Give your opinion on the following issues.

1. Young people are two to three times more likely than older people to be unemployed. Why?

2. Read the following descriptions of unemployment scenarios. Decide which of the four types of unemployment each scenario describes.

· Because of reduced demand, a shoe making company temporarily closes one of its factories and lays off workers.

· In September, a part-time student at the University loses his job at a discount supermarket.

· A newspaper journalist leaves his job to make a switch into television journalism. He has been looking for a new job for several months.

· A local travel agency has to close down because of the widespread availability of direct online booking options.

B. Discussion

Work in pairs or groups. Discuss your answers to the following questions.

1. Think about the type of career you hope to start when you graduate from the Academy. Do you think it is more likely or less likely than other careers to be affected by each of the various types of unemployment? Explain each of your answers.

2. Are there any jobs that can never be affected by unemployment? Why?

VII. Writing

Write a cause-and-effect essay that predicts what would happen if the minimum wage were greatly increased nationwide.

Unit 8 Finance. Financial System

I. Anticipating the Issue

Discuss your answers to the following questions.

1. What is finance?

2. What types of finance do you know?

II. Background Reading

Read the following text. Focus on the meaning of the boldfaced words. Determine whether what you anticipated coincides with the information of the text.

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.