9 С Listening 4)))

Now listen and check your answers.

Before you read

Discuss the following with your partner.

In some ways, running a large economy is like running a small business. What do you think are the similarities and what are the differences?

ф D Vocabulary

Complete each sentence with a word or phrase from the box.

aggregate availability behave exports long run predict required short run trend

The price of a flight often depends on the of seats.

Tecluiology is making it easier and easier to changes in the weather.

When talking about the we mean

the total.

Some people very differently

when they go abroad.

The means in the next few weeks

or months.

The means in the coming years

or decades.

China's include all kinds of

manufactured goods.

Л lot of raw materials for

manufacturing arc imported.

Prices are still following a

to increase.

I^f Ro^Hinn 9

Aggregate demand and aggregate supply

When a company makes plans for how much to produce and what prices to set. it needs information. The company needs to predict the level of supply that will he required to meet demand. It needs to set prices that will keep the business running. In the same way. governments need this information for the whole economy The total level of demand for all products and services is called the <t!if>rebate denumd. The total supply- is called the иццгецate supply.

The demand for products and services is how much is wanted. For a company, the demand comes from customers, For a whole economy, things arc a little more complicated. Demand in the whole economy comes from the following.

from consumers, because they buy products and services (consumption)

from companies, because they invest money to build factories and buy- machines (investment 1

from the government, because they spend money on services and projects (government spending I

from exports, because these are sales to customers in other countries (export)

Real National Income

Prkes

Figure 2:

Aggregate Supply

I O'H) run

Figure 1: Aggregate Demand

A

Prkes

Real National Income

^M u m j • G ■ <1 ♦ г ' ( . • -r. '. U r . ■ tj 63

Although aggregate demand is made up ol many tilings, it l/t hiiii s in the same way as demand tor a single produet For example, demand rises when incomes rise. The same applies to aggregate demand Similarly, demand falls as prices rise. The same is true for aggregate demand. You can see this relationship shown in tigure 1 on page o.V I'he vertical axis shows prices The horizontal axis shows real national income Real national income is the value of all the serv ices and products produced b> the whole economy. It's calculated in the same way as aggregate demand (consumption, investment, government spending and exports). You can see from the curve that national income (and therefore aggregate demand) increases as prices tall

Changes in any of the four things which make up aggregate demand will cause a shift in demand For example, if the government decides to spend a huge amount of money on building new hospitals and schools, this will have an effect on the whole economy. Aggregate demand will increase at all price levels. This is shown in aggregate demand curve 2 I Al>2) in tigure 1

l he supply curve for an individual produet or service is very simple As the company increases its supply to the market, it increases the price. But what about aggregate supply for the whole economy'' This is more complex. In the short run. aggregate supply follows the same trend as tlu supply for a single product. Supply rises as prices rise However, the long run is different In the long run. supply is not affected by price In the Jong run. production is limited by the factors of production In other words, what a country can supply de|4iids on the numlier of factories it has. the number of people working and the availability • >1 raw materials This is why the long run supply curve in figure 2 on page »>A is a straight liiu .

64 Магш111ая Gtiida to Есочеомс» Unit >2

BP E Comprehension

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

PARAGRAPH 1

PARAGRAPH 2

PARAGRAPH 3

PARAGRAPH 4

PARAGRAPH 5

What aggregate demand includes

Two types of aggregate supply curve

The relationship between aggregate demand and price

Wiry are aggregate supply and demand important to governments?

What causes aggregate demand to shift?

Before you listen

Discuss the following with your partner.

The gross domestic product ( GDP) is a way of measuring the income of a whole nation.

-» How do you think GDP is calculated?

-» Why do you think some countries have a larger GDP than others?

Which countries in the world do you think have a large GDP?

Which ones have a small GDP?

0 F Listening *)))

Now listen and complete the summary.

The gross domestic product is the total value

of all the (1) supplied by a

country during a whole (2)

. It is often called the (3)

It is a way for the government to measure

the economic (4) of the

country. The GDP per capita is the GDP

divided by the number of (5)

It is a useful measure of a nation's

(6) In 2005. Luxembourg had

a per capita GDP of $ (2) In

the same year, the figure for Burundi was only $ (8)

ff G Speaking

Discuss these questions with your partner.

Why is it important for a coimtry to have steady economic growth?

The GDP of a country is sometimes used to measure standard of living. Do you think this is a good measure for standard of living? Why / Why not?

Task

Work in groups of three or four.The diagram below shows the aggregate demand and aggregate supply curves for a country.Talk to each other about how the curves could change for each of these situations.

the government decides to spend billions of pounds on road building

there is a large increase in the price of petrol

the government increases income tax rates by five per cent

wages increase a lot

Figure 1: Aggregate Demand and Supply

Real Hatwnal Oitput

Use the space below to write your notes.

Notes:

Prices

Imagine you're a farm worker in America in the 1930s.You've just lost your job because of the Great Depression. Write a letter to your cousin in Russia.

Look back at the unit and make notes before you start.

Letter from history

Dear [your cousin's name],

PARAGRAPH 1

Tell your cousin the bad news about losing your job and what difficulties you're facing.

Useful words and phrases:made redundant, struggle to got by, landlord demanding rent, bills to pay, go into debt

PARAGRAPH 2

Explain the situation in America: how the stock market crash happened, the Depression. Head the notes from С Listening on page 62.

Useful words and phrases:stock market, crash, fall in demand for produce, businesses closing down

PARAGRAPH 3

Explain what life is like in America now, especially for farmers and farm workers.

Useful words and phrases:high unemployment, families struggling to get by. people depressed, people leaving their homes for the city

PARAGRAPH 4

Say what you plan to do to find work.

Here are some ideas:move to the city to find work, join the army, try to sell something valuable you own and buy a ticket to Europe.

Sign off

Write 100-150 words

Pronunciation guide

Devastating 'dev.Weitnj Fiscal Tiskl

Mechanism 'mek.im/nm Monetary тлпнп Recession пм*|п Availability .iveibbtloii Axis ';ek<is

Match words from box A to words in box В to make expressions we use in economics.You can use words in box В more than once.

A

в? В The words in bold in this newspaper story have been wrongly printed. Put the letters in the correct order to make the right word.

66 N¹ a idftoEccioiT'rtRe.b 'Vcibji-t • e t * rt>

absolute aggregate disposable fiscal income mixed monetary pension poverty public relative

demand gap goods income policy poverty scheme trap

Now match the expressions to their meanings.

services that the government provides because no one else will

services and goods that the government provides because they are good for us

not having enough money to survive

to be much poorer than other people in the same country

the government's decisions about taxation and spending

the government's decisions about interest rates and money in the economy

the money you can spend after you have paid tax

a situation in which it is impossible to escape from being poor

all the services and goods that are bought in the economy

a way to save money for old age

Revision Vocabulary Units 9 to 12

the difference between the highest earners and the lowest earners

Economic hard times set to continue

The government released more gloomy economic figures today. Unemployment lias risen again this mor.th. and now ten per cent of the (1) krowforec are without a job. At the same time, the Bank of England has said that (2) vinnetmestby companies lias decreased dramatically. 'Businesses simply don't want to be involved in (3) srki-agtkniwhen the economy is like this.' commented John Cash, a senior director with the bank.

But the people worst affected are the unemployed and their families. Many are now spending their life (4) gisvansin order to survive. Government Minister. Alison Wellby said yesterday that. 'The(5) frelwaeof ordinary people is our most important concern'. To prove this, the government has promised to increase spending on (6) frantres payments such as unemployment (2) fitsbeen. However, this could be a sign that the (8) cresseion will probably continue into next year. It seems that even in the (9) glon nurthings are not looking good.

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Unit

Before you read

Discuss these questions with your partner.

-* What is money?

-» Can anything be used as money?

Could stones and leaves be used instead ol coins and notes?

0 A Vocabulary

Choose the correct word or phrase.

One reason why people buy gold is because it

holds its value / is taken (or granted.

When we buy things, we money

for goods.

Diamonds are valuable because they are so

intrinsic / rare.

The dollar is the of the USA.

When people goods, they

simply exchange one good for another.

Banks will only lend to people who can to pay back the loan.

Some shops won't accept credit cards. They will only take

When something

people don't think it has great value.

Coins and notes are used to value.

Metals have value because they

can be used to make things.

If money can easily bo moved around and used we say it has

Centuries ago people paid using

. such as gold and silver.

.like

banknotes and coins, has no intrinsic value. It only represents value.

IF Reading 1

Money

The cash vve use every day is something we take for granted, hut for thousands of years people trailed without it. Ilefore money w;is invented, people used a system called hurt к rina Bartering is simply swapping one good for another. Imagine that you have milk, for example, and you want eggs. You simply l'ind someone who has eii£s and wants milk - ami you swap! However, you can set that this isn't a very convenient way to trade.

first of all. you can't be sure that anyone will want what you've got to offer. Yon have to hope that you'll be lucky and find someone who has what you want and that he or she wants what you've got The second problem with bartering is that many goods don't hold their value For example, you can't keep your milk for a few months and then barter it. Nobody will want it!

и

о 67

After some time, people realised that some goods held their value and were easy to carry around and to trade with. Fxamples were metals like copper, bron/e and gold and other useful goods like salt. These are examples of comminlity money.

With commodity money, the thing used Юг buying goods has inherent value. For example, gold has inherent value because it is rare, beautiful and useful. Salt has inherent value Ivcause it makes food tasty. If you could buy things with a bag of salt, it meant you could keep a store of salt ami buy things anytime you needed them. In other words, commodity money can store value

I'sing commodity пюпеу was much more convenient than ordinary bartering, but it still had drawbacks < >nc of these drawbacks is that commodity пюпеу often lacks litfuulity Liquidity refers t.i how easily money can circulate There is obviously a limit to how much salt you can carry around¹ t here's another problem with commodity money not everyone may agree on the value of

^ В Comprehension

Complete the table with information from the text.

1 lie commodity which is used as money. It you live by the sea. salt may not b@ SO valuable to you. Money needs to be а ц<мк1 unit о/шччшш. In other words, everyone should know and agree on the value of a unit. This way. money can be used to measure the value of other things.

The solution is to create a kind of money that does not have any real intrinsic value, but that represents value. This is calledJuit money. The coins and notes that wi use today are an example of fiat money. Notes don't have any inherent value

they are just paper. However, everyone agrees that they arc worth something. More importantly, their value is guaranteed by the government This is the reason why pounds and dollars and the world's other currencies have value.

	Examples	Advantages	Disadvantages
Bartering	swapping eggs for milk	simple to understand	goods don't
Commodity Money	) and )	allows you to store	not agrees on its value lack of liquidity means money can't
Fiat Money	) and )	value is (10) by the government

Before you listen

Discuss the following with your partner.