Inflation and Interest Rates

The general health of the economy can also be measured by the rate of inflation and the rates of interest consumers and businesses are charged by lenders. Inflation is the rise of the general price level of all goods and services. Looked at another way, it is a decline in the purchasing power of a unit of money. Consequently, when the inflation rate is high, consumers and businesses cannot purchase as much as when inflation is low. Marketers are thus strongly affected by the ups and downs of inflation.

Interest is the price paid for loaned funds over a period of time, usually expressed as a percentage per year. Rising interest rates reduce the willingness and ability of consumers to make purchases and businesses to make investments. High rates of inflation and interest contribute to a recession — a downward phase of a business cycle resulting in a falling of business and consumer optimism.

Anticipating changes in inflation and interest rates is quite difficult because such changes are produced by a complex set of causes. Nevertheless, economists continually attempt to project the courses of inflation and interest rates; marketers must pay attention to such predictions, since consumer demand is so directly affected by the overall health of the economy.

Active Words and Phrases:

environment навколишнє середовище personal income особистий дохід; персональний дохід
variables змінні per capita в розрахунку на душу населення
trend тенденція; тренд buying power купівельна спроможність
gross national product валовий національний продукт (ВНП) necessities предмети першої необхідності
disposable income дохід після сплати податків; дохід, яким можна вільно розпоряджатися household домашнє господарство; родина (статист.)
discretionary income дохід після сплати податків та придбання предметів першої необхідності on average в середньому
overall performance робота, функціонування lender кредитор
value цінність, вартість decline зниження
interest rate процентна ставка recession рецесія; спад
distribution розподіл purchase закупівля; покупка
total output загальний випуск durable goods товари довготривалого вжитку

Ex. III. Find in the text the words that mean the following:

- the situations, people etc. that influence the way in which people live and work (paragraph 2 );

- something that may be different in different situations (paragraph 2);

- the act of supplying goods to stores, companies, etc. or giving something to each person in a large group (paragraph 5);

- all the people who live together in one house (paragraph 7);

- something that you need to have or that must happen (paragraph 7);

- a continuous increase in prices or the rate at which prices increase (paragraph 9);.

- the good things and bad things that happen in a particular situation (paragraph 9);

- a particular amount out of every hundred (paragraph 10);

- good reasons for feeling or behaving in a particular way (paragraph 11).

Ex. IV. Fill in the gaps with the words from the box:

inflation, average, interest rates, purchases, declined, trend, lends, per capita, performance, value, goods

 

1. The banks have raised their … … twice this year.

2. Strict government control of the money supply has brought about the fall in … .

3. The two women have just made several large … .

4. On … women live longer than men.

5. As his health has …, so has his influence.

6. The average … … in the area is $40.000 a year.

7. There’s a … toward more part-time employment.

8. The country’s economic … has been poor recently.

9. Our bank … money at low interest rates.

10. The supplier said that the … were damaged in transit.

11. His research was of great … to doctors working with this disease.