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How the economy grows

An economy must grow to provide people with an increasing standard of living – that is, more and better goods and services. In general, the faster a country’s economy grows, the faster its standard of living rises.

Four main elements make it possible for nations to produce goods and services. These elements, called productive resources, are: (1) natural resources, (2) capital, (3) a labor force, and (4) technology. Economists define natural resources as all land and raw materials, such as minerals, water, and sunlight. Capital includes factories, tools, supplies, and equipment. The word capital also means the money that can be used to buy these items. Labour force means all people who work or are seeking work, and their education and skills. Technology refers to scientific and business research and inventions.

To grow, a nation’s economy must add to its productive resources or improve the way it uses them. For example, an economy could grow if the nation used some of its resources to build factories, heavy equipment, and other capital goods. These capital goods could then help increase future production. In addition, a nation might train scientists, create new technologies, educate workers, or train business managers to direct future production. The knowledge of these people is known as human capital. New technology and improved human capital could increase productivity – that is, produce more units of goods or services for each unit of resources consumed in production.

The value of all goods and services produced within a country during a year makes up a nation’s gross domestic product, or GDP. A nation measures its economic growth by the change in GDP over a period of years.

Task 4. Answer the questions how needs and wants are satisfied in the world of business:

  1. What are four kinds of resources that an owner invests in a business?

  2. What is the difference between profit and return on investment?

  3. Why is accounting necessary for all businesses?

  4. What are the factors of production? How are they used in satisfying the economic needs and wants of consumers?

  5. What is the difference between investments and resources? Explain their importance in business.

  6. What advantages does a competition offer to consumers?

Task 5. Make word-combinations. Match adjectives (or nouns) to nouns (a) and verbs to nouns (b):

A business

working

set

financial

circular

consumer

high

labour

raw

human

capital

goods

materials

transaction

time

quality

statement

force

rate

flow

B to fill

to keep

to perform

to earn

to take

to circulate

to record

to interpret

to produce

to meet

to increase

to train

to sell

engineer

demand

money

job

information

obligation

product

entry

word

service

income

work

productivity

Task 6. Define one different word or word combination:

NATURAL RESOURCES: land, minerals, water, wood, people.

CAPITAL: money, factory, tools, supplies, happiness, equipment.

LABOUR FORCE: student, engineer, employee, the unemployed, skills.

TECHNOLOGY: research, invention, know-how, contract, knowledge.

CAPITAL GOODS: heavy equipment, factory, land.

HUMAN CAPITAL : education, technology, training courses, updated skills.

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