Unit 1 Introduction to Economics

Unit 1 Introduction to Economics

I. Anticipating the Issue

Discuss your answers to the following questions.

1. What is economics? What is economy? How are they interconnected?

2. What is national economy? What is international (world) economy? Are they interconnected?

3. What do economists as experts in the science of economics do?

II. Background Reading

III. Vocabulary Reinforcement

A. Vocabulary

Match the words with their definitions.

Now and further on use the Longman Business English Dictionary, Webster’s Dictionary or electronic dictionaries which will help you to expand your professional vocabulary.

economics, n	tell in advance what will happen
economy, n	steady, solid
economic, adj	make or become different
economical, adj	connected with trade, industry and wealth
stagnation, n	the study of the use of resources to produce and distribute wealth
recession, n	insufficiency, shortage
allocate, v	collapse of economy or trade
stable, adj	temporary period of reduced business activity/trade
vary, v	which saves money
scarcity, n	the way in which a country produces and distributes goods
eliminate, v	remove, exclude
predict, v	give smth as a share for a particular purpose

B. Word Families

Complete the chart.

Verb	Adjective	Noun
economize
		stability
	variable/various*
stagnate
	scarce
	predictable
		allocation
		elimination
recess

*Remember: these two adjectives have different meanings:

variable =which varies/changes all the time: The weather in Great Britain is variable.

various =different/several: We’ve met on various occasions.

C. Word Groups

Match the words having similar meanings.

elimination	drop
unemployment	welfare
producer	consumer / purchaser
buyer	manufacturer
fall	removal
well-being	job losses

Match the words having opposite meanings.

economy does well	wealthy
sufficiency (of goods)	concentrate on
seller	economy is in stagnation
poor	rise
neglect	scarcity
(wages and income) fall	buyer

D. Word Fields

Which of the words and phrases below are associated with the following: 1) economic weakness, 2) doing well economy?

Boom; the nation suffers; stagnation; a wealthy society; stability; recession; to do well; to eliminate poverty; unemployment; scarcity of goods and services; wages and incomes rise; to reduce working hours; a decent home; inflation; price rise; sufficiency of goods.

E. Word Usage

Complete: use an appropriate preposition where necessary.

to (2), about (2), in, of (2), with, at

1. It is important to study … economics and learn … our economy.

2. A market refers … any place that brings together a buyer and a seller.

3. Markets vary … size, range, geographical scale and variety … human communities.

4. Every family should be provided … a decent home.

5. The more you know economics, the better you will contribute … the development … our country’s national economy.

6. National economy of any country aims … making the nation wealthy.

Linking: match the first half of each sentence with the most appropriate second half.

1. Economics can be defined as …	a) our economy does well.
2. We as a nation do well when …	b) the study of making choices.
3. Economics explains how …	c) efficient allocation of resources.
4. National economy aims to explain how …	d) our economy is in stagnation, recession or crisis.
5. The nation suffers when …	e) economies work and how economic agents interact.
6. A market can be referred to as …	f) a place that brings together a buyer and a seller.
7. A national economy of any country focuses on …	g) a nation can be made wealthy.
8. International economics …	h) predicts production, trade and investment across countries.

Complete: use appropriate information from the text to finish the following sentences.

1. It is important for all people to be informed about the economy because …

2. We need economics because … .

3. Economists are experts in the science of economics, they … .

4. National economy of every country is … .

5. International economics predicts … .

6. There are certain distinctions between macroeconomics and microeconomics: … .

B. Reading for Details

Read the text again to understand details and try the following tasks.

C. How the text is organised

What do these words refer to in the text?

1) it (§ 1); 2) which (§ 4); 3) its (§ 5); 4) it (§ 6); 5) that (§ 6)

V. Additional Reading

VI. Speaking

A. Giving your opinion

Explain how you understand the saying:

The economy is to business as the ocean is to fish.

B. Role play

The situation

The roles

1. Lecturer: Get your students to understand the concept of economics, the importance of studying economics and learning about our economy, the key economic terms referring to the topic of the lecture.

2. Team A: You represent the students who believe that the less ordinary people are informed about the country’s economy and economics as a science, the quieter their life is since the questions related to economics and economy are only economists’ concern and area responsibility.

Ask the lecture questions to clear up the problem. Prepare your arguments.

3. Team B: You represent the students who strongly support the idea that everyone but not only economists should be well informed about economy and economics. Prepare your arguments.

Moreover, make sure about the meaning of some economic terms related to the topic of the lecture.

4. Moderator: You evaluate the performance.

The Procedure

1. Appoint a lecturer.

2. Form two teams for the two roles.

3. The lecturer delivers the lecture.

4. Team A voice their opinions.

5. Team B give arguments against Team A’s opinions.

6. The lecturer answers the students’ questions.

7. Team B ask the lecturer questions related to the difference between such concepts as: economy / economics, economic / economical, microeconomics / macroeconomics, positive economics / normative economics.

8. The lecturer answers the questions and sums up the discussion.

9. The moderator evaluates the participants’ performance.

VII. Writing

Write an essay on one of the following topics. Use the ideas and vocabulary from the unit. Try to incorporate the following:

· an introductory paragraph that presents the topic;

· paragraphs (at least two) that develop your arguments with supporting evidence;

· a conclusion that reinforces the position you have taken.

1. Economic analysis is applied throughout the society: in business, finance and government, in the family, health and education, in politics and science.

2. Are you planning to specialize in national or international economics? Why?

Factors of Production

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb	Adjective	Noun
		consumer
		excess
		product
distribute
	limited
divide
		analysis
invest

C. Word Groups

D. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

VI. Speaking

A. Giving your opinion

B. Discussion

C. Simulation

VII. Writing

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb	Adjective	Noun
transact
	competitive
	beneficial
advance
consume
		trade
sell
	productive
	distributive

C. Word Groups

D. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

Types of Market Economies

1. In our diverse society even a market economy strictly restrained by the laws of supply and demand can not exist in the same forms. It may be explained by differences between cultures and the levels of development of the societies which have entered the market. Obviously, Great Britain where the Industrial Revolution took place and post-Soviet countries can not use the same market mechanisms. Hence the variations in market economies.

2. Capitalism generally refers to an economic system in which the means of production are all or mostly privately owned and operated for profit, and in which investments, distribution, income, production and pricing of goods and services are determined through the operation of a market economy. In capitalism, there is no central planning authority but the prices are decided by the demand-supply scale. Capitalism has been dominant in the Western world since the end of feudalism, but most feel that the term "mixed economies" more precisely describes most contemporary economies, due to their containing both private-owned and state-owned enterprises, combining elements of capitalism and socialism, or mixing the characteristics of market economies and planned economies.

3.Laissez-faire is synonymous with what was referred to as strict capitalist free market economy during the early and mid-19th century as an ideal to achieve. It is generally understood that the necessary components for the functioning of an idealized free market include the complete absence of government regulation, subsidies, artificial price pressures and government-granted monopolies (usually classified as coercive monopoly by free market advocates) and no taxes or tariffs other than what is necessary for the government to provide protection from coercion and theft and maintaining peace, and property rights.

4. Anarcho-capitalism, market anarchism or individualist anarchism advocates a true free market like laissez-faire and in addition the complete elimination of the state apparatus; the provision of law enforcement, courts, national defense, and all other security services by voluntarily-funded competitors in a free market rather than through compulsory taxation; the complete deregulation of nonintrusive personal and economic activities; and a self-regulated market. Anarcho-capitalists argue for a society based in voluntary trade of private property and services in order to maximize individual liberty and prosperity.

6.Market socialism refers to various economic systems in which the government owns the economic institutions or major industries but operates them according to the rules of supply and demand. In a traditional market socialist economy, prices would be determined by a government planning ministry, and enterprises would either be state-owned or cooperatively-owned and managed by their employees. The People's Republic of China currently has a form of market socialism referred to as the socialist market economy, in which most of the industry is state-owned, but prices are not set by the government.

VI. Speaking

A. Discussion

B. Giving your opinion

Give your opinion on the following issue:

"The Concept of the Market in the Republic of Belarus".

C. Role play

The situation

The roles

1. The moderator.You are to run the flow of the summit by setting the problem and giving the floor to the participants or experts and organising a discussion. You may express your personal opinion as well.

2. A chieftain of an African tribe. You live in a small community with a traditional economy. The population is involved in hunting and primitive agriculture, which has not been changed for centuries. If they experience scarcity they declare a war to the neighbouring tribe and take the values by force. You do not feel any global crisis. Try to convince the rest of the audience of the benefits of your way of driving the economy.

3. A politician from North Korea. Your society has experienced planned economy for many years. There is not much diversity in your economy, nevertheless you do not suffer from the global economic crisis. People of your country are convinced that if you want to suffer less you should reduce your desires instead of increasing producing. Try to convince the rest of the audience of the benefits of your country’s way of driving the economy.

4. A qualified doctor from the USA. You are convinced that market economy is the best, and the USA is the best example of it. You do not want to realize that the American society is doing well thanks to the efforts of the rest of the world. You think that all the difficulties are temporary and they will not influence the global social development on the whole. Try to convince the rest of the audience of the benefits of your country’s way of driving the economy.

5. A programmer from Japan. You think that the main resource of economic development is the brain. You find the way out of the crisis in introducing new technologies and give examples of other countries following the same direction. Try to convince the rest of the audience of the benefits of your country’s way of driving the economy.

6. A businessman from Singapore. You find the way out in creating favourable business conditions, eliminating corruption and an efficient use of natural resources and an efficient use of the geographic position of any country. Try to convince the rest of the audience of the benefits of your country’s way of driving the economy.

7. A public servant from Belarus. You think that “pure” market economy is unsocial. You are convinced that it will not do without the government’s interference. Try to convince the rest of the audience of the benefits of your country’s way of driving the economy.

8. Experts in economics (3-4 people). You are to listen to the representatives and pass a professional judgement.

9. Students (the rest of the group). You are to put questions to the experts and participants and express your views based on your professional knowledge of economics.

The procedure

1. The moderator opens the summit.

2. The participants in turn take the floor and make their reports, saying their opinion of what should be done to the world's economy.

3. The moderator organizes the exchange of views and opinions.

4. The moderator closes the summit.

VII. Writing

Unit 4 Supply and Demand

I. Anticipating the Issue

II. Background Reading

Supply, Demand and Price

1. The most basic laws in economics are the law of supply and the law of demand. Indeed, almost every economic event or phenomenon is the product of the interaction of these two laws. The law of supply states that the quantity of a good supplied rises as the market price rises, and falls as the price falls. If all Belarusian companies producing TV-sets, for example, raised the prices on their product all of a sudden, it certainly means that the Belarusian market would be overstocked with domestic TV-sets of “Vityas” and “Horizont”. Conversely, the law of demand says that the quantity of a good demanded falls as the price rises, and vice versa. (Economists do not really have a “law” of supply, though they talk and write as though they do. They are the same things, actually, looked at from different view points.)

2. Supply and demand are regulated through a price mechanism. Price in economics and business is the result of an exchange and from that trade we assign a numerical monetaryvalue to a good, service or assets. It is commonly confused with the notion of cost as in “I paid a high cost for buying my new plasma television”. Technically, though, these are different concepts. Price is what a buyer pays to acquire products from a seller. Cost concerns the seller’s investment (e.g., manufacturing expense) in the product being exchanged with a buyer. (Have you ever thought buying a cheap article of clothes at a discount that its actual cost might have been much higher than that?) For marketing organizations seeking to make a profit the hope is that price will exceed cost so the organization can see financial gain from the transaction.

3. One function of markets is to find “equilibrium” prices that balance the supplies of goods and services and demands for them. In this connection economists often talk of “demand curves” and “supply curves.” An equilibrium price (also known as a “market-clearing” price) is one at which each producer can sell all he wants to produce and each consumer can buy all he demands. Naturally, producers always would like to charge higher prices. But even if they have no competitors, they are limited by the law of demand: if producers insist on a higher price, consumers will buy fewer units. Our mentioned above TV-set producers would not benefit much raising the price as the consumers would have to do without their TV-sets or choose those made by other producers. The law of supply puts a similar limit on consumers. They always would prefer to pay a lower price than the current one. In our case Belarusian buyers could prefer even buying those of much worse quality made by little known producers. But if they successfully insist on paying less (say, through price controls), suppliers will produce less and some demand will go unsatisfied, and in some families a TV-set might be passed from one generation to another as a family rarity!

4. Markets in which prices can move freely are always in equilibrium or moving toward it. For example, if the market for a good is already in equilibrium and producers raise prices, consumers will buy fewer units than they did in equilibrium, and fewer units than producers have available for sale. In that case producers have two choices. They can reduce price until supply and demand return to the old equilibrium, or they can cut production until the quantity supplied falls to the lower number of units demanded at the higher price. But they cannot keep the price high and sell as many units as they did before. If ordinary people were aware of the principle of equilibrium in economy, they would understand why the heads of most producing companies in the world were taking unpopular measures during the global financial crisis in 2008-2009.

5. Why does the quantity supplied rise as the price rises and fall as the price falls? The reasons really are quite logical. The consumers buy fewer units than producers have available for sale. First, consider the case of a company that makes a consumer product (in our case a TV-set). Acting rationally, the company will buy the cheapest materials (not the lowest quality, but the lowest cost for any given level of quality). As production (supply) increases, the company has to buy progressively more expensive (i.e. less efficient for the company) materials or labour to keep the demand (otherwise the buyer would prefer another producer), and its costs increase. It charges a higher price to offset its rising unit costs.

6. In a perfect economy, any market should be able to move to the equilibrium position instantly without travelling along the curve. Any change in market conditions would cause a jump from one equilibrium position to another at once. If the overall standard of the buyer's living falls the consequences for the producer may be dramatic. Or in the case when the supply decreases all the buyer's money turns to be worthless and it finally leads to inflation and further even to more global social and political changes, as it happened in the former USSR at the end of the 1980's. Unfortunately, in real economic systems markets don't behave in an ideal way, and both producers and consumers spend some time travelling along the curve before they reach equilibrium position. This is due to asymmetric, or at least imperfect, information, where no one economic agent could ever be expected to know every relevant condition in every market. Ultimately both producers and consumers must rely on trial and error as well as prediction and calculation to find the true equilibrium of a market. But supply and demand curves can still serve as an excellent tool for making those kinds of predictions.

B. Word Families

Complete the chart.

Verb	Adjective	Noun
cost
		balance
price
	decreased
increase
minimize
		maximum
		reduction
		rise

C. Word Groups

D. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

Competition

The fundamental condition for market's existence is competition. Traditionally a competitive market is considered an ideal form of market. As a rule almost all markets where the laws of supply and demand exist are competitive in nature. Competition is said to be Pure and Perfect when six basic characteristics are satisfied.

Pure Competition: The market is said to be pure when

1) there is a large number of buyers and sellers;

2) goods produced and sold are homogeneous, and

3) there is Free Entry or Exit for any producer or seller.

Perfect Competition: Competitive market is supposed to be perfect in every respect. For this three conditions must be satisfied:

1) perfect knowledge on the part of the buyers and sellers about market conditions,

2) perfect mobility of the factors of production, and

3) proximity to the market.

In order to be competitive on the market companies tend to keep to certain marketing approaches – as customer oriented or product oriented. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. History attests to many products that were commercial failures in spite of being technological breakthroughs.

In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that profitable market segment(s) exist for the innovation. Taking risks, marketers, however can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played).

There are some exceptional cases in which certain market imperfections may cause departure from competition. Such exceptions to competition are in the form of monopoly, monopsony or oligopoly.

Monopolistic competition is a modern form of the market. A large variety of goods are sold in such a market. A monopoly is the case of a single supplier that can adjust the supply or price of a good at will. The profit-maximizing monopolist is modeled as adjusting the price so that its profit is maximized given the amount that is demanded at that price. This price will be higher than in a competitive market. A similar analysis can be applied when a good has a single buyer, a monopsony, but many sellers. Oligopoly is a market with so few suppliers that they must take account of their actions on the market price or each other. Each market type has a different impact on the price and quantity sold by the firm. Besides the difference in the number of firms under competition and monopoly there are also qualitative distinctions.

VI. Speaking

A. Giving your opinion

B. Discussion

C. Role play

Raising Sales

The situation

A company called “Super View” produces TV sets, mostly for a domestic market. Your main competitor is another domestic company called “Super Vision” producing TV sets of practically the same quality for the same customer. There are TV sets of some foreign producers on the market, too, but they are more expensive. Recently the demand for “Super View” company's product has decreased, and the sales have critically fallen. The Board of Directors are discussing all possible ways out of the situation.

The objective

Develop a complex plan aimed at overcoming difficulties and solving the problem.

The roles

General Director.You are the Chairman of the meeting. Explain the existing problem to the audience. Suggest all possible reasons for the situation that occurred. Give the floor to the staff and shareholders. Organize voting after discussing the proposals. Note down the most efficient ones. At the end of the meeting read out a complex plan, run the voting to approve it, thank the participants and close the meeting.

Managing Director.You keepto a customer oriented approach. Say what, in your opinion, should be done to increase the demand and raise sales. If possible, suggest several ways.

Financial Director.You are sure that if the company gets a bump order from the government the situation will be solved immediately. Give your proposals how to convince the government to make such orders for schools, universities, public agencies etc.

Production Manager.In your opinion, the company should look forward and enter the international market. Suggest what will happen if the company succeeds in it. Say what should be done to achieve this purpose.

Marketing Manager.You are a supporter of a product innovation approach. Express your own view on solving the problem. Give some examples of innovations (there may be even the most incredible ones, like a kind of a TV set with functions of a dishwasher, or special glasses for watching TV without a screen).

Sales Manager. You think that the best way is to unite with your competitors, “Super Vision”, creating a monopoly of domestic TV set suppliers. Give your arguments in favour of your plan.

Shareholders (the rest of the audience).Put questions to the speakers. Express your agreement or disagreement with the speakers' views. (You may suggest your own ways out of the situation as well). Try to predict the reaction of the market to this or that change in the company's strategy. Take part in the voting.

The procedure

1. The moderator opens the meeting.

2. The participants in turn take the floor and make their reports, expressing their views.

3. The moderator organizes the exchange of views and opinions.

4. The moderator organizes the voting to decide which decision to make.

5. The moderator closes the meeting.

VII. Writing

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb	Adjective	Noun
		manipulation
convert
	accountable
perform
		advertisement
		patent
publicize
mix
	priceless
		infringement

*Remember: these two nouns have different meanings:

Patentisthe exclusive right granted by a government to an inventor to manufacture, use, or sell an invention for a certain number of years or an invention or process protected by this right; an official document conferring such a right: You have no patent to produce this kind of mobile phones.

Copyrightisthe exclusive right to make copies, license, and otherwise exploit a literary, musical, or artistic work, whether printed, audio, video, etc.: The composer sold his copyright to perform this piece of music to several singers.

C. Word Groups

D. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to better understand details and try the following tasks.

V. Additional Reading

VI. Speaking

A. Discussion

B. Giving your opinion

C. Role play

Introducing a New Product

The situation

A company which produces cosmetics is to promote a new line (creams, shampoos, lotions, after-shaves etc) but it has not been clinically tested.

The roles

1. Moderator (Production Manager). You run the flow of the meeting by setting the problem and giving the floor to the participants and organising a discussion. You may express your personal opinion as well.

2. The Boss. You are encouraging the management to hide the true information from the customers ensuring them that the product is not going to do any harm to people's health.Think of the arguments proving your point of view.

3. Marketing Manager. The only risks you worry about are profit risks. You have already made up a plan of promotion campaign. Deliver it to the audience.

4. Managing Director. You arequite loyal to your boss, but at the same time you do not want to tell lies to the consumers. You find it more honest to warn the consumer that the product has not been clinically tested.

5. Chief Technologist. You are scientifically literal, but you have little experimental experience. The new product is one of your first inventions. In theory, you suggest that the product is not going to do any harm. Prove why you think so.

6. Consultant, Doctor of Medicine. You are totally against letting the new product enter the market without clinical testing. Say what consequences it may cause to people's health (if not immediately, then in the future) and appeal to social responsibility of the company.

7. Chief Engineer. You explain to the audience that the process of manufacturing the new product is less energy consuming, the new package is made of ecologically recyclable materials etc (think of other advantages), and so in the end it is going to do more good than harm.

8. Expert in Chemistry. You say that while interacting with sun light, air and water the new product quickly and easily turns into absolutely safe chemical components, but in this connection you doubt its cosmetic effectiveness.

9. Secretary. You have been using the new cosmetics for a week and you are very satisfied. You are sure it is safe and effective (prove it).

10. Currier. You have washed your dog with the new shampoo, and now it seems to be losing its hair. Besides, it has changed the colouring. So you are not sure that the product is safe.

11. Shareholders (the rest of the audience). Listen to the speakers, put questions to them and express your own opinion.

The procedure

1. The moderator opens the meeting.
2. The participants in turn take the floor and make their reports, saying their opinion of what should be done with the new product.
3. The moderator organizes the exchange of views and opinions.
4. The moderator organizes the voting to decide which decision to make.
5. The moderator closes the meeting.

VII. Writing

Unit 6 Production Costs

I. Anticipating the Issue

II. Background Reading

B. Word Families

Complete the chart.

Verb	Adjective	Noun
subtract
		margin
fix
		sale
		analysis
	produced
pay
	beneficial
		profit

C. Word Groups

E. Word Fields

E. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Speaking

A. Discussion

B. Giving Your Opinion

C. The Debate

Divide into two teams (A and B) for a debate.

VI. Writing

I. Anticipating the Issue

II. Background Reading

Employment and Unemployment

1. Types of Unemployment:After the Great Depression (1929-33), two major economic problems that world economies have been facing are Unemploymentand Inflation. Expert economists advise government officials about the causes and cures of economic problems. One statistic they consider is the unemployment rate. This is the percentage of the civilian labour force without jobs but actively looking for work. High unemployment indicates that the economy is not doing well and human resources are being wasted. Therefore, low unemployment is a major goal in stabilizing the economy.

2. The public authority of any nation today has the primary responsibility of minimizing the level of unemployment and aiming for the full employment condition. This requires large-scale public spending on employment promotion schemes and on the payment of unemployment doles. So that this function can be performed promptly and satisfactorily, it is important that the information about unemployment conditions should be quickly available.

3. For most of the twentieth century, people often thought of “a job” (or at least a good job) as something you typically did Monday through Friday, 40 hours a week, for a wage or salary and benefits (such as health insurance and pension plans). People often expected to stay in the same job for years, or even decades. In recent years, it has become popular to talk about how employment is becoming more flexible.

4. Despite its name, full employment does not mean a zero unemployment rate. Instead, it means a level of unemployment in which none of the unemployment is caused by a decreased economic activity. Economists generally believe that full employment exists when unemployment rate is below 5 percent. Even in a healthy economy there is always some level of unemployment. Sometimes people become unemployed when they relocate or when they leave one job to try to find another job that suits them better. Sometimes the available jobs do not match up with the skills of the available workers. In other words, some amount of unemployment is inevitable.

5. Economists pay attention not only to the unemployment statistics, but also to the reasons for unemployment. Economists recognize the following main types of unemployment:

6. Frictional unemployment, temporary unemployment experienced by people changing jobs. It is a reflection of workers’ freedom to find the work best suited for them at the highest possible wage. Economists consider frictional unemployment normal and not a threatto economic stability.

7.Seasonal unemployment, unemployment linked to seasonal work. Demand for some jobs changes dramatically from season to season, resulting in seasonal unemployment.

8.Structural unemployment, a situation where jobs exist but workers looking for work do not have the necessary skills for these jobs. A dynamic economy will often create structural unemployment as businesses become more efficient and require fewer workers to create the same amount of output. There are a number of possible triggers for structural unemployment. New technology can replace human workers or require workers to retrain. New industries requiring specialized education can leave less well-educated workers out of work. A change in consumer demand can shift the type of workers needed. Offshore outsourcing – the contracting of work to suppliers in other countries – is another source of structural unemployment.

9.Cyclical unemployment, unemployment caused by a part of the business cycle with a decreased economic activity. It results when the economy hits a low point in the business cycle and employers decide to lay off workers. Workers who lose their jobs during a recession can have trouble finding new jobs because the economy as a whole is scaling back, and the demand for labour declines. When the economy picks up again, many workers are again able to find jobs.

10.Disguised Unemployment, a situation under which productivity of the working force is very low. This is because an excessive number of workers are employed than what is optimally desirable.

11. The duration of unemployment in these types ranges widely, but the average duration of unemployment is relatively short.

12. The impact of unemployment:Although some unemployment is unavoidable, excessive or persistent unemployment hurts the economy in several ways. It reduces efficiency, it hurts the least economically secure, it damages workers’ self-confidence.

Efficiency. Unemployment is inefficient. It wastes human resources, one of the key factors of economic growth.

Inequality. Unemployment does not follow equal opportunity rules. In an economic slowdown, those with the least experience lose their jobs first. Also, with fewer jobs available, people on the lower rungs of the employment ladder have less opportunity to advance.

Discouraged Workers. People who are unemployed – or underemployed – for long periods of time may begin to lose faith in their abilities to get a job that suits their skills. Potentially productive workers may give up their search for work. If they are underemployed, they may not be motivated to do their work best.

13. Whether an economy is able to generate and sustain “good jobs” depends on the whole institutional structure and dynamics of the national economy. The actions of business, governmental units, nonprofits (including unions, industry associations, and universities) and households all work together to determine the numbers and types of jobs that are generated, the number of workers in the labor force, and the skills with which workers are equipped. The responses of a country’s business leaders, policy makers, workers and consumers to natural resource constraints and to the challenges and opportunities offered by participation in global markets for goods, services, and finance have a further significant impact on the employment situation.

B. Word Families

Complete the chart.

Verb	Adjective	Noun
reduce
	stable
lose
		employment
create
reflect
		impact
sustain
		constraint
		rate

C. Word Groups

C. Word Fields

D. Word Usage

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

VI. Speaking

A. Giving your opinion

B. Discussion

VII. Writing

I. Anticipating the Issue

II. Background Reading

Finance. Financial System.

1. Do you have a savings account? If so, you play a very important role in our economy. Your savings – what you gave up to get those assets – will be borrowed and invested by businesses and the government to build factories, offices, roads, and so on. The jobs and new products and services created by these investments, in turn, further help to fuel the nation’s economy.

2. There are two things you can do with your money – spend it or save it. Savings is income not used for consumption, in other words, not spent on immediate wants. Savingsthat are put to use are investments. In general, investment is the use of income today in a way that allows for a future benefit. More specifically, economic investment refers to money lent to businesses. Personal investment refers to the act of individuals putting their savings into financial assets, i.e. the written confirmation of the transaction. By saving, you make funds available for the bank to lend. Borrowers use these funds for many purposes, such as investing in new businesses or in new equipment for established businesses. The financial system, which consists of institutions such as banks, insurance markets, bond markets, and stock markets, allows for this transfer of funds between savers and investors.

3. Consumers, business firms, and governments often do not have the funds available to make expenditures, pay their debts, or complete other transactions and must borrow or sell equity to obtain the money they need to conduct their operations. Savers and investors, on the other hand, accumulate funds which could earn interest or dividends if put to productive use. These savings may accumulate in the form of savings deposits, savings and loan shares, or pension and insurance claims; when loaned out at interest or invested in equity shares, they provide a source of investment funds. Finance is the process of channeling these funds in the form of credit, loans, or invested capital to those economic entities that most need them or can put them to the most productive use. The institutions that channel funds from savers to users are called financial intermediaries. They include commercial banks, savings banks, savings and loan associations, and such nonbank institutions as credit unions, insurance companies, pension funds, investment companies, and financecompanies.

4. Three broad areas in finance have developed specialized institutions, procedures, standards, and goals: business finance, personal finance, and public finance. In developed nations, an elaborate structure of financial markets and institutions exists to serve the needs of these areas jointly and separately.

5. Business finance is a form of applied economics that uses the quantitative data provided by accounting, the tools of statistics, and economic theory in an effort to optimize the goals of a corporation or other business entity. The basic financial decisions involved include an estimate of future asset requirements and the optimum combination of funds needed to obtain those assets. Business financing makes use of short-term credit in the form of trade credit, bank loans, and commercial paper. Long-term funds are obtained by the sale of securities (stocks and bonds) to a variety of financial institutions and individuals through the operations of national and international capital markets.

6. Personal finance deals primarily with family budgets, the investment of personal savings, and the use of consumer credit. Individuals typically obtain mortgages from commercial banks and savings and loan associations to purchase their homes, while financing for the purchase of consumer durable goods (automobiles, appliances) can be obtained from banks and finance companies. Charge accounts and credit cards are other important means by which banks and businesses extend short-term credit to consumers. If individuals need to consolidate their debts or borrow cash in an emergency, small cash loans can be obtained at banks, credit unions, or finance companies.

7. The level and importance of public, or government, finance has increased sharply in Western countries since the Great Depression of the 1930s. As a result, taxation, public expenditures, and the nature of the public debt now typically exert a much greater effect on a nation's economy than previously. Governments finance their expenditures through a number of different methods, by far the most important of which is taxes. Government budgets seldom balance, however, and in order to finance their deficits governments must borrow, which in turn creates public debt. Most public debt consists of marketable securities issued by a government, which must make specified payments at designated times to the holders of its securities.

A. Word Families

Complete the chart.

Verb	Adjective	Noun
finance
		debt
insure
		account
expend
	safe
		dividend
		tax
invest

C. Word Groups

D. Word Fields

E. Word Usage

A B

dominate / enter / decline / break into a market

make / run / go into / do (a) business

make / earn / boost / do profits

complete / make / conduct / carry out transactions

obtain / acquire / receive / rise assets

consolidate / collect / create / earn debts

reduce / make / do / increase expenditure

have / exert / go down / put into (an) effect

do / invest / spend / accumulate savings

issue / hold / drop / purchase securities

have / assess / cause / consider an impact

B. Reading for Details

Read the text again to understand details and try the following tasks.

V. Additional Reading

Raising Finance

When a company is growing rapidly, for example, when contemplating investment in capital equipment or an acquisition, its current financial resources may be inadequate. Few growing companies are able to finance their expansion plans from cash flow alone. They will therefore need to consider raising finance from other external sources. In addition, managers who are looking to buy-in to a business ("management buy-in" or "MBI") or buy-out (management buy-out" or "MBO") a business from its owners may not have the resources to acquire the company. They will need to raise finance to achieve their objectives.

There are a number of potential sources of finance to meet the needs of a growing business:

a) Existing shareholders and directors funds; b) Family and friends;

c) Business angels; d) Clearing banks (overdrafts, short or medium term loans); e) Factoring and invoice discounting; f) Hire purchase and leasing; g) Merchant banks (medium to longer term loans); h) Venture capital.

A key consideration in choosing the source of new business finance is to strike a balance between equity and debt to ensure the funding structure suits the business.

The main differences between borrowed money (debt) and equity are that bankers request interest payments and capital repayments, and the borrowed money is usually secured on business assets or the personal assets of shareholders and/or directors. A bank also has the power to place a business into administration or bankruptcy if it defaults on debt interest or repayments or its prospects decline.

In contrast, equity investors take the risk of failure like other shareholders, whilst they will benefit through participation in increasing levels of profits and on the eventual sale of their stake. However, in most circumstances venture capitalists will also require more complex investments (such as preference shares or loan stock) in additional to their equity stake.

The overall objective in raising finance for a company is to avoid exposing the business to excessive high borrowings, but without unnecessarily diluting the share capital. This will ensure that the financial risk of the company is kept at an optimal level.

Types of Finance

Venture Capital

Venture capital is a general term to describe a range of ordinary and preference shares where the investing institution acquires a share in the business. Venture capital is intended for higher risks such as start up situations and development capital for more mature investments. Replacement capital brings in an institution in place of one of the original shareholders of a business who wishes to realise their personal equity before the other shareholders. There are over 100 different venture capital funds in the UK and some have geographical or industry preferences. There are also certain large industrial companies which have funds available to invest in growing businesses and this 'corporate venturing' is an additional source of equity finance.

Grants and Soft Loans

Government, local authorities, local development agencies and the European Union are the major sources of grants and soft loans. Grants are normally made to facilitate the purchase of assets and either the generation of jobs or the training of employees. Soft loans are normally subsidised by a third party so that the terms of interest and security levels are less than the market rate. There are over 350 initiatives from the Department of Trade and Industry alone so it is a matter of identifying which sources will be appropriate in each case.

Hire Purchase and Leasing

Hire purchase agreements and leasing provide finance for the acquisition of specific assets such as cars, equipment and machinery involving a deposit and repayments over, typically, three to ten years. Technically, ownership of the asset remains with the lessor whereas title to the goods is eventually transferred to the hirer in a hire purchase agreement.

Loans

Medium term loans (up to seven years) and long term loans (including commercial mortgages) are provided for specific purposes such as acquiring an asset, business or shares. The loan is normally secured on the asset or assets and the interest rate may be variable or fixed. The Small Firms Loan Guarantee Scheme can provide up to £250,000 of borrowing supported by a government guarantee where all other sources of finance have been exhausted.

Mezzanine Debt

This is a loan finance where there is little or no security left after the senior debt has been secured. To reflect the higher risk of mezzanine funds, the lender will charge a rate of interest of perhaps four to eight per cent over bank base rate, may take an option to acquire some equity and may require repayment over a shorter term.

Bank Overdraft

An overdraft is an agreed sum by which a customer can overdraw their current account. It is normally secured on current assets, repayable on demand and used for short term working capital fluctuations. The interest cost is normally variable and linked to bank base rate.

Completing the finance-raising

Raising finance is often a complex process. Business management needs to assess several alternatives and then negotiate terms which are acceptable to the finance provider. The main negotiating points are often as follows:

· Whether equity investors take a seat on the board

· Votes ascribed to equity investors

· Level of warranties and indemnities provided by the directors

· Financier's fees and costs

· Who bears costs of due diligence.

During the finance-raising process, accountants are often called to review the financial aspects of the plan. Their report may be formal or informal, an overview or an extensive review of the company's management information system, forecasting methods and their accuracy, review of latest management accounts including working capital, pension funding and employee contracts etc. This due diligence process is used to highlight any fundamental problems that may exist.

VI. Speaking

A.