What Causes Inflation?

Ask any person today what causes inflation and they will tell you that it is 0)__B__ prices. Like many issues on money, the inflation issue is clouded and 1)_____. That is because the inflationists want it that way. By focusing attention on rising prices, it takes the attention away from the cause, which is 2)_____ money creation. Instead, all of the attention is focused on the symptoms of the disease rather than the root of it.

There are only three 3)_____ that prices can rise. The most important influences are as follows:

1. the supply of money and 4)_____

2. supply of goods and services

3. demand for goods and services

Prices can increase by:

1. increasing the supply of money

2. a decrease in the supply of goods and services

3. an increase in demand, i.e. 5)_____ increase

Conversely, prices can decrease by the same three measures when:

1. the supply of money declines

2. the supply of goods and services increases

3. demand decreases

There is very little understanding of where inflation comes from or where it 6)_____. Most individuals define inflation as rising prices. They speak about symptoms rather than 7)_____. If inflation is simply rising prices, then what causes it? You’ll find that inflation is attributed to many sources – none of which are accurate. The common misperceptions by policymakers and the public is that inflation has three principal causes:

1. 8)_____ inflation as a result of arbitrary demands of labour unions.

2. 9)_____ inflation resulting from the greed of businesses raising prices.

3. 10)_____ inflation resulting from acts of God or weather.

The general belief that inflation is the result of something other than its true cause makes it hard to understand and resolve. Most people believe that inflation is conspiratorial such as OPEC raising crude oil prices, businessmen wanting to make higher profits, or unions looking to 11)_____ worker benefits and pay. Somehow inflation has become an evil caused by greedy individuals and businesses. To most people inflation has become a causeless phenomenon inexplicable and born of 12)_____ will.

0 A stable B rising C falling D high

1. A puzzled B uncertain C confused D clear

2. A low B excess C scarce D exceed

3. A methods B means C causes D ways

4. A credit B bills C loans D goods

5. A producers B population C citizens D sellers

6. A starts B originates C goes D rises

7. A cause B cure C prevention D recovery

8. A longterm B shortterm C cost-push D profit-push

9. A cost-push B profit-push C longterm D unanticipated

10. A expected B induced C uncontrolled D crisis-driven

11. A secure B enhance C reduce D multiply

12. A good B bad C ill D demon

Exercise 9. Translate into English.

1. Явище інфляції треба відрізняти від підвищення цін на окремі товари.

2. Впродовж останнього місяця інфляція на споживчі товари зросла на 5 відсотків.

3. З, Відносна ціна — це ціна одного товару в порівнянні з ціною Інших товарів.

4. Інфляція найчастіше має місце в країнах Із нестабільною економікою.

5. Номінальний доход — це кількість грошей, які ви отримаєте за певний період.

6. Він досліджує про­блеми інфляції у цій країні вже протягом двох років.

7. Не всі ціни підвищуються однаково під час інфляції: деякі зростають дуже швидко, інші — помірно, а деякі зовсім не змінюються.

8. Темп інфляції— це щорічний середній темп підвищення рівня цін.

Exercise 10. Communicative situations.

1. Can you identify any groups of who are particularly helped or hurt by inflation? Explain.

2. Does an increase in the price level automatically lower society's real income? Explain.

3. Would it be advantageous to borrow money if you expected prices to rise? Why, or why not? Provide a numerical example.

Exercise 11. Change the following sentences using the Future Perfect Tense.

EXAMPLE: Inflation will increase by 3% next month.

Inflation will have increased by 3% by the end of the month.

1. Average price level will fall next month.

2. His nominal income won't change next year.

3. She will finish her report on inflation tomorrow.

4. Inflation rate will change next month.

5. Prices on specific goods and services will increase next week.

Exercise 12. Translate into English.

1. Наш номінальний прибуток зміниться до кінця року.

2. Ціни на деякі товари та послуги зростуть до кінця тижня.

3. Виробництво цих товарів зросте на 5 відсотків до кінця місяця.

4. Ціни на споживчі товари не зміняться до кінця року.

5. Реальний прибуток компанії збільшиться на 10 від­сотків до кінця бюджетного року.