1. Which goods shall be produced and in what quantities? This problem concerns the composition of total output. The community must decide which goods it is going to produce and hence which goods it is not going to produce. Having decided the range of goods to be produced, the community must then decide how much of each good should be produced. In reality the choices before a community are rarely of 'all or nothing' variety. They usually take the form: more of one thing and less of another. The first and major function of any economic system is to determine in some way the actual quantities and varieties of goods and services which will best meet the wants of its citizens.
2. How should the various goods and services be produced? Most goods can be produced by a variety of methods. Wheat can be grown by making use of much labour and little capital, or by using vast amounts of capital and very little labour. Electrical appliances can be made by using large and complex machines operated by relatively few semi- or unskilled workers. Alternatively they might be produced in hosts of small workshops by highly skilled technicians using relatively little machinery. Different methods of production can be distinguished from one another by the differences in the quantities of resources used in producing them. Economists use the term capita – intensive to describe the alternative methods just outlined. The total output of the community depends not only on the total supply of resources available but on the ways in which these resources are combined together. A community must make decisions on the methods of production to be adopted.
3. How should the goods and services be distributed? This is the third function which an economic system has to perform. The total output has to be shared out among the members of the community. The economic system has to determine the relative sizes of the shares going to each household. Should everyone be given an equal share? Should the output be shared out in accordance with people's ability to pay the price, or should the shares be decided according to tradition and custom? These basic problems are common to all societies no matter what level of economic development they have reached. The methods of solving them will be different from one society to another but the problems are common in all societies.
Материал для обсуждения
1. В парах обсудите одну из предложенных ниже тем
- individual and a society
- scarcity and choice
-three basic problems
2. Подготовьте устное изложение по теме «The Economic Problem».
MACROECONOMICS AND MICROECONOMICS
Лексический материал
1. Выучите следующие слова и выражения.
total production – общая производительность
total employment – общая занятость
the rate of change of overall prices – коэффициент изменений предельных цен
rate of economic growth - темпы экономического роста
broad aggregates - масштабные совокупности
individual households – индивидуальные хозяйств
layoffs – увольнения
economic activity - экономическая активность
determinant - показатель, определитель
value – ценность
meaningful totals - значимые итоги
gross domestic product (GDP) - валовой внутренний продукт (ВВП)
national income - национальный доход
personal income - личный доход
personal disposable income - личный доход после уплаты налогов
business cycle - экономический цикл
economic growth - экономический рост
attainment – достижения
maintenance - поддержание, содержание
price stability - стабильность цен
eliminate - ликвидировать, исключать
labor shortage - нехватка рабочей силы
reduction - уменьшение
Текст A
1. Прочтите и переведите текст
WHAT IS MACROECONOMICS?
The word macroeconomics means economics in the large. The macroeconomist's concerns are with such global questions as total production, total employment, the rate of change of overall prices, the rate of economic growth, and so on. The questions asked by the macroeconomist are in terms of broad aggregates – what determines the spending of all consumers as opposed to the microeconomic question of how the spending decisions of individual households are made; what determines the capital spending of all firms combined as opposed to the decision to build a new factory by a single firm; what determines total unemployment in the economy as opposed to why there have been layoffs in a specific industry.
Macroeconomists measure overall economic activity; analyze the determinants of such activity by the use of macroeconomic theory: forecast future economic activity; and attempt to formulate policy responses designed to reconcile forecasts with target values of production, employment, and prices. An important task of macroeconomics is to develop ways of aggregating the values of the economic activities of individuals and firms into meaningful totals. To this end such concepts as gross domestic product (GDP), national income, personal income, and personal disposable income have been developed.
Macroeconomic analysis attempts to explain how the magnitudes of the principal macroeconomic variables are determined and how they interact. And through the development of theories of the business cycle and economic growth, macroeconomics helps to explain the dynamics of how these aggregates move over time.
Macroeconomics is concerned with such major policy issues as the attainment and maintenance of full employment and price stability. Considerable effort must first be expended to determine what goals could be achieved. Experience teaches that it would not be possible to eliminate inflation entirely without inducing a major recession combined with high unemployment. Similarly, an overambitious employment target would produce labor shortages and wage inflation.
During the 1960s it was believed that unemployment could be reduced to 4 percent of the labor force without causing inflation. More recent experience suggests that reduction of unemployment to 5.5 percent of the labor force is about as well as we can do.
Материал для обсуждения
1. Answer the following questions for general understanding
l) What does the word macroeconomics mean?
2) What are the concerns of the macroeconomist?
3) What is the difference between the Questions asked by macroeconomists and
microeconomists?
4) What is, according to the text, the important task of macroeconomist?
5) What does macroeconomic analysis attempt to explain?
6) What are the concepts of macroeconomics?
7) What are the most important theories of macroeconomics?
8) What is said about the correlation between the inflation and unemployment?
2. Fill in the table to show the difference between macroeconomics and microeconomics
| Macroeconomics | Microeconomics |
3. Talk to your partner and decide which of the following statements are true about macroeconomics and macroeconomists
a) Macroeconomics deals with global questions only.
b) Macroeconomics means economics in the large because it asks more questions than microeconomics.
c) Macroeconomist analyzes activities of families and large firms.
d) Such concepts as gross domestic product, national income and personal disposable income serve as meaningful totals.
e) Macroeconomic analysis shows the development of the economic theory.
f) Theory of business cycles concerns business. That is why this is a microeconomic theory.
g) Inflation could not be eliminated without some negative changes in economics.
h) More recent experience proves that macroeconomists of 60s were wrong.
4. Translate into Russian
a) The questions asked by the macroeconomist are in terms of broad aggregates
b) What determines the capital spending of all firms combined as opposed to the decision to build a new factory by a single firm?
c) Macroeconomists measure overall economic activity; analyze the determinants of such activity by the use of macroeconomic theory.
d) Macroeconomic analysis attempts to explain how the magnitudes of the principal macroeconomic variables are determined.
e) Considerable effort must first be expended to determine what goals could be achieved.
f) More recent experience suggests the reduction of unemployment to 5.5 percent of the labor force.
g) Experience teaches that it would not be possible to eliminate inflation entirely.
5. Explain in your own words the importance and practical applications of the following concepts. (Give the Russian equivalents)
a) total production;
b) total employment;
c) the rate of change of overall prices;
d) GDP;
e) national income;
f) personal income;
g) personal disposable income.
6. Think and tell if you are able to answer the following macroeconomic questions (If not, explain why it is impossible)
a) What determines the spending of all consumers?
b) What determines the capital spending?
c) What determines the capital spending of all firms?
7. Discuss the following questions
l) Was there such a difference between macroeconomics and microeconomics in the Soviet economics? In 18th century? In 19th century?
2) What is more important for economy in general- microeconomics or macroeconomics?
3) Is there a difference in analyzing macroeconomic and microeconomic problems?
Лексический материал (вторая часть)
1. Выучите следующие слова и выражения
monetary policy – финансовая политика
fiscal policy – налоговая (фискальная) полтика
the Board of Governors of the Federal Reserve System – совет директоров
Федеральной резервной системы
supply of money – предложение денег
to stem from – происходить от
to purchase – покупать
government securities – государственные ценные бумаги
to transmit – передавать
to lend – одалживать
cost of borrowing – издержки займа
to be empowered – быть уполномоченным
interest rate (the rediscount rate) – процентная ставка
to reduce – уменьшать
to enable – способствовать, давать возможность
set of policies – пакет установок, законов
vehicle – средство
tax code – налоговый кодекс
to legislate – издавать законы
huge – огромный, громадный
tax cuts – урезание налогов
to bemoan – оплакивать
virtual – фактический, виртуальный
to imply – подразумевать, намекать
to engage – привлекать, вовлекать
bond – обязательство, облигация
to decline – падать, уменьшаться
to prevent – предотвращать
Текст B
1. Прочтите и переведите текст
TOOLS OF MACROECONOMIC POLICY (USA)
The principal tools of macroeconomic policy are monetary policy and fiscal policy. Monetary policy in the United States is under the control of the Board of Governors of the Federal Reserve System. The Federal Reserve controls the supply of money and credit in a number of ways. The most important Federal Reserve instrument stems from its authority to purchase and sell government securities in the so-called open market. Credit tightening, for example, may be accomplished by an open-market sale. The purchasers of the government securities transmit money balances to the Federal Reserve, thereby reducing the nation's money supply. This, in turn, reduces bank lending power and drives up the cost of borrowing. The hoped-for outcome is less borrowing and spending by the private sector of the economy. The Federal Reserve is also empowered to lend funds to its member banks. It may raise or lower the interest rate (the rediscount rate) at which it lends the funds, thereby discouraging or encouraging bank borrowing.
The other principal tool of macroeconomic policy is fiscal policy. This means the use of the federal budget to add or subtract purchasing power from the economy. To stimulate the economy, government expenditures may he raised directly or taxes may be reduced, thereby enabling individuals and firms to increase their spending. The opposite set of policies could be employed if aggregate demand is excessive, because higher taxes and less government spending would reduce total spending and help slow inflation.
The principal vehicle of fiscal policy is the federal budget. The annual budget plan is developed by the administration and submitted for review by the congressional budget committees. Changes in the tax code must be legislated by the Congress, and the tax system is administered by the Internal Revenue Service under the general supervision of the Secretary of the Treasury.
Beginning in 1983, the economy experienced mammoth budget deficits that, in five of the next eight years, exceeded $200 billion. These huge deficits make it very difficult to use fiscal policy as a tool of economic stabilization in as much as tax cuts to stimulate the economy would further add to the size of the deficit. Some macro-economists bemoan the virtual loss of fiscal policy as a stabilization tool, and others, usually described as monetarists, welcome it because they have never believed in the efficiency of fiscal policy as a stabilization tool. A third group believes that the policies in order to be effective, should be carefully coordinated. For example, during a recession it would be appropriate to reduce taxes. However, this implies that the Treasury must engage in added borrowing. As a result, bond prices will decline and interest rates will rise, thereby discouraging private borrowing and expenditure. If the tax cut were accompanied by open-market purchases by the Federal Reserve, this expansionary monetary policy could prevent the rise in interest rates.
Материал для обсуждения
1. Answer the following questions for general understanding
1) What are the two principal tools of macroeconomic policy in the United States?
2) What is the basic role of the Board of Governors of the Federal Reserve System?
3) What is the role The Federal Reserve in the economy of the United States?
4) What is an example of the Federal reserve's operations? What «instrument» does it use?
5) What is a fiscal policy? What «vehicle» does it use?
6) Explain the conflict between the three group of economists?
7) What, according to the author, would happen if the takes were reduced?
2. Talk to your partner and decide which of the following statements are true
a) Monetary policy in the United States is under control of monetarists.
b) The Federal Reserve's control function is that it can buy and sell bonds in the open market.
c) Purchasers of the government securities are under control of Board of Governors.
d) By lending funds to it's member banks, Federal Reserve discourages encourages bank borrowing.
e) Government raises taxes to stimulate the Secretary of Budget and Internal Revenue Service.
f) US economy had a large budget deficit beginning from year 1983.
g) The group of macroeconomists called «mammoths» borrowed $200 to prevent the rise in interest rates.