1. An economic shock causes ...

A prices to rise.

B a demand or supply shift.

C demand to fall.

2. Demand- side shocks of a domestic nature

A are caused by events in another country.

B are only caused because of a fall in property prices.

C are caused by events at home.

3. The Great Depression is an example of...

A an external demand-side shock.

B an external supply-side shock.

C a domestic demand-side shock.

4. Supply-side shocks can cause ...

A a fall in variable costs.

B an increase in variable costs.

C a fall in fixed costs.

5. Stagflation is when ...

A prices fall but output rises.

B prices rise and output rises.

C prices rise and output falls.

6. A positive supply-side shock is when ...

A prices fall but output rises.

B prices rise and output rises.

C prices rise and output falls.

Inflation

Inflation is an overall increase in prices over a certain period of time. It's also a worry for anybody who's trying to make ends meet, and a headache for many governments. The rate of inflation is often in the headlines. However, inflation isn't really news. In most of Europe, for example, prices have risen year after year for at least the last 50 years. Deflation (overall decrease in prices) docs happen occasionally, but the trend is mostly for the cost of living to increase.

There are lots of ways to measure inflation. One of the most popular ways is the retail price index. This is calculated by recording increases in price for a range of goods and services. This is sometimes called a basket of goods. Some of the goods are weighted more heavily than others because they are more important. For example, food will be weighted more than the cost of a cinema ticket, because a 5% increase in food is more important than a 10% increase in the cost of seeing a film. Inflation is worked out from an average of all the price increases in the basket.

Inflation can happen for a number of reasons, but economists say there are two main culprits. These are demand-pull inflation and cost-push inflation. Demand-pull inflation can happen when the economy is growing fast. Aggregate demand begins to grow faster than suppliers can cope with. This causes a shortage, and prices rise. At first, customers may be able to pay the higher prices, and demand grows again. This forces prices up even more, and the cycle continues.

One of the characteristics of demand-pull inflation is that there is often too much money going round the economy. This is explained by the quantity theory of money. This theory uses the following equation:

money supply x velocity = average price x transactions

Velocity is the speed that money is passed on from one person to another. Some economists say that velocity and the number of transactions don't really change. The only things that change in this equation are the money supply and average prices. This means that when the money supply increases, prices will increase too. For this reason, printing money is rarely a solution for economic crises.

Cost-push inflation, on the other hand, occurs when prices rise without an increase in demand. This happens when suppliers' variable costs increase sharply. For example, workers may demand higher wages or raw materials may become more expensive. Producers then pass these increases on to consumers by raising prices. So, as usual, we are the ones who pay!

Переведите на английский язык:

1.    Один из способов измерения уровня инфляции — это индекс розничных цен, который рассчитывается для корзины товаров.

2.    Инфляция издержек происходит, когда цены растут без роста спроса, что бывает при резком увеличении переменных издержек производителей.

3.    Среди других причин роста инфляции — рост денежной массы в обращении, что объясняет количественная теория денег.

4.    Больше всех страдают от роста инфляции люди с фиксированными доходами.

5.    Безработица может быть циклической или структурной. Циклическая безработица меняется с ростом или спадом в экономике. Структурная безработица зависит от низкого спроса на труд в какой-либо отрасли.

6.    Есть и другие типы безработицы. Например, фрикционная безработица, когда люди ищут новую работу, а также сезонная безработица, когда отрасль работает сезонно.

7.    Ситуация, когда все, кто может работать, имеют работу, называется полной занятостью.

Inflation

1. Choose the correct word.

1. When something is in the headlines / articles, it is an important story in the news.

2. When parents are unemployed it is difficult for a family to make ends touch/ meet.

3. The cost / price of living m cities like London and Tokyo is very high.

4. People prefer to shop in supermarkets because they find a wide range / amount of goods there.

5. The retail/shopping industry includes shops, supermarkets and department stores.

6. In statistics, when a number is valued / weighted it is multiplied by another number to show its importance.

7. The victim / culprit is the person or thing that is responsible for doing something bad.

8. It is difficult for old people to manage / cope with living on a small pension.

9. In maths, a/an equation / formula is a sum which is equal on both sides.

10. The speed that something travels at is called velocity / capacity.

2. Now read the text again and match each paragraph with the correct heading.

PARAGRAPH 1

PARAGRAPH 2

PARAGRAPH 3

PARAGRAPH 4

PARAGRAPH 5

A Measuring inflation

B Too much cash

C The effect of aggregate demand on inflation

D Production cost changes

E Inflation is a fact of life

Unemployment

There will always be a certain amount of unemployment in the economy. When economists talk about full employment they mean that everyone who can work and wants to work has got a job. Able workers who are not working are simply not happy with the salaries that are offered - or just can't be bothered!

However, economies rarely reach full employment. There are a number of reasons for this, and a number of different types of unemployment. One of these is cyclical unemployment. This type of unemployment varies with the growth and recession cycle of the economy. As the economy grows, demand for labour grows and unemployment falls. As the economy contracts, unemployment grows.

A second kind of unemployment is structural unemployment. This occurs when changing public tastes or advances in technology cause a fall in demand for some types of work. For example, computer technology has revolutionised the printing industry, and many traditional printers' jobs have become obsolete. Sometimes whole regions of a country suffer from high structural unemployment. The north-east of England, for example, was famous for many years for its shipbuilding industry. Competition from abroad forced many shipyards to close. This caused huge unemployment in the region.

How long structural unemployment lasts will depend on two things. Firstly, how easily the workforce can retrain for new jobs. This may be difficult for older workers who find it hard to learn new skills. There is also the question of who pays for the training. The second issue is mobility. Workers who are able to relocate easily to another part of the country will find new jobs more quickly.

There are two other kinds of unemployment which we should mention here. These are less serious, perhaps, but they are still difficult for governments to get rid of. The first is frictional unemployment. This is a natural kind of unemployment that occurs when someone leaves a job and is looking for another one that suits them. Frictional unemployment often happens because people want to leave their job in order to change careers. Few people walk straight into another job. However, when the economy is in recession, frictional unemployment will be more common because jobs are harder to find.

The second kind is seasonal unemployment. Some industries have busy periods and periods where there is no work at all. Some freelance farm workers, for example, get most of their work in the spring and summer. Like structural unemployment, seasonal unemployment can affect whole regions of a country. Areas that rely on summer tourism, for example, suffer serious unemployment during the autumn and winter months.

Переведите на английский язык:

1.    Один из способов измерения уровня инфляции — это индекс розничных цен, который рассчитывается для корзины товаров.

2.    Инфляция издержек происходит, когда цены растут без роста спроса, что бывает при резком увеличении переменных издержек производителей.

3.    Среди других причин роста инфляции — рост денежной массы в обращении, что объясняет количественная теория денег.

4.    Больше всех страдают от роста инфляции люди с фиксированными доходами.

5.    Безработица может быть циклической или структурной. Циклическая безработица меняется с ростом или спадом в экономике. Структурная безработица зависит от низкого спроса на труд в какой-либо отрасли.

6.    Есть и другие типы безработицы. Например, фрикционная безработица, когда люди ищут новую работу, а также сезонная безработица, когда отрасль работает сезонно.

7.    Ситуация, когда все, кто может работать, имеют работу, называется полной занятостью.

Unemployment