
groups, or forces that compete with each
other, so that none is stronger than the oth-
ers and a situation is not likely to change
suddenly
4) distort (v) d) to keep smth or continue to have smth
5) induce (v) e) to be a particular amount when added
together
6) preserve (v) f) to limit all or most of your study, busi-
ness, etc. to a particular subject or activity
7) retain (v) g) a number of things that belong or are
dealt with together
8) specialise (v) h) to save smth or someone from being
harmed or destroyed
9) equilibrium (n) i) to change a situation from the way it
would naturally be

2. Use the terms from exercise 1 to fill in the gaps.


1. With this theory, exchange rates will adjust so that the same
_______ of goods costs the same in all countries.
2. Perfectly competitive free market _________ will then allo-
cate resources efficiently.

376
3. It is quite inadequate, when assessing the relationship of the
elderly to the economy, just __________ the costs of ser-
vices; their inputs should be taken into account.
4. But the model he develops tends _________ the past in
order to exaggerate the extent of change.
5. To overcome and penetrate this formidable barrier, the Brit-
ish would have ________ some new tactic.
6. For professions in a complex society, the question becomes
not whether ________ internally but how to co-ordinate
these specialities into a comprehensive whole.
7. They enjoy their status as a family company and intend
________ it.
8. English Heritage is an organisation whose duty is
__________ this historic environment.
9. They _______ the customer to buy that car by promising
generous discounts.

3. Find the following words and word combinations in the text


Macroeconomics and microeconomics.
специализироваться на; экономика труда; экономика
города; землепользование; перенаселенность; широкий
спектр подходов; цитировать; совокупные продажи автомо-
билей; сложный (тонкий); теория общего равновесия; одно-
временно; явление; структура потребления; обоснованное
упрощение; косвенный эффект; поддержать высокий уро-
вень оплаты труда; не брать во внимание; потребительские
товары; ввести понятие о чем-либо; валовой национальный
продукт; уровень совокупных цен; уровень безработицы;
рабочая сила; высокий уровень инфляции; приводить к
результатам

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
precedent  • pattern •  commodity
methodology  •  to simplify  • intention
to emphasise  •  to classify  •  outcomes
1. The country’s most valuable ________ include tin and dia-
monds.

377
2. ________ is the theoretical study of the logical basis of
research, of collecting data, and of interpreting and analys-
ing the findings.
3. The report ________ the importance of improving safety
standards for the industry.
4. Economists ________ markets into some separate groups.
5. For the Soviet Union, the return to any nation of terri-
tory occupied during the war would create a dangerous
__________.
6. Economic models help _______ the reality and predict
future ________ of financial decisions.
7. The government have no _______ of changing their policy;
they pursue the principles adopted last February.
8. A ________ is beginning to emerge from our analysis of the
accident data.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 specialise
2 division
3 extend
4 complicated
5 simplification
6 refer

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. The division of labour here is a notion used in part to express
the fact that with more complex technology one gets more
________ in society.
Are you a jack of all trades or do you prefer _________?
_________ training for specific jobs is highly demanded at
the factory.
2. The equal _________ of labour between workers is a secrete
of efficiency.
After World War Two, Germany _______ into two separate
countries.

378
3. There was an __________ news bulletin because of the
plane crash.
Martin Luther King, Jr, campaigned for the __________ of
civil rights to black people.
The effects of this legislation ________ further than the
government intends.
4. If any _______ arise, let me know and I’ll help.
These new rules ______ the tax system even further.
The rules are rather _______ to follow.
5. To make the analysis more manageable, we introduced some
______ of the methodology.
He tried ______ the story for the younger audience.
The new ______ tax system helps raise more taxes.
6. The article made no _______ to previous research on the
subject.
The figures _______ to our sales in Europe.

7. Choose the correct word.


1. It is very difficult to define the conception / concept of pov-
erty.
2. Private pension schemes fall into two broad / wide catego-
ries.
3. They offered / secured him a very good job, but he turned it
down.
4. It is hard to make a direct comparison, for relative / corre-
sponding prices have changed.
5. The analysis of the impact of taxes on households should
allow for changes in the manner / pattern of consumption.
6. But the tests are susceptible to many factors that can distort /
disturb the results.
7. We asked for a breakthrough / breakdown of the accident fig-
ures into day time and night time.
8. Property costs / values have fallen since the plans for the
airport were published.
9. New companies often experience / exercise a loss in their first
few years.
10. What is your party’s policy / politics on immigration?

379
8. Fill in the gaps using the words from the box.
rate  •  trade  •  total  • respectively
division  • beneficial •  specialisations
Comparative advantage
Building on the concept of (1) _________ of labour is
that of comparative advantage. Some countries have devel-
oped (2) _________ in certain areas. Rather than manufacture
everything in one country, it is (3) ___________ for countries
to make only what they are talented at and (4) _________
for those things that requires different skills. For example,
England and France both make wine and cheese. In France
it takes two man hours to produce a bottle of wine and four
man hours to make a round of cheese. In England it takes four
man hours to make a round of cheese and six hours to produce
a bottle of wine. Although both countries make cheese at the
same (5) _________, England has the comparative advantage
at cheese-making and France with wine producing. If England
makes two rounds of cheese, it will take a (6) __________ of
eight man hours. If France focuses on wine, it will produce two
bottles in four hours. Each country can keep one item and trade
the other. Now France and England each have a round of cheese
and a bottle of wine for four hours and eight hours of work,
(7) ___________, saving each country two hours.
http://www.ehow.com/facts_6371135_macroeconomic-policies_.html

Text B

1. Match the term with its definition.


1) convert (v) a) to produce or cause smth
2) corporation (n) b) smth that can be regarded as a sign of
smth else
3) count (v) c) to change smth into a different form of
thing, or to change smth so that it can be
used for a different purpose or in a different
way
4) generate (v) d) to take a number or an amount from
a larger number or amount

380
5) indicator (n) e) an organisation or group of organisa-
tions that work together for a particular
purpose and are officially recognised as one
6) ownership (n) f) a part of smth larger, especially a part
that is different from the other parts
7) portion (n) g) to be allowed or accepted, or to allow or
accept smth, according to a standard, set of
ideas, or set of rules
8) subtract (v) h) the fact of owning smth

2. Use the terms from exercise 1 to fill in the gaps.


1. In this case you _______ a total of six from the eighty to
give you the correct total of 74.
2. Our clear objective is ______ as many of these contract per-
sonnel to permanent staff, bringing stability to the industry
in the long term.
3. A _______ of rentals on leased cars costing in excess of
£12 000 is disallowed for tax purposes.
4. After several changes in ________, the company is now on
the market again.
5. Used strictly whether in reference to a household, a ______
or a government, an economy consists of a set of activities by
which scarce means are allocated to specific ends.
6. _______ your money carefully to make sure it’s all there.
7. The new development will ________ 1500 new jobs.
8. Commodity prices can be a useful ______ of inflation, he
claimed.

3. Find the following words and word combinations in the text


Scarcity and importance of economics.
постоянный житель (резидент); факторы производства;
пересылать (отправлять назад); различать; доход, созданный
внутри страны; валовой национальный продукт; совокупный
выпуск; преобразовать; рыночная стeоимость; индикаторы
объемов производства; на душу населения; денежные пере-
воды; уровень жизни; в итоге; перевод прибыли, фактически
полученный резидентом

381
4. Use the words from the box to complete the sentences. Do
not forget to change the word form to fit the sentence properly.
There are some extra words in the list.
measure (n)  •  regardless of  •  to approach
decade  • versus •  transfer (n)
domestic  • remittance
1. The official __________ of ownership will take a few days to
complete.
2. Record sales are not always a _________ of a singer’s popu-
larity.
3. This is because the volume of Japanese imports has become
more sensitive to the _________ economic cycle.
4. I tell them the truth, __________ what they want to hear.
5. The uncertainty is illustrated by the fact that even five years
ago Vodafone profits were forecast at around £40 million by
the end of the ________.
6. The total amount raised so far __________ $1000.
Unit 9
Economic growth and development
Text A
1. Match the term with its definition.
1) per capita (adj) a) the ability to read and write
2) given (adj) b) a subject that you study, or a type of
work that you do
3) literacy (n) c) to be similar to someone or smth, espe-
cially in appearance
4) branch (n) d) based on calculations that show the av-
erage amount for each person affected
5) vogue (n) e) used for referring to a particular thing
6) field (n) f) a part of a particular area of study or
knowledge
7) variable (n) g) money spent by a government, organ-
isation, or person
8) resemble (v) h) smth that is popular or fashionable
9) expenditure (n) i) a letter representing a number that can
change depending on the other numbers
in an equation

2. Use the terms from exercise 1 to fill in the gaps.


1. In a ________ situation, more than one of these methods
may be used.
2. The two species _________ each other.
3. Per ________ income rose sharply last year.
4. The temperature remained constant while pressure was a
________ in the experiment.
5. Teachers have been asked to concentrate on ________ and
numeracy.

383
6. Mechanics is a ________ of physics.
7. The budget will certainly include increased ________ on
education.
8. This discovery has opened up a whole new ________ of
research.
9. This novel had a great ________ ten years ago.

3. Find the following words and word combinations in the text


Growth and development.
здравоохранение; стандарты охраны окружающей среды;
жилищно-коммунальное хозяйство; образовательный стан-
дарт; различные сферы деятельности; уяснить особенно-
сти современной науки; сдвинуть с мертвой точки; кривая,
построенная в координатах времени и пространства; в том
смысле, что; автономный; сравнительно устойчивый рост;
темп роста; умноженное воздействие; поведенческий; допол-
нительный доход; принимая во внимание; коэффициент
накопления; сбалансированность; эндогенный; инновация
в сфере продуктов; инновация в технологическом процессе;
огромная популярность

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
to grasp  •  to investigate  • approach
to attempt  • exogenous •  to sustain
innovation  • equation • endogenous
1. Together, all these ________ are making a difference in
curbing the spread of HIV and in restoring quality of life to
infected people and their families.
2. While some media ________ to make their reporting more
neutral, overall, media outlets failed to comply with the prin-
ciples of the charter.
3. Hence, the market model cannot be ________ in the long
run either.
4. Leo shook his head to clear it, ________ for the lost thread
of his original argument.
5. Similarly, the present age of entrepreneurship will be as
important for its social ________ — and especially for

384
________ in politics, government, education, and econom-
ics — as for any new technology or material product.
6. We will only present those measures, which are related to
the ________ risks for sustainable growth discussed above.
7. Russian, as well as foreign scientists have ________ the
issue, which shows a more or less active interest in the proj-
ect during this period.
8. As oil prices are an ________ factor, the foreign trade bal-
ance can only be improved by higher exports via increasing
the national competitiveness.
9. Check that all three terms satisfy the same functional
________ and are differentials of the same type.

5. Complete the table using the proper word form.


Singular Plural
1 addressees
2 analysis
3 inquiries
4 data
5 equilibria
6 phenomenon
7 criteria
8 economy
9 characteristic
10 emphases

6. Choose the proper form of the word to complete the sentences.


1. The electronic letters with advertisements just often fail to
reach a number of ________ as they are automatically dis-
tributed to spams by mailing systems and cannot come to the
user’s mailbox.
The effectiveness of advertisement to be distributed by the tele-
communications network may be improved by the distribution
of personalized advertisements provided that the ________
will be interested in viewing the coming advertisements.
2. The assessments and ________ are based upon data and
information available in open scientific literature, in regional

385
reports or available from reliable sources, including Govern-
ments.
All further ________ were made according the same
________ method using the recorded calibration.
3. As Nobel laureate Wassily Leontief put it, “In no field of
empirical ________ has so massive and sophisticated a sta-
tistical machinery been used with such indifferent results.”
In the given section you can choose the place of rest appro-
priate to your ________ and material opportunities.
4. The ________ shows a tendency of toward a reduction of
the development of symptoms.
A rule is applicable just when the ________ has the form
indicated in the rule and the same rule has not previously
been applied to the same ________.
5. In my earlier book, I noted that markets need to be far from
________ if they are to stay alive.
The numerosity of ________ in the considered model is
rather the rule than the exception.
6. Social regimes like all other ________ must be estimated
comparatively.
Your mind is going to die, your mind is not eternal: it is a
time ________, it is born and it dies.
7. Statistical data processing was conducted by method of vari-
ational statistics with the usage of student’s ________.
Mr. Gref emphasises that the bank considers an acquisition
as interesting if it meets several ________.
8. Despite the crisis phenomena in the ________, the bank
managed to maintain a relatively high quality of the loan
portfolio throughout 2008.
Thus, developed countries, where production is oriented pri-
marily towards domestic market, operate in a different way
than small, export oriented developing ________.
9. In the future parents may be able to choose their children’s
physical ________.
The need to communicate is a key ________ of human soci-
ety.
10. We provide all types of information, with an ________ on
legal advice.
The examples we will look at have quite different ________.

386
7. Choose the correct word.
1. However, operating margin recovery will significantly / spe-
cifically improve this ratio.
2. A technician doesn’t have to be an expert in a given / brought
market to be able to analyse it technically.
3. After the euphoria over the bailout of Freddie and Fannie is
mostly over, investors will return attraction / attention to the
macroeconomic situation.
4. In order to understand the nature of the Roman achievement
in this field and the resemble / reason why, unlike other legal
systems, the Roman law plays a role in the history of eco-
nomic analysis, we must recall a few facts about it.
5. Privatisation has already helped fire up China’s economic
growth and other countries like Turkey are also looking to
benefit from increased efficiency and better assess / access to
capital.
6. In any modern economy, such outright purchases of common
stocks by the central banks would be considered a dramatic,
radical departure from decades of firmly / firm established,
tried-and-tested policies.
7. There can be a variable / variant: the means can be of one
type, for example only computers, or mixed, for example
computers and audio devices, various training apparatuses
at the same time.
8. The bank offers its clients flexible deposit programs which
enable them to use their available funds efficiently and
receive some surplus / extra income.
9. It is difficult for developing / developed countries to enter
technologically dynamic sectors, as technical progress is con-
centrated in industrialised countries.
10. There the private businessman was provided with extensive
markets and encountered no particularly terrible compe-
tence / competition.

8. Fill in the gaps using the words from the box.


population  •  returns  • sustain • output
produced  • diminishing • negligible
consumption  • redundant • progress

387
The neoclassical model of exogenous growth
The most basic proposition of growth theory is that in order
to (1) _________ a positive growth rate of output per capita in
the long run, there must be continual advances in technological
knowledge in the form of new goods, new markets, or new pro-
cesses. This proposition can be demonstrated using the neoclassi-
cal growth model developed by Solow (1956) and Swan (1956),
which shows that if there were no technological (2) _________,
then the effects of diminishing returns would eventually cause
economic growth to cease.
The basic building block of the neoclassical model is an aggre-
gate production function exhibiting constant (3) __________
in labour and reproducible capital. We abstract initially from all
issues concerning (4) __________ growth and labour supply
by assuming a constant labour supply normalised to equal unity.
Thus the aggregate production function can be written as a
function of capital alone: Y = F(K). This function expresses how
much (5) _________ Y can be produced, given the aggregate
capital stock K, under a given state of knowledge, with a given
range of available techniques, and a given array of different capi-
tal, intermediate and (6) ____ goods. We assume that all capital
and labour are fully and efficiently employed, so F(K) is not only
what can be produced but also what will be (7) __________.
A crucial property of the aggregate production function is
that there are (8) _________ returns to the accumulation of
capital. If you continue to equip people with more and more
of the same capital goods without inventing new uses for the
capital, then a point will be reached eventually where the extra
capital goods become (9) _________ except as spare parts in
the event of multiple equipment failure, and where therefore the
marginal product of capital is (10) _________.
Text B

1. Match the term with its definition.


1) divergence (n) a) not clear in a person’s mind
2) evolve (v) b) to help smth to increase, improve, or be-
come more successful
3) vague (adj) c) happening at the end of a process or ac-
tivity

388
4) concept (n) d) a difference in the way that two or more
things develop from the same thing
5) shrink (v) e) to develop gradually, especially from a
simple to a more complicated form
6) boost (v) f) an idea or a principle that is connected
with smth abstract
7) ultimate (adj) g) to become smaller in amount, value, or
range
8) beneficiary (n) h) a person who gains as a result of smth

2. Use the terms from exercise 1 to fill in the gaps. Do not


forget to change the word form if necessary to fit the sentence
properly.
1. He outlined the policy in ________ terms.
2. He can’t grasp the basic ________ of mathematics.
3. Their share price climbed again today, ________ by rising
sales.
4. The negotiators faced a wide ________ of opinion on the issue.
5. Who will be the main ________ of the income tax cuts?
6. The company has ______ into a major chemical manufacturer.
7. The company’s profit margins ________ from 32.5 per cent
to 17 per cent.
8. Independence remains their ________ political goal.

3. Find the following words and word combinations in the text


The difference between economic development and economic
growth.
благосостояние человека; средняя продолжительность
жизни; младенческая смертность; процент грамотного населе-
ния; благосостояние экономики; благополучие граждан; конеч-
ный выгодоприобретатель; минимально необходимый уровень
жизни; доход на душу населения; охрана окружающей среды;
более узкое понятие; стоимость товаров; взвешенный индекс

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
indicator  •  to grow  •  welfare  • impact
to encourage  • rate  •  amount
to increase  •  to depend

389
1. The infant mortality ________ is the number of babies that
die at or just after birth.
2. They would rather work than live on ________.
3. Development is also very important because the income of
local government ________ on local economic wealth.
4. Between 1990-1995 and 1995-2000, life expectancy
________ in all regions of the world except Eastern and
Southern Africa and Eastern Europe.
5. The social ________ that have mainly been used are ones
that are more likely to respond quickly to external changes,
that is, student drop-out rates as opposed to literacy rates.
6. It also discussed production, noting that while per capita
income had ________ faster in developing countries than in
developed countries during the 1990s, that growth had been
very uneven.
7. The convening of the Conference was an acknowledgement
of the often devastating ________ of small arms and light
weapons on the well-being of many developing countries.
8. As at 31 December 2007, included in customer accounts are
________ of RR 1 656 325 thousand (2006: RR 2 860 571
thousand) belonging to the ultimate beneficiaries of IFD
Kapital Group.
9. Since a rising standard of living was accompanied by an
escalation of costs, Singaporeans were being ________ to
participate in additional commercial savings plans to boost
retirement income.

5. Complete the table using the proper word form.


Noun Adjective
1 benefit
2 sustainable
3 conservation
4 associate
5 synonym
6 qualitative
7 quantity

390
6. Choose the proper form of the word from exercise 5 to
complete the sentence.
1. The new regulations will be for the ________ of everyone
concerned.
They finally came to a mutually ________ agreement.
2. Unfortunately, this level of output is not ________.
In addition, he emphasised the link between market access in
trade, debt ________ and achieving the Millennium Devel-
opment Goals.
3. Road development in the area has been severely affected by
the state’s ________ program.
The country had a ________ government for ten years.
4. She was only the ________ producer of the movie.
An ________ professor is a teacher who works at a college
or university in the US who is above the level of an assistant
professor and below the level of a full professor.
5. “Scared” is a ________ for “afraid”.
Wealth is not necessarily ________ with happiness.
6. There are ________ differences between the two products.
We aim to provide ________ at reasonable prices.
7. It’s cheaper to buy goods in ________.
The differences are not measurable in ________ terms.

7. Choose the correct word.


1. Long-Term Capital Management (LTCM) used a strategy
that relied / relieved on very high leverage and the tendency
for the price of fixed-income bonds to converge in certain
circumstances.
2. The foundations have to be customer variables / values and
customer decisions on the distribution of their disposable
income.
3. We must see that poverty is the greatest enemy of piece /
peace!
4. Panels of legal, medical, and social welfare experts were con-
vened to investigate cases, and appeal procedures / proceeds
were worked out.
5. Growth of income, calculated on the basis of projections of
consumption and investment, will be about 8 per cent in real
time / terms in the year under review.

391
6. Specifically, the growth in per capital / capita food purchas-
ing power of money income (1993—1996) as analternative
measure of regions growth (data on both measures were
reported by Goskomstat) was used.
7. Structure of money income of the population by quintile
groups responds / reflects differentiation of the population by
income size into five (quintile) groups, each of which con-
sists of 20 per cent of the population.
8. In spite / despite of the increase in many “poverty diseases”,
overall mortality and infant and child mortality continued to
decrease globally.
9. We are open to discussions and clarifications on these proj-
ects, as well as to co-operation with Norway in the case /
field of safety and conservation of natural environment.

8. Translate the following sentences from Russian into English.


Экономический рост и развитие
Растущая значимость индивидуальных человеческих
решений для развития городов переводит дилемму «эконо-
мический рост/развитие» из области деклараций в область
конкретных действий. Предпочтение, традиционно отдавае-
мое экономике, и остаточное финансирование гуманитарных
программ и социальной сферы начинают все больше входить
в противоречие с требованиями времени.
На протяжении всей эпохи индустриализации, а в России
все последнее столетие, идея «экономического роста» была
ключевой идеей развития. Логика роста была заложена во все
крупные и мелкие проекты. Рост превратился в ожидаемый
результат проводимой политики. Отсутствие роста трактова-
лось как тревожный сигнал и отсутствие успеха. Данная логика
в значительной степени соответствовала социально-экономи-
ческим реалиям, ключевые процессы эпохи были связанны
с демографическим переходом, урбанизацией и индустриали-
зацией. В соответствии с этой логикой и старопромышленные
территории, и регионы нового освоения, и подавляющее боль-
шинство городов постоянно и неуклонно наращивали числен-
ность населения, экономический потенциал и благосостояние,
часто демонстрируя впечатляющую динамику.
Эпоха «роста» подошла в нашей стране к своему логи-
ческому завершению еще в советское время, хотя никто

392
не говорил о необходимости пересмотра критериев разви-
тия. Наступивший «застой» объяснялся неповоротливостью
советской плановой машины, нуждавшейся в реформиро-
вании. Сегодня недостаточность экономического роста для
развития еще более очевидна, и это невозможно списать
на экономический кризис, транзитный характер российской
экономики, наследие советского прошлого и прочее. Хотя
в стране в целом тенденции экономического роста сохраня-
ются, но они ненадежны, так же как и рост цен на энергоноси-
тели. Рынок труда напряжен не столько из-за экономического
бума, сколько из-за неблагоприятной демографической ситу-
ации и сокращения населения. Если еще десяток лет назад
городские и региональные власти были обеспокоены тем, как
создать новые рабочие места, то сегодня голова болит о том,
как заполнить уже существующие. Необходимость привле-
чения рабочей силы и массовой миграции пугает города,
поскольку масштаб проблем перевешивает все экономиче-
ские выгоды. Процессы урбанизации достигли своего зенита,
последней возможностью роста остается агломерирование —
стягивание ресурсов в единый центр или создание полицен-
тричных урбанизированных ареалов, насыщенных разными
видами экономической деятельности. Сельской местности
уже некого отдать городам, во многих регионах депопуляция
приобрела необратимый характер, поэтому города — главные
фокусы территориального развития — начинают тянуть соки
друг из друга. О «моногородах» сегодня говорят примерно
так же, как когда-то говорили о «неперспективных деревнях»,
забывая, что они обслуживают территорию и сохраняют
ее обжитость, что принципиально важно для поддержания
инфраструктуры и будущего развития. Тенденции социаль-
ной и пространственной поляризации заметно усилились.
Место, где человеку повезло или не повезло родиться, при-
обрело огромное значение, став залогом бедности или успеш-
ности. Миграция превратилась в почти безальтернативное
средство социальной мобильности. Общество разделилось
на «выигравших» и «проигравших». Рост в одном месте про-
исходит, как правило, за счет других территорий, лишая их
шансов или резко замедляя развитие.
Ольга Вендина
“Невидимые сдвиги в развитии городов”, 2010

393
Unit 10
Economics and globalization
Text A

1. Match the term with its definition.


1) barrier (n) a) to move someone or smth from one
place, vehicle, person or group to another
2) immigration (n) b) when you work with someone to
achieve smth that you both want
3) integration (n) c) multinational company (corporation)
4) sovereignty (n) d) a rule, problem, etc. that prevents peo-
ple from doing smth, or limits what they
can do
5) unified (adj) e) if someone in authority imposes a rule,
punishment, tax, etc., they force people to
accept it
6) admission (n) f) transnational company (corporation)
7) impose (v) g) the process of entering another country
in order to live there permanently
8) transfer (v) h) when people become part of a group or
society and are accepted by them
9) co-operation (n) i) permission given to someone to enter a
building or place, or to become a member
of a school, club, etc.
10) poverty (n) j) brought together, combined
11) MNC (abb.) k) the condition of being extremely poor
12) TNC (abb.) l) the power of a country to control its
own government

394
2. Use the terms from exercise 1 to fill in the gaps.
1. As some Asian countries are constrained by the lack of exper-
tise and resources, technical _______ should be increased.
2. Globalization consequences are reflected on economic devel-
opment practically of all countries of the world, including
Russia, which is at the stage of active _______ to the world
economy.
3. Critics of _______ say that they can have undue political
influence over governments, can exploit developing nations
as well as create job losses in their own home countries.
4. Multinational corporations which are sometimes called
_______ — those corporations which operate in more than
one country or nation at a time — have become some of the
most powerful economic and political entities in the world
today.
5. Authorities of the country believe such development assis-
tance must be focused on human development, ________
reduction and on the development of capacities for partici-
pating in expanding world markets for goods and capital.
6. The ________ to global competition raised by differing
product needs clearly depends on the cost of altering prod-
ucts to fit national markets.
7. Many pension systems ________ money from the poor to
the middle class, simply because richer people usually live
longer.
8. Targeted ________ can considerably contribute to over-
coming acute shortages on the labour market in the country.
9. There should be provided the equal right of women and
girls to education without discrimination, the reopening of
schools and the ________ of women and girls to all levels of
education.
10. Confucius was the first to formulate the Golden Rule of
Reciprocity: “Never ______ on others what you would not
choose for yourself.”
11. National ________ should not be viewed as a means of bar-
ricading a country against the outside world, but as a means
of ensuring the security and welfare of all citizens.
12. For more than a hundred years, antisemitism had gradually
made its way into almost all social strata in almost all Euro-
pean countries until it emerged suddenly as the one issue
upon which an almost ______ opinion could be achieved.

395
3. Find the following words and word combinations in the text
Globalization economy.
в каждом смысле этого слова; по всему миру; увеличение
объема торговли; сделки по перемещению товаров или услуг
через границу государства; неблагоприятные следствия гло-
бализации; ожидаемые последствия; экономия от масштаба;
внутри страны; таможенные ставки; производственная мощ-
ность; спорный вопрос; эксплуатация рабочих; сложное обо-
рудование; имущие и неимущие; выросли в геометрической
прогрессии; из-за отсутствия технических навыков; по отно-
шению к определенным странам; парниковые газы; ухудше-
ние окружающей среды

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
concomitant  •  transaction  •  excessive
emergence  •  to polarise  • concurrent •  to emit
turnkey  •  fallout  • assimilation
exploitation  •  to encompass
to ascribe  •  slowdown
1. The Mongol rulers proved quite susceptible to gradual
________ by the often culturally more advanced peoples
they had conquered.
2. The failure of the project was _______ to poor preparation
at the initial stage.
3. Delivering gas to utilities and industry, and the _______
upgrades to the transport infrastructure, would have a posi-
tive socio-economic impact of the project.
4. The ________ computer system is easy to use in case you
have at least some basic skills.
5. Owning to the _______ rainfall the agricultural sector suf-
fered a loss last year.
6. The risk of economic ________ in the country has become
more evident in the recent years.
7. The sale of goods is the most common form of commercial
________.
8. The _______ from the Asian financial crisis has continued to
affect business.

396
9. The _______ of a stronger China has reduced America’s
regional importance.
10. The authorities give permits to ______ gases into the envi-
ronment up to an assigned limit.
11. With urban areas _______ an increasing share of the world
population, one quarter of the world population still lives in
small cities.
12. Working people are often vulnerable to _______ by unscru-
pulous employers.
13. The issue of a new road construction has ______ the entire
community.
14. They registered as _______ users of the trade mark.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 integration
2 debatable
3 exploitation
4 acquire
5 erosion
6 globalization

6. Choose the proper form of the word from exercise 5 to


complete the sentence.
1. The unpopular measures led to the _______ of public confi-
dence in the government.
People’s savings can easily be _______ by inflation.
2. The justifiable _______ of natural resources can contribute
to sustainable development.
Child labour is often ______ in many of the factories in
developing countries.
The state provided adequate protection against repressive
and ______ measures directed at low-skilled workers.
3. _______ is a multifaceted process involving many factors.
The small developing countries were particularly neglected
and often did not benefit when the world economy has been
_______.

397
4. How would such culturally different people be _______ into
our society?
The government will continue to contribute to the con-
solidation of peace and security in the region by promoting
democracy, economic development and regional ______.
5. There has been intense ______ over political union.
The partners are ready to discuss many ______ questions
which are still unsettled.
The two sides ______ whether to raise taxes or not.
6. We want people ______ the habit of using public transport
instead of their cars.
Due to his _______ mind he learned how to operate the
sophisticated machine very fast.
He was responsible for regular and duly ______ of full and
true information concerning the company.

7. Choose the correct word.


1. The United States, together with the United Kingdom,
France and Germany, account for / encompass 80 per cent of
foreign activities by TNCs.
2. The city encompasses / spreads a vast area.
3. Globalization of the world economy has been especially pro-
nounced / announced after World War II.
4. The country bears / suffers from severe environmental prob-
lems.
5. The economy went / came into a decline.
6. Poverty may be the top / main factor in crime.
7. Fish farming plays / takes a crucial role in the economy.
8. Many people believe that the Internet greatly enhances peo-
ple’s lives but the costs may outweigh the profits / benefits.
9. Initial / Prime results achieved from the experiment have
been encouraging.
10. The society has initiated the research made / done on the
environment degradation.
11. The economic aspect of what he expects from the research
acquires / inquires quite considerable importance.
12. New channels of communication will accumulate / facilitate
the secure and rapid exchange of information.

398
8. Fill in the gaps using the words from the box.
to impose  • facilities •  tariffs  •  globalization
to gain  • integrated • powerful
exceed  • competitive • scale
MNC/TNC
Multinational corporation (or transnational corporation)
(MNC/TNC) is a corporation or enterprise that manages produc-
tion establishments or delivers services in at least two countries.
Very large multinationals have budgets that (1) __________
those of many countries. Multinational corporations can have
a (2) __________ influence in international relations and local
economies. Multinational corporations play an important role in
(3) __________; some argue that a new form of MNC is evolv-
ing in response to globalization: the “globally (4) _________
enterprise”.
There are many reasons for multi-national enterprises to locate
to other countries. One reason is to escape trade (5) _________.
The decision made by Toyota to produce in the UK was almost
certainly (6) _________ access to the European markets with-
out having to pay tariffs. Others may be seeking the lowest cost
location for their production (7) _______ or be attracted by
skilled or cheap labour. Other businesses may want to reach
foreign markets more effectively. Avoiding transport cost is not
really an incentive because transport on a large (8) _________
is relatively cheap. Only heavy or large product may be produced
in the market they are intended to sell in, products such as build-
ing materials.
Many MNCs are large in relation to the national income of
the countries they are located in. This means that it is not as easy
for the governments (9) _________ laws on the MNCs. Gener-
ally speaking, governments want investment from these MNCs
because they generate jobs and incomes and may lead to people
becoming skilled. Technology transfer is also an incentive. In a
highly (10) __________ world, companies seek to reduce their
costs as much as possible. The prospect of a foreign company
setting up in a country where labour is cheap is attractive both
for the company and the government.

399
Text B

1. Match the term with its definition.


1) capture (v) a) concerned with making laws
2) intellectual b) someone who teaches at a college, or
property who studies as part of their job; scientist or
researcher
3) sustained (adj) c) a number that shows the value of smth
compared with smth
4) stall (v) d) to represent or describe smth very ac-
curately
5) index (n) e) a group of people with experience or
knowledge of a particular subject, who
work to produce ideas and give advice
6) legislative f) continuing for a long time
(adj)
7) academic (n) g) to stop making progress or developing
8) think tank h) smth that someone has created or in-
vented and that no one else is legally al-
lowed to make, copy, or sell

2. Use the terms from exercise 1 to fill in the gaps.


1. The new law provides the protection of ________ in the
area of science, technology and manufacturing.
2. China’s leading _______ expects the country’s gross domes-
tic product (GDP) growth to reach 8.4 per cent the follow-
ing year.
3. Strong government action and the lifting of _______ barri-
ers are needed to encourage small scale business.
4. In his article the author managed _______ the situation
happening in the world economy in the 1990s.
5. In conclusion, he said that the country had set out on the
path to ______ growth and development and was deter-
mined to pursue that goal.
6. A number of _______ of the university also have scientific
co-operation with coordination centres in Germany.
7. It may be more convenient to represent the data as ______
numbers than to quote actual prices.

400
8. When prices reach a new high and ______, professionals
sell, forcing the market down.

3. Find the following words and word combinations in the text


Top ten economies of the world.
ведущие экономики мира; экономическая обстановка;
легкость проведения сделок в целом; перспективы роста;
авторитетный рейтинг; в сотрудничестве с; хорошо управля-
емая экономика; конкурентоспособность; государственный
контроль; защита интеллектуальной собственности; под-
вергаться гонениям; огромный внешнеторговый дефицит;
главные приоритеты; следовательно; на различных уровнях;
внесли большой вклад

4. Use the words from the box to complete the sentences. Do


not forget to change the word form to fit the sentence properly.
profile  •  to determine  • deficit
to lack  • innovation
perception  •  to dub  •  to maintain
1. One of the best ways to determine the prevailing _______
and attitudes throughout the organisation is to conduct an
employee attitude audit.
2. Announcement of significant company news, corporate cal-
endar and corporate ______ on the company webpage made
the company easily recognisable among the clients.
3. The company products are constantly changing and being
enhanced, and you should validate current product features
_______ if our concerns are still valid.
4. Due to the unexpected results of the conference, it was
______ “the most outstanding” by the press.
5. The country has chosen a new model of economic growth
based on _______ and development.
6. Firms in these countries must design and develop cutting-
edge products and processes _________ a competitive edge.
7. A number of countries expressed optimism to help Greece
in resolving its budget _____ issues and it was immediately
supported by world stock indices.

401
8. The company has the possibility to experience information
risk if it ______ credible and complete information about
exchange rates, prices of financial instruments, market
trends.

5. Complete the table using the proper word form.


Verb Noun Adjective
1 governmental
2 ease
3 develop
4 growth
5 legislative

6. Choose the proper form of the word to complete the sentence.


Use the words from exercise 5.
1. In order to achieve sustainable ______ much attention
should be paid to environment protection.
The government makes effort _______ international stan-
dards for lowering the environmental and social costs of pri-
vate sector growth.
In the globalized world there can be observed a new trend of
exporting hazardous electronic waste from ________ coun-
tries for recycling in ________ countries in Asia.
2. In order to implement the project it is necessary to found the
_________ framework according to standards.
In frontier countries where governance remains weak, we
often start with advisory services to help simplify regulation
and strengthen local institutions and corporate ________.
The government had to _______ against these practices but
the measures occurred to be counterproductive in the long
run.
3. For maximum _______ of use the materials are arranged in
groups.
The actions undertaken by the UK government and Bank
of England including base interest rate cut and purchase of
debts in the market may to some extent ______ recession in
the country.

402
It’s ________ enough to speak about it but more difficult
to do.
4. There should be some measures designed to stimulate eco-
nomic _______ in the country.
Inflation is expected to moderate to 1% in March, while
unemployment rate is likely to _________ to 8.7%.
5. It is a good venue for informal meetings not only with my
colleagues, _______ representatives, but also with business-
people.
The ________ affects for whom output is produced through
taxes and transfer payments.
Some of the rules ________ relations between the countries
and thus have become part of international law.

7. Choose the correct word.


1. The scale of government activities in the modern economy is
highly controversial / conventional.
2. The government’s inconsistent policy can virtually / eventu-
ally cause a recession.
3. The law they passed should facilitate / facility the setting up
of small businesses.
4. The bookkeeper keeps a record of every action / transaction.
5. I wish they had a more consistent / constant policy on dis-
counts.
6. We could not get a more comfortable / convenient location
for the office.
7. Short-term measures are not enough; we need a more tempo-
rary / permanent solution.
8. Talks must take place within the network / framework of the
national agreement.
9. If they work to rule / regulation, the job might not be com-
pleted in time.
10. Many countries are perfectly / heavily dependent on interna-
tional trade.
11. It’s better to start exporting on a small scale / rate and then
expand if things go well.
12. Some manufacturers were accused of revaluing / dumping, in
other words selling goods abroad at a lower price than they
were sold domestically.

403
8. Translate the following sentences from Russian into English.
1. Глобализация — процесс всемирной экономической,
политической и культурной интеграции и унификации.
Ведущую роль в данном процессе играет бурный рост меж-
дународной торговли.
2. Существуют разные точки зрения на последствия гло-
бализации, в которых одни видят серьезную угрозу мировой
экономической системе, а другие рассматривают ее как сред-
ство дальнейшего прогресса экономики.
3. Экономическая интеграция выражается в некоторой
унификации национальных хозяйств разных стран, ликвида-
ции барьеров в движении товаров, услуг, капитала, рабочей
силы между этими странами, образовании единого рынка,
стирании различий между экономическими субъектами раз-
ных государств.
4. ТНК становятся определяющим фактором для реше-
ния судьбы страны в международной системе экономиче-
ских связей. Принимающие страны от притока инвестиций
выигрывают по многим аспектам — привлечение иностран-
ного капитала способствует снижению безработицы в стране,
росту доходов государственного бюджета.
5. Некоторые экологические организации критикуют дей-
ствия ТНК, считая, что огромные производства ТНК могут
угрожать местной экологической обстановке. Именно поэ-
тому многие производства стали переносить в страны тре-
тьего мира.
Reading file
Unit 1
What is Economics all about?
The most general definition of Economics is perhaps this:
“Economics is the discipline studying the organisation of eco-
nomic activities in society.” You may, at first, think that this is
too much of an abstraction. After all, how do questions like “how
much should be produced?”, or “what determines prices?”, or
“how can I make money?” relate to the general problem of the
social organisation of economic activities?
Broadly speaking, particular institutions created by society
will have an effect on the answer to the questions posed in the
preceding paragraph. The answers will depend, for example,
on whether society wishes to have competitive institutions as
opposed to, say, cooperative structures. They will also depend
on whether decisions are made through a decentralised system of
decision-making (which does not necessarily imply competition)
or some form of hierarchy. Naturally, the system that will emerge
will be a reflection of what is commonly perceived as the “eco-
nomic problem”. To complicate things, similar institutions may
not necessarily reflect similar perceptions of the economic prob-
lem. Likewise, similar perceptions may not always produce the
same kind of institutions. For instance, Adam Smith was not the
first one to point out the benefits of the division of labour. He
did so because for him, broadly speaking, the “economic prob-
lem” was that of reproduction and growth. He asked how society
could organise its activities in order to produce as much surplus
(above what is needed for reproduction) as possible. But forms
of division of labour had been recommended before, as solutions
to entirely different problems. Plato, for instance, in his Republic,
suggests a division of labour as a means to create the just society.
However, while both of them considered the division of labour
as central to the ideal form of social organisation, their institu-
tional recommendations were very different indeed. In part, this
can be attributed to a fundamental difference in the way these
two scholars understood the world. In a brief and unsatisfactory
way one can say that the difference between Plato and Smith
is that the former was a kind of “rationalist” while the latter a
kind of an “empiricist”. Plato felt that the way we know about

406
the world is by the power of our mind. Appearances may be mis-
leading. Smith, on the other hand, wrote in the tradition which
followed the principle that knowledge can only be acquired by
means of the senses and experience. Consequently, while both
of them considered division of labour, the latter attached it to
decentralised decision making based on private ownership of
property while the former created a clearly hierarchical system
with communal ownership among those who make decisions
about what society should do, and private ownership among
those who provide society with its material wealth.
Put broadly, Smith felt that the division of labour must give
rise to the institutions of private property, the market and com-
petition as a means of coordinating economic activities. While
Plato felt that division of labour gives rise to communalism —
which should not be confused with communism — sharing and
co-operation. Evidently, the answers to questi