Lesson 4 THE CONSUMER IN OUR ECONOMY
I. Read and memorize the following words, word- combinations and word-groups:
to meet one's needs — задовольняти потреби
e.g. Many businesses work very hard to meet your needs
and wants.
wage(s) (syn. salary) — заробітна плата
e.g. In return for working, you will receive a wage or
salary.
wealth — багатство
e.g, Wealth is the value of the things you own,
to deposit money in a savings account — класти гроші на
ощадний рахунок
e.g. We decided to deposit money in a savings account,
to earn interest — одержувати відсотки
to loan — позичати, давати позику
e.g. Wealth, in the form of money that is loaned to others
or deposited in a savings account, will earn interest, expenditures — витрати savings — заощадження
e.g. The Greens plan their expenditures and savings very carefully.
to make one's decision — приймати рішення
e.g. When the time comes to make a major purchase, we
compare products and prices before making our decision, to keep track — дотримуватися курсу
e.g. Most of the time, we are able to keep track of our
expenditures (the money spent), so that we are able to meet our immediate needs.
to exceed — перевищувати
surplus — лишок
e.g. Budgets in which income exceeds expenditures will have a surplus.
rate of return — норма прибутку
e.g. The rate of return is expressed as a percentage of the
amount on deposit for a period of a year, compound interest — складні відсотки
e.g. Most accounts offer compound interest, yield — прибуток
e.g. It is important to distinguish between rate of return
and yield, the actual amount of interest earned. to share risk — розподіляти страхову суму e.g. Insurance enables people to share risk,
endowment insurance — страхування-вклад
e.g. Endowment insurance protects the insured for a specific
number of years.
consumer credit — споживчий кредит
e.g. Consumer credit provides cash, goods, or services
now, while spreading repayment into the future, finance charge — фінансові витрати
e.g. Finance charge is the total amount you pay to use credit.
passbook loan — книжка займу
e.g. If you have a savings account, you may to apply for a
passbook loan against your balance in that account.
II. Give English equivalents of the following:
класти гроші на банківський рахунок дотримуватися курсу
одержувати відсотки фінансові витрати
захист інтересів споживача витрачати гроші норма прибутку складні відсотки
джерело прибутку страхування-вклад споживчий кредит приймати рішення задовольняти потреби
III. Fill in the blanks with appropriate words:
| 1. ... refers to earning paid on a weekly or monthly basis. 2. Interest and rent are two forms of... that can be earned by wealth. 3. ... is a financial plan that summarizes income and expenditures over a period of time. A. Banks and savings institutions protect your against fire, theft and other disasters. 5. ... depends on the rate of return and the frequency of compounding. 6. Property ... protects policyholders against the loss or damage of their property. 7. Change accounts, credit cards, installment plans, car loans and household mortgages are some of the best known forms of... . | credit yield income insurance salary a budget money |
IV. Read and translate the text:
Most of the income you are likely to earn will come from work. In return for working, you wilt receive a wage or salary. (The term «wage» typically refers to the earning of workers paid by the hour or unit of production. «Salary» refers to earning paid on a weekly or monthly basis.) How much you earn will depend on your job, your abilities, your performance, and a number of other factors.
Wealth can be expressed as the value of the things you own. Adding the value of all your possesions by banks
accounts, savings, and the like will give you the total amount of your wealth.
Used in certain ways, wealth can earn income. If you owned a motorcycle, you might be able to let others use it for a fee. In that instance economists would say that you used your wealth to earn «rent». Wealth in the form of money that is loaned to others or deposited in a savings account will earn interest. Interest and rent are the two forms of income that can be earned by wealth.
The number and value of things we are able to buy depends upon the size of our income and how wisely we spend it.
To help keep track of income and expenditures, many people use personal budgets. A budget is a financial plan that summarizes income and expenditures over a period of time. When a budget has expenses that exactly equal income, it is said to be balanced. When proposed expenses are greater than expected income, the budget is said to have a deficit
Budgets in which income exceeds expenditures will have a surplus.
Although there are as many ways to prepare a budget as there are people who use them, the process usually involves three steps: setting financial goals, estimating income, and planning expenditures.
Bank and savings institutions protect your money against fire, theft and other disasters.
One of the main reasons people save their money is to earn interest, the income from allowing someone else to use one's capital, The amount that they earn is known as the rate of return which is expressed as a percentage of the amount on deposit for a period of a year. A deposit of $100 in an account paying 5 percent, for example, would earn a total of $5 in interest over a year. The $5 is the return; the rate of return is 5 percept ($5 divided by $100).
Most accounts offer compound interest- This is interest computed on the principal and on the interest that was previously paid.
The rate of return offered by banks and savings institutions will vary with economic conditions and the length of time they hold your money. It is also important to distinguish between rate of return and yield, the actual amount of interest earned. Yield depends on the rate of return and the frequency of compounding.
Liquidity is a measure of the ease with which you can convert your savings to cash. The easier it is to withdraw your funds, the greater is the liquidity.
Theft, accident, sickness, and natural disasters are daily risks of life. Just as we do our best to avoid the physical consequences of these perils, we can also protect ourselves from their financial cost. We do this by sharing the risk of that loss with others through insurance. You can purchase insurance on your life and to pay your medical bills. You can purchase property insurance to protect your car, home, and other major possessions from damage or theft. Liability insurance protects you if you should injure others or damage their property.
One of the principal services offered by savings institutions and banks is the checking account. Some of the things that consumers need to know in using and maintaining a checking account are reviewed in the Study Guide.
Credit allows you to purchase the things you want now and pay for them over a special period of time. Credit can be useful but it does require good character, capital, and capacity to repay the loan. Credit can be expensive. Two of the most important things to look for when shopping for a loan are the finance charge and the APR.
The purpose of advertising is to sell goods and services. While certain advertising techniques benefit consumers, others do not. Consequently, consumers ought to be familiar with the kinds of strategies that advertisers use to self their products.
The principal responsibility for consumer protection lies with government agencies at the federal state and local levels. There are, however, a number of organizations, sponsored by the private sector, whose purpose is to protect consumers. These include such well-known institutions as the Better Business Bureau and local Chambers of Commerce.
Because consumers make up the largest economic sector (business and government are the other two), the level of consumer spending has a direct impact on the economy as a whole (pp. 35—48).
V. Answer the following questions:
1. What is the difference between «wage» and «salary»?
2. How can «wealth» be expressed?
3. How can you use your wealth to get income? Give your examples.
4. What is a budget?
5. When is a budget said to have a deficit and when a surplus?
6. What three steps are involved to prepare a budget?
7. What makes up your personal budget?
8. What is the rate of return?
9. What is liquidity?
10. What does credit allow you?
11. What is the purpose of advertising?
VI Define the terms:
| wage | budget |
| liquidity | the rate of return |
| salary | wealth |
| surplus | compound interest |
VII. Translate into English:
1. Велика кількість підприємств старанно працюють, щоб задовольнити ваші потреби. 2. Ми вирішили покласти гроші на рахунок у банку. З. Фінансові витрати — це загальна сума, яку ви сплачуєте, щоб скористатися кредитом. 4. Страхування-вклад захищає страхувальника кілька років. 5. За
свою роботу ви отримуєте заробітну плату. 6. Підсумувавши вартість вашої власності, банківських рахунків, заощаджень, ви отримуєте загальну суму вашого багатства. 7. Кількість і вартість речей, які ви спроможні купити, залежить від розміру вашого прибутку та від того, як розумно ви витратите його. 8. Банки та ощадні установи до
поможуть захистити ваші гроші від пожежі, крадіжки та інших нещасних випадків.
VIII. Read and dramatize the following dialogue:
A.: Sorry, I will be very obliged to you if you will answer some of my questions.
B.: O.K. I'm at your disposal.
A.: I know that most of the nation's personal savings are held by the commercial banks, different types of savings institutions, and credit unions. The deposits held by these institutions are insured by agencies of the federal government. But I wonder what kinds of accounts can be offered by savings institutions?
B.: Well, savings institutions offer the following kinds of accounts: passbook and statement saving accounts, NOW (Negotiable Order of Withdrawal) accounts, money-market accounts, certificates of deposit, credit-union accounts. U.S. savings bonds and money-market bonds.
A.: O.K. It's very interesting. Can you tell me some more about passbook and statement accounts?
B.: Oh, yes, of course. I can. The safety of your money and high liquidity are the most important advantages of these accounts. Minimum balance requirements are usually quite low, and your savings can be withdrawn at any time. A.: Is there any disadvantage to this kind of account?
B.: The disadvantage of them is that they pay relatively low interest rates,
A.: I see. And what about NOW and money-market accounts? Please, some words about them.
B.: Well, NOW accounts pay interest and allow the depositor to write checks. NOW accounts generally offer a slighty lower rate of return than savings accounts. Money-market accounts allow you to write a limited number of checks while participating in the «money-market» where banks and other businesses buy and sell short-term credit instruments and notes that come due in a year or less. The rate of return for money market accounts is usually higher
than for passbook savings accounts. Would you like me
to tell you about certificates of deposit and credit-union accounts?
A.: Oh, no, thank you very much- But it seems to me I know everything about them. Certificates of deposit, or CD's, pay the highest rates of interest offered by banks and savings institutions. They require the money to be left on deposit for a specified period of time that can run from a few weeks to five of more years. The money can be withdrawn early, if necessary, but not without a penalty.
Credit unions often serve people who have the same employer, work in the same industry, or belong to a particular church, labor union, or club. The rate of return offered by credit unions is higher than that of the other institutions. But what do you know about U.S. savings bonds and money-market funds?
B.: U.S. savings bonds can be purchased at most savings institutions. Guaranteed by the United States government,
they are one of the safest investments one can make. After five years bonds earn a variable rate adjusted every six months. And money-market funds use the resources of their investors to buy money-market certificates. Money- market funds generally pay a higher rate of return than savings and NOW accounts. Unlike other accounts at savings institutions, money-market fund accounts are not insured nor do they provide check-writing privileges.
А.: I'm more than grateful to you for such important information.
Thank you ever so much. В.: Don't mention it.
IX. Make up your own dialogue using the following words, expressions and word-combinations:
| to deposit money in a savings account | wage |
| to make one's decision | wealth |
| to earn interest | to loan |
| finance charge | rate of return |
X. Express the following In the Passive Voice:
M o d e l : The health maintenance organization or HMO provided its members with complete medical
coverage.
The members of the health maintenance organization were provided with complete medical coverage.
1. Partners brought additional funds to a proprietorship.
2. You received a wage in return for working. 3. The Greensplanned their expenditure and savings very carefully. 4. We
compared products and prices before making a decision.
5. Consumer credit provided cash, goods and services. 6. In 1990, consumers purchased over 60 percent of the GNP — more than $3 trillion in goods and services.
XI. Ask questions to the following sentences:
M o d e ! : Almost everyone was covered by some form of insurance.
Who was covered by some form of insurance? 1. A direct relationship between the kinds of goods and services bought and the income of the purchaser was shown by a Prussian statistician by the name of Ernst Engel, back in the 19th century. 2. As consumers, all of us were limited by what we can spend. 3. Most of the nations' personal savings were held by the commercial banks, different types of savings institutions, and credit unions. 4. Consumers were tempted to spend money for products they did not really
need. 5. Group policies were offered by employers, professional associations, unions, and other organizations to their employees or members. 6. At the end of the specific number of years the full amount was paid to the policyholders.
XII. Translate into English:
1. Гроші були покладені на банківський рахунок. 2. Кількість речей, які ми спроможні були купити, залежала від розміру нашого прибутку. 3. Ваші гроші були захищені від пожежі, крадіжки та Інших нещасних випадків банками та ощадними установами. 4. Земля та інші природні ресурси були закуплені бізнесменами в надії на прибуток. 5. Майже всі члени нашої родини були застраховані.
XIII. Communicative situations:
1. As total consumption in the United States has gone up, the percent spent on different types of goods has changed. Spending for some goods has increased while that for others
has decreased. Explain the trends for each of the following goods:
a) Spending as a percent of total consumption has decreased for good, clothing, household operation.
b) Spending as a percent of total consumption has increased for housing, medical care, transportation and travel.
2. Two hundred families live in the village of Middleville. Every year, for as long as anyone can remember, there has been one burglary- The average loss from the thefts has been $5,000.
a) How could the people of Middleville insure themselves against the financial costs of a burglary?
b) Why is insurance often described as a «method of sharing risk»?
3. Most states require drivers to have liability insurance. Why? You can choose whether you want collision insurance for a car. Why would someone choose not to buy collision insurance? Under what circumstances might you want to buy collision insurance?