Lesson 10 ECONOMIC STABILITY
I. Read and memorize the following wordsr word- combinations and word-groups:
circumstance — обставина
e.g. In some circumstances the President and Congress can
choose to increase taxes or reduce government spending or both, to have serious drawbacks — мати серйозні недоліки
e.g. Fiscal policy solutions have several serious drawbacks,
revenue — прибуток
e.g, A budget deficit means that the government's revenues
will be less than its expenditures, and the government's debt will increase.
fiscal policy — фінансова політика
e.g. Fiscal policy is applied by changing the level of tax
receipts relative to federal spending, monetary policy — грошова політика
e.g. Monetary policy refers to regulating the supply of
money as a way of stabilizing the economy.
.ax receipts — грошові надходження еід оподаткування е'9' It is the responsibility of the President to control the
level of this tax receipts in the country, budget deficit — дефіцит бюджету e-g- Budget deficit occurs when government's revenues
are less than its expenditures.
money supply — грошові надходження
e.g. A reduction in the money supply will serve to reduce demand and lower prices.
II. Give English equivalents of the following:
підвищувати податки випускати гроші зменшувати податки попит на товари
стабілізувати економіку дефіцит бюджету
контролювати податки та витрати спад виробництва застосовуватися в потрібний момент змінювати рівень грошових надходжень за рахунок податків
III. Fill in the blanks with appropriate words:
| 1. Fiscal policy is applied by changing the level of tax receipts relative to ... . 2. When taxes are ..., individuals and business firms will have more money available to spend for the things they want, 3. When properly applied, canprovide effective tools with which to fight recession and .,. . A, Fiscal policy solutions have several serious . 5. When government reduces taxes to fight a recession, it often creates a ... . 6. The federal government can alsofinance its debts by printing ... , 7. Fiscal policies must be ... so that they are applied at the right moment. 8« There is a direct relationship between the amount of money in and the level of business activity. | reduced fiscal policies inflation federal spending timed budget deficit money drawbacks circulation |
IV. Read and translate the text:
Ever since the days of the Great Depression, the federal government has sought to stabilize the economy.
To achieve these goals the government relies upon two sets of «tools» or strategies: fiscal policy and monetary policy.
Fiscal Po//cy. Fiscal policy is applied by changing the level of tax receipts relative to federal spending. It is the responsibility of the President and Congress because they control taxing and spending.
When taxes are reduced, individuals and business firms will have more money available to spend for the things they want. As business and consumer spending begins to increase, the
economy will enter the expansion phase. If taxes are increased consumers and business would have less to spend. This would create a contraction in the total demand for goods that should reduce inflation.
Fiscal Po//cy Has Its Critics: Many economists feel that when properly applied, fiscal policies can provide effective
tools with which to fight recession and inflation. Others, however, believe fiscal policy solutions have several serious drawbacks.
— When government reduces taxes to fight a recession, it often creates a budget deficit. That is its revenues will be less than its expenditures, and the government's debt will increase. When taxes are reduced, the government can still spend because it can borrow or print money.
If the government chooses to borrow from the public to offset a tax reduction, the money it borrows cannot be spent by the lenders.
— The federal government can also finance its debts by printing money.
Unfortunately, such increases in the money supply tend to fuel inflation by pushing up prices. For that reason a number of economists are opposed to this strategy.
Fiscal policies must be timed so that they are applied at the right moment.
Monetary Po//cy. Monetary policy refers to regulating the supply of money as a way of stabilizing the economy. Monetary policy is the responsibility of the Federal Reserve System.
There is a direct relationship between the amount of money in circulation and the level of business activity. When the money supply is increased, consumer spending and business spending tend to increase with it. It follows that in time of
contraction and recession, an increase in the money supply will help to bring about economic recovery. When the opposite situation prevails and the booming economy is pushing up prices in an inflationary spiral, a reduction in the money supply will serve to reduce demand and lower prices (pp, 139—147).
V. Answer the following questions:
1. What strategies does government rely upon to promotemaximum employment, production and purchasing.
2. What is fiscal policy?
3. How is fiscal policy applied?
4. In what ways could the recession be reversed?
5. What will happen when business and consumer spendingbegins to increase?
6. Can fiscal fools be used to slow the economy?
7. What serious drawbacks have fiscal policy solutions?
8. What is monetary policy?
VI. Define the terms:
| revenue receipts inflation recession regulating the supply of money | fiscal policy monetary policy budget deficit tax |
VII. Translate into English:
1. Економісти шукають шляхів, щоб стабілізувати економіку. 2. Для того щоб досягти мети стабілізації економіки, уряд звертається до двох стратегій: фіскальної та грошової політики, 3. Коли податки зменшуватимуться, фірми та приватні особи матимуть у розпорядженні більше грошей,
щоб витрачати їх на речі, які вони хочуть придбати. 4. Деякі економісти стверджують, що фінансова політика має кілька серйозних недоліків. 5. Коли уряд зменшує податки, він може створити дефіцит бюджету. 6. Дефіцит бюджету означає, що прибутки будуть меншими за витрати, і заборго
ваність уряду зросте. 7. Уряд може покривати дефіцит бюджету, роблячи позички або випускаючи нові гроші.
8. Прикро, що збільшення грошової маси е поштовхом до інфляції, 9. Існує прямий зв'язок між наявною в обігу кількістю грошей та рівнем виробництва.
VIII. Read and dramatize the following dialogue:
A.: Can you tell what times we are living through. As I know when people speak of prosperity and depression, they think of things like business cycles.
ВYes! The business cycle is the pattern of periodic ups and downs of business activity.
A,: And how does the government try to stabilize the ups and downs of the economy?
в,: In its efforts to stabilize the economy and achieve its goals the government relies on the fiscal and monetary policy, A.: Do you know anything about fiscal policies?
8.: Certainly, I do. Fiscal policies seek to adjust total demand through the appropriate use of the government's powers to tax and to spend. Fiscal policy is in the hands of the President and Congress.
А.: Then monetary policies must be quite different.
B.: Not exactly. Monetary policies seek to achieve similar goals by regulating the money supply. Monetary policies are determined by the Board of Governors of the Federal Reserve System.
A.: And how do fiscal policies influence the events in times of recession?
B.: In times of recession fiscal policies would call for some combination of tax reductions and increases in government spending.
A.: And what about monetary policies?
B.: Monetary policies in those times would seek to increase the money supply through strategies such as the increased purchasing of government securities by the Open Market Committee, a lowering of discount rate, and a reduction in the reserve ratio.
A.: And what happens in the times of inflation?
8.: In times of inflation both fiscal and monetary policies would follow an opposite course.
A.: Oh! I came to know very much about some things lrve never heard before. Thanks a lot.
ВYou're welcome.
IX. Make up your own dialogue using the following expressions:
| to stabilize the economy to enter the expansion phase to fight recession and inflation to control taxing and spending to provide effective tools monetary policies | to reduce inflation to fuel inflation to increase taxes fiscal policies to reduce taxes |
X. Change the following sentences using the Passive Voice:
M o d e l : At that time the government was controlling taxing. Taxing was being controlled by the government at that time.
1. They were stabilizing the economy during the last two years. 2. Congress was reducing inflation the whole year. 3. The President was applying fiscal policy, while they controlled taxing and spending. 4. They were providing effective tools to fight recession and inflation. 5. When the government borrowed money, it was reducing taxes.
XI. Ask when and iv/iaf-quesfions using the Passive Voice:
M o d e l : The company was being managed extremely well, when he was president.
When was the company being managed extremely well?
I. Fiscal policy was being applied by the government successfully at that time. 2. Taxing was being controlled by the Congress. 3. Money was being spent by individuals and business firms for the things they wanted, when taxes were reduced, 4. Effective tools were being provided, when government fought recession and inflation. 5. Debts were being
financed by the federal government, while they printed money.
Xli. Translate into English using the Past Continuous Tense (the Passive Voice):
1 . Рівень податку змінювався з липня по вересень минулого року. 2. Витрати цього підприємства зростали, тоді як економіка вступала в нову фазу. 3. За час інфляції провадилася фіскальна політика. 4. Коли уряд робив позики та випускав нові гроші, податки збільшувалися. 5. Під час оздоровлення економіки урядом випуск грошової маси зменшувався.
XIII. Communicative situations:
1. Although economists know a great deal about how to stabilize the economy, our system still goes through periods of expansion and contraction. Describe some of the problems facing decision makers who are trying to use fiscal and monetary policies to keep the economy growing steadily but smoothy.
2. As the economy moves from «recession» to «expansion», what is likely to happen to wages, investment, employment, profits?
3. During which phase of the cycle («recession» or «expansion») is production increasing? Why?