Lesson 19 MEASURING ECONOMIC ACTIVITY
L Read and memorize fhe following words, word-combi- nations and word-groups:
measures of economic activity — показники економічної
діяльності
e.g. Understanding how an economy works and carefully
examining different perspectives on the economy frequently require quantitative measures of economic activity, to lower — знижувати(ся)
e.g. The stocks lowered in value,
unit of account — одиниця обчиспекня
e.g. Money is frequently used as a unit of account,
to quote a price in terms of smth. — визначати ціну в
чомусь
e.g. When prices are quoted in terms of the domestic unit of account it is easy to determine how many units of one
good trade for another, implicit — не виражений прямо, прихований
exchange ratio — мінове відношення
e.g. This implicit exchange ratio of goods for goods is the
relative price.
relative price — відносна ціна
e.g. Relative prices play an important role in the decisions
that individuals make, purchase — купівпя
e.g. \ have some purchases to make,
microeconomics — мікроекономіка
ІІ9
e.g> The study of what determines relative prices and what
happens when relative prices change is called microeconimics. aggregate price level — загальний рівень цін
e.g. It is often useful to have a measure of the general or
aggregate price level in addition to measures of specific relative
prices.
price index — індекс цін
e.g. The price level is measured using a price index,
market prices — ринкові ціни
e.g. A price index is usually created by pricing a basket of
goods at market prices in a base year, to normalize expenditures — нормувати витрати
e.g. The expenditures at each subsequent date are also
normalized, using the base period expenditures, current prices — існуючі ціни
e.g. The same basket of goods is priced at current market
prices at subsequent dates.
aggregate output — сукупний обсяг виробництва
e.g. Aggregate output is the way to measure the dollar
value or the total production of goods and services in an economy, to evaluate — оцінювати
e.g. These goods were evaluated at current market prices. to deflate — знижувати ціни
e.g. A price index can be used to create a measure of real
aggregate output, real GNP, by deflating nominal GNP.
II. Give English equivalents of the following:
| визначати ціну в чомусь приховане мінове відношення мати ціну на існуючому ринку нормалізувати витрати сукупний обсяг виробництва індекс цін зростає або знижується (падає) | одиниця обчислення визначати відносні ціни загальний рівень цін за ринковими цінами Індекс цін |
III. Fill in the blanks with appropriate words:
| 1. Money often becomes a convenient way of ... 2. When prices ... of the domestic unit of account it is easy to determine how many units of one good trade for another. | are quoted in terms microeconomics measuring economic activity the relative price | |||
| 3. The implicit exchange ratio of goods for goods is ... . 4. The study of what determines relative prices and what happens when relative prices change is called ... . 5. It is often useful to have a measure of the general or ... in addition to measures of specific relative prices. 6. ... is usually created by pricing a basket of goods at market prices in a base year. 7. ... or national income are ways to measure the dollar value or the total production of goods and services in an economy. 8. A common measure of aggregate output, domestic product, or national income is which is the dollar value of output in an economy over a one-year period evaluated at current dollar prices. | aggregate price level aggregate output a price index the Gross National Product | |||
IY. Read and translate the text:
Understanding how an economy works and carefully examining different perspectives on the economy frequently require quantitative measures of economic activity.
Money is important to an economy because it lowers transaction costs, thereby increasing the gains to individuals from exchange and specialization. Once money has developed in an economy, however, it serves other very useful roles. One of the most important of these roles is that money often becomes a convenient way of measuring economic activity. That is, money is frequently used as a unit of account.
When prices are quoted in terms of the domestic unit of account ii is easy to determine how many units of one good trade for another. This implicit exchange ratio of goods for goods is the relative price.
The study of what determines relative prices and what happens when relative prices change is called microeconomics (orf sometimes, price theory). While relative prices are of great importance, in an economy that produces tens of
thousands of goods, it is useful to have some idea of what is happening to the prices of all goods taken together, particularly when comparing changes in prices through time. That is, it often useful to have a measure of the general or aggregate price level in addition to measures of specific relative prices.
The price level is measured using a price index. A price index is usually created by pricing a basket of goods at market prices in a base year and normalizing the expenditures on those goods to 100. The same basket of goods is priced at current market prices at subsequent dates. The difference in the expenditures on the basket from those made in the base year indicates the changes that have occurred in the price level. The expenditures at each subsequent date are also normalized, using the base period expenditures so that the
price index begins at 100 and then moves upward or downward depending upon whether there is inflation or deflation.
Aggregate output, domestic product, or national income are ways to measure the dollar value of the total production of goods and services in an economy, A common measure of aggregate output, domestic product, or national income is the Gross National Product (GNP), which is the dollar value of output in an economy over a one-year period evaluated at current dollar prices, A price index can be used to create a measure of real aggregate output, real GNP, by deflating nominal GNP. If an economy imports goods and services, the individuals within the economy have more goods and services to consume
than those produced within the economy, while if an economy exports goods and services, the individuals within the economy have fewer goods and services to consume. Therefore, whether more or fewer goods and services are available than those produced within the economy will depend upon whether exports exceed imports or imports exceed exports (pp. 89—103).,
V Answer the following questions:
1 . Why can money be used to measure economic activity?
2. What is the relative price?
3. What do relative prices measure?
4. What is called microeconomics?
5. Why is it useful to have a measure of the aggregate price level?6. What is price index usually created by? What is the Gross National Product? What can a price index be used for?
VI. Define the terms:
| commodity microeconomics price index market prices | aggregate output relative prices imports exports |
VII. Translate info English:
1. Ціна, яка була визначена на цей товар, виявилася дуже високою. 2. Якби у них був вибір, вони закупили б обладнання за твердими цінами. 3. Споживання палива зменшилось у зв'язку з підвищенням податків. 4. Як ви оцінюєте купівельну спроможність цієї компанії? 5. Затримка у постачанні споживчих товарів перевищила два тижні, 6. Гроші — вигідний засіб вимірювання результатів економічної діяльності. 7. Зміни у відносних цінах відображають зміни в альтернативних цінах, 8. Він вивчає мікроекономіку вже впродовж двох років.
VIII. Read and dramatize the following dialogue:
A.: You know that the radical reform of our national economy may be realized on the basis of a new price formation system, setting up a single market.
B.: Yes, I know it perfectly. What's beyond me is why we should try to invent the bicycle when it was already done ages ago. Why can't we study the experience of the common market thoroughly and apply it to our reality with corresponding alterations. Surely it may be much
easier and help avoid possible mistakes and miscalculations.
A.: I agree with you. They have a wide experience in this field. And it took them over 40 years at that. Since the EEC was created in 1957 they have had several stages in developing their collective currency unit.
B.: One thing's absolutely clear. We can't do it in a day. It may take quite a long time.
A.: Again I agree with you there.
B.: And we must have a really common currency unit for our trading community instead of the existing currency.
A.: Naturally our existing currency should be covered by the amount of goods produced, Ї. e. we should check, fight down so to say, the inflationary process first of all. B.: How serious is it in our country?
A.: Some say 2%, others up to 6%. No one knows exactly.
B.: There're many terms in our economic literature concerning currency. Let's see which is which. First, what is hard currency and soft currency?
A.: Hard currency is defined as one that is reliable and stable, which is why it is readily accepted by foreign countries in payment for goods or of debt. Soft currency is defined as one that is not convertible to gold or into certain other currencies which are more in demand as it is likely to fall in value usually because of an adverse trade balance.
В.: What foreign exchange belongs to hard currency?
A.: Currencies of almost all advanced industrialized countries and even of some developing or as they are now called newly-industriatized countries like Singapore or South Korea. I can't enumerate them all, but one thing's quite clear, that the US dollar, the Japanese yen and the Deutsche mark are most popular and more or less reliable at that.
B.: I'm not an expert in financial matters, but I think that the real exchange rate is necessary not only in respect of hard
currencies but in respect of clearing currencies as well. A.: What does a real exchange rate impiy?
B.: Perhaps I won't be able to answer your question properly but I know that monetary exchange is impossible without the real exchange rate; and there must be several stages; but first is the convertibility of our currency inside this country.
A.: What does that mean?
В.: That means that our enterprises must have a chance to buy foreign currency for our currency to pay for their machinery imports to modernize their factories, A.: How can that be achieved?
B.: A domestic monetary market should be created or a cu rrency exchange should be allowed.
A.: That's a good prospect but it seems far away to me.
B.: I don't think it'll take much time.
IX. Make up your own dialogue using the following expressions:
measures of economic activity price index
| to consume | relative prices |
| market prices | to export |
| to be measured | expenditures |
| opportunity costs | to normalize |
| unit of account | to exceed |
| useful | prices |
| to import | current |
X. Complete the following sentences as in the model using the Past Perfect Continuous Tense:
Model: He had been studying microeconomics for 2 years ... . He had been studying microeconomics for 2 years before he passed the exam (by that time, etc.).
1. They had been quoting prices on these goods for an hour ... . 2. This company had been lowering stocks in value for 2 hours ... . 3. They had been discussing current prices (or 20 minutes ... . 4. We had been talking about the aggregate output for half on hour ... . 5. They had been establishing price index for an hour ... .
XI. Ask questions to which the following statements are answers:
M o d e l : They had been discussing market prices for half an hour before he came.
How long had they been discussing market prices?
1. He had been calculating expenditures for 20 minutes before the manager came. 2. We had been discussing current prices on this equipment for an hour by that time. 3- They had been talking about the contract on different commodities for 15 minutes before the chief came. 4. I had been making purchases for half an hour before he came. 5. They had been talking about different measures of economic activity for 15 minutes before I came back.
XII. Translate into English:
1. Вони обговорювали загальний рівень цін упродовж 20 хвилин перед тим, як повернувся шеф. 2. Вони знижували ціни на товари вже впродовж місяця до того часу. 3. Він підраховував витрати компанії впродовж двох годин перед тим, як повернувся завідувач відділу. 4. Ми обговорювали існуючі ціни на товари протягом півгодини до того часу. 5. Він ретельно вивчав ринкові ціни на обладнання протягом години перед тим, як повернувся його шеф.
XIII. Communicative situation:
If the price index increases from $50 to 180 in a single year, are the individuals living within the economy worse off or better off?