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Text 3AInflationInflation is generally defined as a persistent rise in the general price level with no corresponding rise in output, which leads to a corresponding fall in the purchasing power of money. Inflation varies considerably in its rate. Hence, the consequences for the business community differ according to circumstances. Mild inflation of a few percent each year may pose few difficulties for business. However, hyperinflation, which entails enormously high rates of inflation, can create almost insurmountable problems for the government, business, consumers and workers. Economists recognize that two general types of inflation exist:
Demand - pull inflation occurs when demand for a nation’s goods and services outstrips that nation’s ability to supply these goods and services. This causes prices to rise generally as a means of limiting demand to the available supply. Alternatively, inflation can be of the cost-push variety. This takes place when firms face increasing costs. This could be caused by an increase in wages owing to trade union militancy, the rising costs of imported raw materials and components or companies pushing up prices in order to improve their profit margins. Inflation affects business in a number of ways. Significant rates of inflation can cause accounting and financial problems for business. They may experience difficulty in valuing assets and stocks, for example. Such problems can waste valuable management time and make forecasting, comparisons and financial control more difficult. Many businesses may experience falling sales during inflationary periods for two broad reasons. Firstly, it may happen that saving rises in a time of inflation. We would expect people to spend more of their money when prices are rising to avoid holding an asset (cash) which is falling in value. However, during the mid-1970s, when industrialized nations were experiencing high inflation rates, savings as a proportion of income rose! It is not easy to identify the reason for this, but some economists suggest that people like to hold a relatively high proportion of their assets in a form which can be quickly converted into cash when the future is uncertain. Businesses might be hit by a reduction in sales during a time of inflation for a second reason, as inflation progresses, it is likely that workers’ money wages (that is, wages unadjusted for inflation) will be increased broadly in line with inflation. This may well take a worker into higher tax bracket and result in higher percentage of his or her wages being taken as tax. This process, known as a fiscal drag, will make workers spend less money available on firms’ goods and services. The poverty trap has a similar impact as money wages rise, the poor will have to find that they no longer qualify for state benefits to supplement their incomes and at the same time they begin to pay income tax on their earnings.This leaves less disposable income to spend on the output of firms. The wages of many groups are not index-linked and so they rise less quickly than the rate of inflation, causing a reduction in spending power and demand for goods and services. Inflation is often accompanied by high interest rates. High interest rates tend to discourage investment by businesses as they increase the cost of borrowing funds. Thus, investment falls. Businesses may also be dissuaded from undertaking investment programme because of a lack of confidence in the future stability and prosperity of the economy. This fall in investment may be worsened by foreign investment being reduced as they also lose some confidence in the economy’s future. A fall in investment can lower the level of economic activity, causing lower sales, output and so on. During a bout of inflation, firms will face higher costs for the resources they need to carry on their business. They will have to pay higher wages to their employees to compensate them for rising prices. Supplies of raw materials and fuel will become more expensive as will rents and rates. The inevitable reaction to this is that the firm has to raise its own prices. Such cost-push inflation may make the goods and services produced by that enterprise internationally less competitive in terms of price. Some economists think that a low and stable rate of increase in the price level can be beneficial. Governments realize that low rates of inflation exist in many economics. Inflation rates of 5 percent or below are not considered to be a great problem, especially if competitor nations are suffering similar rates. However, inflation is, in general, harmful to business and its environment. It is for this reason that its control has been a major objective of government economic policy for years. Exercises
2. Match each word or word combination with its definition.
3. Translate the sentences paying attention to the word combinations: owing to, no longer, tend to, in terms of, because of, in line with. 1. Because of hyperinflation customers and workers face a lot of difficulties. 2. Many businesses may no longer experience rising sales during inflation periods. 3. The business trip was delayed owing to organizational problems. 4. People tend to think that their salaries depend on the efficiency of their work. . 5. Mild inflation tends to pose few difficulties. 6. A number of firms faced high costs for resources. 7. I could give you a number of reasons for not going to the meeting. 8. The number of homeless people has increased dramatically. 9. In terms of sales many businesses will benefit in this situation. 10. Annual pay increase will be in line with inflation. 11. We should carry on with our work while our boss is away. 4. Mark these sentences T (true) or F (false) according to the information in the text.
6. Find in the text sentences with the modal verbs. Before translating them define which of them express possibility depending on the capacity of doing the action, possibility depending on the circumstances (or supposition) and necessity of the event. 7. Translate the sentences into English.
8. Comment on the meaning of the modal verb “would” in the following sentences. Before doing this read the note. 1. We wanted to persuade him to talk with the director. But he wouldn’t listen to us 2. At the conference which I visited I would ask questions about economic cooperation with other countries. 3. During the recession in the 1930s in the US people would stand in long lines in order to get a job. 4. The manager wouldn’t change his decision, even though he knew it was wrong. 5. The car wouldn’t start this morning because it was freezing. 6. Would you mind leaving us alone for a few minutes? 7. When the boss was away, Mr. Brown would take over his responsibilities. 8. When I worked for this company I noticed that managers would spend most of their working time at the meetings. Note: Remember that it is used to express unwillingness (mostly in negative sentences), when we talk about things happened regularly in the past, past habits, in set phrases. 9. Translate the sentences paying attention to the emphatic constructions: It is… that (who, which); (именно, только); 1. It is inflation that is the subject of the discussion. 2. It is a lack of confidence that results in falling the investment in any country. 3. It is this problem that a project manager has not taken into account. 4. It was the new machinery by means of which they increased labour efficiency. 5. It is macroeconomics that studies the problems of the country’s economy as a whole. 6. It wasn’t until 1923 that Canada, Australia and New Zealand were able to free themselves from British control. 7. It is through well-planned programmes that extensive data can be collected. 10. Translate the sentences with the verbs “cause”, “make”, “force”. 1.The growing rate of inflation makes us think that the economic situation of the country is not stable yet. 2. Financial deficit in any country or region may cause economic and political downturn. 3. Demand pull inflation is caused by demand for a nation’s goods and services. 4. The government forces all the companies to pay taxes on their profits.
11.Translate the sentences into English using the verbs “to cause”, “to make”, “
Read the text and answer the questions:
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