Revision Vocabulary Units 13 to 16

 

Circle the word in each group which does

not fit.

1 kinds of money

hat, commodity, fake, intrinsic

2 things you can do in a bank

deposit, barter, borrow, make a withdrawal

3 kinds of inflation

demand-pull, exchange rate, cost-push, high

4 kinds of unemployment

target, structural, cyclical, seasonal

5 economic problem

shortage, stagflation, mobility, depression

6 other words for money

cash, exchange, currency, coins

 

Now write six example sentences using as many words as possible from this exercise.

В Complete the crossword with words we use in economics.

 

V

IV

ACROSS

3 People buy these from the government as a way to invest their money.

7 The money that a bank keeps in its account at the central bank.

8 A bank loan given to house buyers.

9 Governments try to get the economy working so it uses ail its resources.

10 This is another word for fake money.

DOWN

1 This is the cost of borrowing money.

2 A kind of income tax system.

4 The whole income of a country is called the gross national.......................

5 When money is paid back.

6 The oil crisis of the 1970s caused an economic

Read this letter and fill in the gaps with the words and phrases from the box.

 

■ allowance ■ cash till ■ knock-on effect

■ lend ■ make ends meet ■ obliged

■ plus ■ purse ■ relocated ■ transport

 

Dear Gill.

How are you getting on at university? As you know, rather than studying, 1 decided to get a job but you will be surprised to hear my news.

I didn't take the job I was offered in the

(1)......................department because I was also

offered another job in a bank: You may well be wondering why and the answer is simple - money!

It would have been hard to (21......................on

the salary the first job paid. As a single person my

personal (3)......................isn't very much so I

have to pay a lot of tax. Being paid well is always a

(4)......................in any job! Added to that. I'm not

(5)......................to work in the city centre which

is something I'd prefer to avoid and neither do I

run the risk of being (6).......................I'd hate to

have to move.

Anyway, the position I have is working at a

(7).......................As you can imagine. I see a lot of

things in a day - it's never boring. Take yesterday. Well, an old lady came to my counter, opened her

bag and took out her (8)................... Then she

began to count a huge pile of coins and notes in front of me. This went on for a while, then the man behind her started to complain. Of course that

had a(n) (9)......................and soon the whole

bank was going crazy, all the customers arguing. Throughout all of this the old woman continued her counting! Well, she deposited her life savings and the customers calmed down. 1 must say. perhaps there's a bit too much excitement sometimes. I may move to the loans department in the future. It might be easier to (10)......................people money!

Anyway, let me know how you're getting on.

Love.

Helen xxx

 

 

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Before you read

 

Discuss this question with your partner.

What do you think makes an economy grow?

 

Vocabulary

Choose the correct answer А, В or С from the list opposite.

1 In many ways his for previous......................was

much more difficult.

2 Home......................has increased in many parts

of Europe.

3 When the economy grows dangerously fast, we say

it.......................

4 A......................is when the economy is growing

quickly.

5......................are fairground rides like trains that

go up and down very fast.

6......................in technology in the last 30 years

has been incredible.

7......................is when you get better after

something bad like an illness - or economic depression.

8 When you......................you fight or work hard

for something.

9 Don't buy anymore milk. We've got......................

in the fridge.

10 A fortunate person is very.......................

11 Mountain climbers are people who enjoy a

12 The......................is the government minister

responsible for the economy.

13..................... growth is growth that can continue

for a long time.

 

1A people

2A ownership

3A boils over

4A bang

5A roller-coasters

6A growth

7A discovery

8A overheat

9A plenty

10A hard-working

11A challenge

12A economist

13A sustainable

1B generations

2B having

3B overheats

4B boom

5B big wheels

6B increase

7B recovery

8B recover

9B a shortage

10B rich

11B race

12B prime minister

13B sustained

1C family

2C belonging

3C warms up

4C balloon

5C bumper cars

6C progress

7C slump

8C struggle

9C none

10C lucky

11C boom

12C chancellor

13C sustaining

 

Reading 1

Economic growth

Many millions of people enjoy a quality of life today that previous generations could not have dreamed of. Home ownership, private ears and holidays are now Standard for most families in industrialised countries. And yet at the same time, billions of people in other countries live without even clean drinking water. How can this be? The answer is that the fortunate few live in countries with sustained economic growth.

An economy is growing in hen the gross national product is increasing year after year. When economists calculate economic growth, though, they must take into account the effects of Inflation. For example, imagine that the gross national product of a country increased from $500 billion to $510 billion from one year to another. That's an increase of two per cent in output. Very impressive! However, if the rate of inflation was two per cent, then there has been no real growth at all.

The other thing to remember about economic growth is that not all growth is good. Governments want steady, sustainable growth. Sudden, sharp increases in growth - a boom - can cause the economy to Overheat and fall into recession. For many economics, the long run growth over many years is steady, but the short run is a roller-coaster ride of boom and depression. For

 

 

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instance, the long run growth of the UK economy since 1950 has been a steady 2,5% per year. However, it you look closely at any decade you'll see that there is a cycle of growth, recession and recovery. The truth is, steady growth in the short term is very hard to achieve.

Nevertheless, many countries are still struggling to achieve any kind of growth at all. Why is this? What is necessary for growth to happen? Many economists have tried to find the answer to this question, and there are plenty of theories to choose from. However, most economists agree that three things are essential for economic growth to occur, capital growth, savings and technological progress.

Capital refers to the factories and machinery that the labour force uses to turn raw materials into products. More workers and more raw materials will only lead to a certain amount of growth. Eventually, the economy needs more capital for the labour to use. Capital growth can also include training and education for the labour force. This makes the workforce more efficient, creative and productive.

Of course, someone has to pay for the new machines and training. In other words, capital growth needs investment. Money for investment needs to be borrowed from banks. Banks can only lend if customers make savings. This is why savings are so important for growth. However, the economy will not grow if everyone is saving and no one is spending. Getting the right balance between consumption and saving is another part of the challenge of economic growth.

But above all, technology is the real miracle worker of economic growth. An advance in technology can increase productivity from the same amount of capital and resources: just what the chancellor ordered!

 

В Comprehension

Now read the text again and choose the sentence which best summarises each paragraph.

PARAGRAPH 1

A Economic growth does not happen everywhere.

B Economic growth did not happen in the past. C Economic growth happens only in industrialised countries.

PARAGRAPH 2

A GNP and economic growth are the same thing. B An increase in GNP always moans the economy is growing.

C An increase in GNP may not show economic

growth.

PARAGRAPH 3

A All growth is good.

B Fast growth is good.

C Steady growth is good.

PARAGRAPH 4

A The majority of economists believe three

factors positively influence economic growth.

B Economists are sure about what causes

economic growth.

C Economists have no idea about what causes economic growth.

PARAGRAPH 5

A The economy needs more raw materials to grow.

B The economy needs more machines and

factories in order to grow.

C The economy needs more labour to grow.

PARAGRAPH 6

A For economic growth there needs to be more

spending and less saving.

B For economic growth there needs to be more

saving and less spending.

C For economic growth there needs to be the

right amount of saving and spending.

PARAGRAPH 7

A Technology creates more raw materials wirh

less labour.

B Technology creates greater output from the same amount of capital, labour and materials.

C Technology creates more labour with fewer raw materials.

 

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Look at the photo below and answer these questions:

What country is this?

What do you know about its economy?

What countries are sometimes called the East Asian Tigers. Do you know why?

Which of the things listed in С Listening helped the East Asian Tigers to grow?

 

С Listening)))

 

Now listen and tick the things that helped the East Asian Tigers grow.

1 spending on education

2 cuts in welfare benefits for unemployed

3 high rate of savings

4 high rate of local consumption

5 exports to richer countries

6 non-democratic governments

7 democratic governments

8 good relations between management and workers

9 strict management rule

 

Before you read

Discuss these questions with your partner.

Look at the chart on page 91 which shows the business or trade cycle.

What do you understand from the chart?

What is happening to the economy at each stage?

 

D Vocabulary

Complete each sentence with a word or phrase from the box.

bankrupt current debt inevitable lay off pay off put up reasonable secure shrink stages turnover

1 Each month I put 100 euros into the bank to

......................my loan.

2 If you feel......................about your job. you don't

think there is a danger of losing it.

3 In Britain if it's sunny in the morning, rain is

......................later!

4 A company's......................is how much money it

spends and earns each year.

5 The......................price of oil is unbelievable.

Painting the body is one of the final......................

of manufacturing a car.

1......................prices are prices you think are fair.

8 If you wash some clothes in very hot water, they

The opposite of taking on staff is to staff.

10 If a company goes.......................it cannot pay

back the money it owes and it must close down.

11 I have a large......................and I have to pay back

a lot of money every month.

12 Farmers have......................their prices so the

cost of fruit and vegetables has increased.

 

The business cycle

In the long term, over man y years, an economy will grow at a steady rate. However, the climb up the hillside of economic growth is actually quite rocky. Long-term growth is made up many sliort-tcrin steps. Eaeh short-term step may last for five live or ten years. Over this short-term period the economy goesthrough a cycle of growth

 

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cycle, and it has lour stages boom, slump, recession and recovery.

During a boom, everything is good. Demand tor goods and services is high and business is going well. To meet demand, companies need to take on more stall, so unemployment is low. Confidence is in the air! Consumers feel confident about spending because their jobs seem secure. What's more, interest rates are reasonable, so people take out loans and use their credit cards. Low interest rates also encourage companies to invest in new capital, and businesses grow. Governments are happy too. because tax revenues are increasing. However, the government has to be careful. Boom economies arc always in danger of overheating. Demand-pull or cost-push inflation will eventually bring the good times to an end.

When the slump comes, the economy continues to grow, but not so fast. Once inflation starts to rise, confidence falls. The government have probably put up interest rates to slow down borrowing. People with mortgages have to spend more money to pay off their debt, so they have less to spend on other things. Higher interest rates discourage business investment. Things are moving slowly, and people just hope that the economy will improve again. Hut will it?

If the government have not acted quickly enough, its fiscal and monetary policy changes may be too late. In this case, recession is inevitable. Some economists say a recession exists when the current rate of growth falls below the long-term rate of growth. Others say a recession is when there is no growth at all. and the economy actually shrinks Whatever it is. a recession is bad news. Companies have to reduce costs because turnover is so low. The first thing they do is to lay off staff. If the recession is very bad, some companies may even go bankrupt and close. When this happens, thousands of workers may lose their jobs. As unemployment rises, the government needs to spend more on providing unemployment benefit for those who are out of work. In the worst recessions, these conditions can last for a number of years.

Eventually, with good government policy and a demand for goods or services from healthier economies abroad recovery will come. Slowly, confidence returns, investment grows and the cycle begins again.

 

 

E Comprehension

Now read the text again and answer these questions in your own words in the space provided below.

1 What is economic growth like in the long run?

2 What is economic growth like in the short run?

3 Why are businesses and consumers confident during a boom?

4 Why are mortgage repayments often higher during a slump?

5 How do companies try to save money during a recession?

6 What can help an economy recover?

Notes:

 

Before you listen

Discuss this question with your partner.

How does each stage of the business cycle affect ordinary people?

 

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F Listening)))

Now listen to these people. What part of the business cycle are they in? Match the people with the stage.

SPEAKER 1 SPEAKER 2 SPEAKER 3 SPEAKER 4

A boom В slump С recession D recovery

G Speaking

 

Discuss these questions with your partner.

Is economic growth always good?

What are the negative results of economic growth (eg. pollution, destruction of environment)?

Task

Work in groups of three. Each of you should take one of the following roles.

STUDENT 1 the Chancellor

chief director of one of the country's largest industries

STUDENT 3 leader of a workers' union

Imagine that the economy has gone into a recession.

you're the Chancellor. Explain to the others why the country is in recession and what you plan to do about it.

STUDENTS 2 and should tell the Chancellor what problems the recession is causing them. Tell the Chancellor what you want him/her to do.

Use the space below to make your notes.

H Writing

 

Answer this essay question: Economic growth isn't always a good thing. How far do you agree with this opinion?

Essay on economic growth

Use this essay plan to help you.

PARAGRAPH 1

Introduction to the topic: What is economic growth and how does it occur? Read text 1 again and make notes.

PARAGRAPH 2

What are the benefits of economic growth for a country?

standard of living, health care, education, employment

PARAGRAPH 3

What are the negative externalities of economic growth?

effects on the environment, traditional way of life, stress and family life, equity and inequality

PARAGRAPH 4

In summary - sum up both sides of the argument in a sentence and say what your view is.

Write 200-250 words

Pronunciation guide

Sustain

Industrialised

Recession

Bankrupt

Inevitable

Chancellor

Externality

 

 

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Before you read_

 

Discuss this question with your partner.

Nearly all countries trade with each other. Why do you think this is?

A Vocabulary

Match the words and phrases with the definitions.

1 balance of trade

2 imports 3 wide range 4 trading partnerships

5 value for money

6 deficit

7 insurance

8 flow

 

A the movement of something, like water in a river

B big variety

C financial protection

D when you receive less money than you pay out

E when something is worth the amount you pay for it

F the difference between the total amount of exports and imports for a country in one year

G people, companies or countries that do business together

H goods and services a country buys from abroad

Reading 1

The open economy

All through history, people from one society have been trading with people from another. Three thousand years ago, for example, the Phoenicians of the Mediterranean built an economy almost completely on foreign trade. In the jargon of economies, the Phoenicians had an open economy, and almost every economy since theirs has been open too.

When an economy is open, this basically means that it imports and exports goods and services What arc the benefits of doing this? First of all, if you trade with other economics, you can import goods that do not exist in your economy. These may be products that your economy cannot manufacture, but they may also be raw materials. With a wider range of raw materials, an economy is able to use its capital and labour to produce a wider range of products. In this way. importing can actually help an economy grow. What's more if you allow imports from other countries, then you will have trading partnership. This means that you can export to countries. If you have customers all over the world, your economy will grow faster.

 

 

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Open economies are g ood for consumers, toe. If

the economy allows imports from abroad, there will be a greater variety of goods available locally. When products are available locally, imports of the same products should help to keep prices down and quality high. This is because local companies will have to compete with foreign companies, and more competition will mean better quality and greater value for money.

Economists describe imports and exports of material products as visible - be cause you can really see and touch them. Examples of visible exports and imports are food stuffs. furniture and electronic equipment. However, there are also invisible imports and exports These ate mainly services, but can include all sorts of things. Examples of invisible exports and imports include banking services, insurance products, educational courses and tourism.

Opening up economics, however, does bring problems. One of the main difficulties is keeping a good balance of trade. Every time a country manages to sell a product or service abroad, this means money will flow into the economy. On the other hand, every time someone buys from abroad, money lows out of the country. Over time, if the flow of money out of the economy is greater than the flow of money into the economy, then there is a trad e deficit. This is not a good situation to be in. The challenge for governments is to keep the flow of trade equal in both directions, or to achieve a trade surplus. This is when total exports are greater than total imports.

 

В Comprehension

 

Now read the text again and decide whether these statements are true or false. If the statement is false, correct It.

1 Most economies in the world were closed until very recently.

2 Open economies exchange exports and imports with each other.

3 Importing products will always make the local economy shrink.

4 Only the producer benefits from an open economy.

5 If you go abroad for a holiday, you create an invisible export for your country.

6 When exports earn more money than imports, there is a trade surplus for the economy.

Before you listen

Try to complete this paragraph about autarchies by using words from the box.

America	China	closed	empires
North Korea	resources	invade	self-sufficient

An autarchy is another word for a

completely (1)......................economy.

An autarchy does not have trading

partners. It is (2).....................D.

There are no autarchies in the world

today, although (3)......................is

almost an autarchy. Autarchies don't exist because no economy has all the

(4)......................it needs. In the 19th

century, (5)......................was an autarchy

for about one year. (6)......................was

almost an autarchy in the 20th century. The only real autarchies that have existed

are (7).......................They have tended

to (8)......................instead of trade!

 

С Listening)))

 

Now listen and check your answers.

 

 

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Before you read_

Discuss this question with your partner.

 

Can you name the currencies that these countries use?

USA

Switzerland

France

UK

Australia

Japan

India

D Vocabulary

 

Complete each sentence with a word or phrase from the box.

 

■ currency ■ equilibrium point ■ euro

■ investors ■ overseas ■sterling

■ swap ■ zone

 

1 A......................is the kind of money used in

a country.

2 The currency used in Italy, France and Greece is

the.......................

3......................is another name for the UK's

pounds and pence.

4 A......................is an area.

5 Being......................means you are not in your

own country.

6 If you're not satisfied with what you've bought,

you can......................it for something else.

7......................are people or companies that lend

money to companies in order to make a profit.

8 The......................is the price that sellers are

happy to sell at and buyers are happy to buy at.

Reading 2

Exchange rates

The UK has sterling, the USA has dollars and Russia has the rouble. Almost every country has its own currency. Some countries in an economic zone share a currency, for example the 13 European countries that share the euro, but this is quite rare. If I live in a Eurozone country and I want to buy something from the UK, I must buy it using UK sterling. To do this 1 need to exchange my euros tor sterling. The amount of sterling I can swap for each euro depends on the excfuxngf rate.

For example, if the exchange rate is $1=?1.50 and the camera I want to buy is worth? 100, then to buy the camera I must spend 100 x 1.5=?150. Similarly, if someone in the UK wants to buy something from a Eurozone country, they must exchange their sterling for euros. If the computer they want to buy costs?5 00. then they must spend 500 x 0.75 =?3,75.

Most exchange rates, however, do not stay the same. They are changing all the time Imagine that a few days later the exchange rate changes to £ = £1.45. This would make the camera cheaper for me, but the computer more expensive for the buyer in the UК. In other words, sterling has got weaker against the euro and the euro has got stronger against sterling.

 

 

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But what makes the exchange rate change? To understand this, just think of the exchange rate as the price of the currency. Just like any other commodity, the price of a currency is decided by supply and demand in the market. The rate set will be the equilibrium point where supply and demand meet.

Where does demand for a currency conic from? Let's take the euro, for example. Exports from the Eurozone need to be paid for in euros. This means the buyers of those exports need to buy euros to make their purchases. So the demand for euros increases. Also, investors from outside the Eurozone may want to invest their money there because they think they will make a profit. To do this, they must buy euros, and again the demand for euros increases. The supply of euros on the international money markets comes from people who want to sell euros. If people want to buy imports from countries outside the Eurozone. or if they want to invest in countries outside the Eurozone, they must sell their euros to buy other currencies. So the supply of euros increases.

A change in the exchange rate of a currency can have a big impact on the economy. For example, it can have a big impact on the economy's balance of payments. As we saw in the example earlier, when a currency gets stronger, imports become cheaper. Hut at the same time, exports to overseas customers get more expensive. This will probably mean that more money will flow out of the economy than in.

 

Comprehension

Now read the text again and answer these questions in your own words in the space provided.

How many countries currently use the euro?

What must you do if you want to buy something from another country?

How is the exchange rate between currencies set?

What two things can make the demand for a currency increase?

What happens to exports when a currency gets stronger?

Notes:

 

Before you listen

Discuss the following with your partner.

A change in the exchange rate will make a currency stronger or weaker against other currencies. How will this affect the rest of the economy? Try to put the effects under the correct heading.

economy grows

economy shrinks

exports fall

exports grow

imports are cheaper

rate of inflation falls

rate of inflation increases

workers demand higher wages

Effects of a strong currency

Effects of a weak currency

 

 

F Listening )))

Now listen and check your answers.

 

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G Speaking

Discuss these questions with your partner.

Do yon think we could have one currency for the whole world? Why not?

What would it be like to live in a closed economy?

 

Task

 

Give a two-minute talk about closed and open economies. First, read text 1 again and the listening summary on page 94 and make notes below on the following.

what is an open economy and what is a closed economy

closed and open economies in history

the advantages and the disadvantages of each type of economy

 

H Writing

Notes:

Pronunciation guide

Insurance

Phoenicians

Deficit

Autarchy

Mediterranean

Euro

terling

Import

 

Answer this essay question: What is the exchange rate and how does it affect the economy?

Essay about exchange rates

First, read text 2 again and the notes from the listening exercise on page 96 and make notes. Use this essay plan to help you. and include these words and phrases:

Organising ideas: first of all, next, furthermore, in addition, in a number of ways

Describing cause and effect: as a result, consequently, this leads to. due to

PARAGRAPH 1

What are currencies?

How do countries trade with one another?

PARAGRAPH 2

What is the exchange rate? How is the exchange rate set?

PARAGRAPH 3

What is the balance of payments?

How does the exchange rate affect imports

and exports?

PARAGRAPH 4

What other effects does a change in the exchange rate have on the economy?

Write 200-250 words

 

 

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Before you read

 

Discuss the following with your partner.

Do you remember how the exchange rate affects the rest of the economy? Tell your partner what you remember about these things:

the exchange rate and interest rates

the exchange rate and the balance of trade

A Vocabulary

Match the words and phrases with the definitions.

1 exchange A unchanging mechanism

2 variations B different types of the same

thing

3 floating C stay

4 fixed D system for buying money

exchange rate

5 extreme E supplies

6 reserves F free

7 constant G stable currency price fixed by

the government

8 remain H most absolute

9 peg I keep two currencies at same level

 

Reading 1

Exchange rate mechanisms

If you're planning a holiday abroad, one of the things you won't forget to do is to buy some of the local currency. You'll probably visit a few banks to see which one offers the best exchange rate. But holidaymakers aren't the only ones who are interested in exchange rates. Governments are watching them all the time. This is because a change in the exchange rale of the national currency can affeet the whole economy. Interest rates, balance of payments and economic growth will all feel the effects of a change in exchange rates.

But can governments do anything about exchange rates apart from watch them? Well, yes, they can. They can use something called exchange rate mechanisms. These are ways to control the value of the national currency against other currencies. There are different types of mechanism, but they are all variations on two extreme mechanisms. free floating exchange tate and fully fixed exchange rate.

When a currency's exchange rate is free floating,

the government doesn't try to control the price of the curency. Remember that, just like any other price, the exchange rate changes when demand and supply change. When governments allow

 

 

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the currency to be free floating, they are saying, let the market decide the price of our currency. In contrast, a hilly fixed exchange rate is strictly controlled by the government. For example, the UK government might decide that they want sterling to remain at a constant exchange rate against the euro of 1 =?1.5. This is sometimes called pegging. In this example, sterling is pegged against the euro at that rate, although in actual fact sterling is a free floating currency.

However, there is a problem. If demand on the money market rises for sterling, then the exchange rate will rise also. How can the government maintain the exchange rate they want V The only way is to change the level of supply of sterling on the money market. The government can increase the amount of sterling on the international market by selling it. This means they buy foreign currencies and sell sterling. Alternatively, if they want to increase demand for sterling, the government needs to reduce the supply on the money market. To do this, they sell their reserves of foreign currencies and buy sterling. This way, they keep the exchange rate (the price) of sterling at a constant rate.

So which system is best - fixed or floating? It depends on lots of things. Bach system has its benefits and drawbacks. A free floating mechanism often makes it caster to keep a steady balance of payments. Also, the government can make any changes it wants to interest rates without worrying about the exchange rate (the market looks after that). On the other hand, a fixed rate mechanism makes industry feel more secure. They know what the value of their exports will be, and so they can plan for the future more easily. This is good for the local economy and for international trade.

В Comprehension

Now read the text again and then read the descriptions below. Which mechanism is being described?

1 The government chooses a target rate for the currency. A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

 

2 The government accepts the market value of the currency.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

 

3 Supply and demand on the currency market affect the exchange rate.

A fixed exchange rate

B floating exchange rate

C both fexed and floating mechanisms

 

4 The government does not attempt to change the rate.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

 

5 The government needs reserves of foreign currency.

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

 

6 There are advantages and disadvantages,

A fixed exchange rate

B floating exchange rate

C both fixed and floating mechanisms

 

Before you listen

Discuss the following with your partner.

You're going to hear someone talking about the foreign exchange market. As you listen, you'll make some notes about what you hear. First, road through the headings. Do you know any of the answers?

Other names: (1)......................

(2)......................

Main trading centres: (3)......................

(4)D......................(5)......................

Most traded currencies: (6)......................

(7)......................(8)......................

Amount traded daily: (9)......................

Trading hours: (10)......................

Main traders: (11)......................

(12).....................(13)......................

(14).....................

 

С Listening )))

Now listen and complete the notes.

 

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Before you read_

Discuss the following with your partner.

Do you remember these ideas from earlier units? Tell your partner what you know about these things:

opportunity cost

economic welfare

the benefits of an open economy

D Vocabulary

Complete each sentence with a word from the box.

comparative	exploit	incentive
quota	restrict	specialises
stimulate	tariffs

 

1 All countries try to......................the natural

resources that they have.

2......................are a kind of tax that the

government puts on imported goods.

3 Low interest rates can help to......................the

economy and make it grow.

4 A rise in salary is an......................to make

people work harder.

5 The UK economy......................in services such

as banking and insurance.

6 Governments sometimes need to......................

the flow of imports and exports.

7 The opposite of absolute is.......................

8 They have a......................which must be fulfilled

if they want to keep the contract.

Reading 2

International trade

There are plenty of incentives for a country to have an open economy. Exports increase the size of the market for producers. Imports stimulate competition in local markets and provide a wider choice for consumers. These are good reasons tor international trade. However, another important reason for trailing is to exploit advantages Economists talk about two types of advantage that an economy can have over others: absolute

advantage and comparative advantage.

An economy has absolute advantage when it can produce goods at a lower cost than other economies can, orthey have resources that others don't have. For example, warm Mediterranean countries have an absolute advantage in the production of olive nil. Many countries in Asia have an absolute advantage in manufacturing electronic goods, Clearly, it makes sense for countries with absolute advantages to trade with each other

The second kind of advantage is comparative

advantage. This happens when an economy can produce something at a lower opportunity cost than other economies can. Remember that the opportunity cost of something is what you have to give up in order to have it. For example, imagine that country A makes two things with its resources: clothes and furniture. If it wants to increase production of clothes, it must decrease its production of furniture. This loss is the opportunity cost.

 

 

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Now imagine that country В also makes clothes and furniture, but it makes less of both than country A. In other words, country A has an absolute advantage over country В in clothes and furniture. However, country В can increase its production of clothes with only a small opportunity cost in furniture. This means that country В has a comparative advantage over country A in the production of clothes.

But why would country A want to trade with country B? What benefit would they gain? In fact, both countries can benefit by specialising. If country A produces only furniture, and country В produces only clothes, both countries will be making best use of their available resources. By trading in this way, production of both products increases. In turn, this increases the economic welfare of both countries.

Despite all the advantages of having an open economy, countries sometimes restrict trade with other countries. For example, governments may charge tariffs on imports. These are taxes which make imports more expensive than locally produced products. Governments may also restrict the amount of imports entering the country. This kind of restriction is called an import quota. Since international trade has so many benefits, why would countries want to restrict trade in this way? There must be some very good reasons!

 

E Comprehension

 

Now read the text again and decide whether these statements are true or false. If the statement is false, correct it in the space provided.

1 Imports can be good for an economy. T/F

2 A country's natural resources can give it an absolute advantage over

other countries. T/F

3 A country with an absolute advantage will always have a

comparative advantage, too. T /F

4 A small economy can have a comparative advantage over a

larger economy. T /F

5 Specialising in one area of trade will give a country a comparative

advantage. T /F

 

6 Tariffs and quotas are used in order to increase imports into the economy.

T/F

Notes:

Before you listen

Discuss this question with your partner.

Why do you think governments sometimes use tariffs and quotas to restrict free trade with other countries?

 

F Listening )))

You're going to listen to four people talking about trade restrictions. Match the speakers with the reasons for restricting trade. There is one extra reason that the speakers do not mention.

SPEAKER 1......................

SPEAKER 2......................

SPEAKER 3......................

SPEAKER4......................

A to stop imports of dangerous goods В to protect local jobs

С to punish other countries who use restrictions

D to stop the local market being flooded with cheap imports

E to let new local industries grow

 

 

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G Speaking

Discuss these questions with your partner.

Are trade restrictions a good thing or a bad thing in your opinion? Why?

Do you know whether your country uses tariffs or quotas on imports?

Do you think any country has a completely open economy?

 

Task

Give a two-minute talk on exchange rate mechanisms. First, read text 1 again and make notes below on the following.

What is an exchange rate?

What is a fixed exchange rate - how does the government keep it fixed?

What is a floating exchange rate?

What are the advantages of each system?

 

Notes:

 

H Writing

Answer this essay question: Describe the trade partnerships that your country has with other nations.

First, do some research and find out what and how your country trades with others. Then use this plan to organise your answer.

Essay about international trade

INTRODUCTION

Explain that you are going to write about your government's trade partnerships nowadays. Mention that historically these partnerships haven't always been the same.

PARAGRAPH 1

What absolute advantages does your country

have (natural resources or strong industries)?

What are the main exports from your country

(goods and services)?

Which countries do they go to?

How does this affect your country's international

trading?

PARAGRAPH 2

What are the main imports into your country,

and where are they from?

Why are these imported?

Do other countries have an absolute or

comparative advantage in these goods?

PARAGRAPH 3

Are there any barriers to trade? If there are, why do they exist?

CONCLUSION

Sum up your country's international trading partnerships in two sentences.

Write 200-250 words Pronunciation guide

Pegging Incentive Quota Tariff

 

 

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Before you read_

Discuss these questions with your partner.

Look at the photos on pages 103 and 104.

Where do you think the photos were taken?

What do you imagine people's lives are like in these countries?

Why do you think some economies are less developed than others?

A Vocabulary

 

Choose the correct word.

1 Many African countries were nations / colonies of European countries until the 20th century.

2 If your debt is stopped / cancelled, you don't need to pay the money back.

3 A privileged / reluctant person is able to have things that others cannot have.

4 Political stability / instability happens when a country's political system does not work properly.

5 A grant / loan is money given to someone (or a country) without them having to pay it back.

6 If you are reluctant / willing to do something, you don't really want to do it.

7 Another word for help is aid / hamper.

8 When something aids / hampers you it stops you from doing what you want to do.

9 Capital / Primary goods axe goods which are used in order to produce other goods, or things which can be consumed without being processed.

10 Mature / Reluctant means fully developed.

11 Capital / Primary goods are the factories and machinery that an economy needs in order to produce other goods.

12 Human aid / capital is the educational level and the health of the working population.

Less developed countries

What do we mean when we say a country is developed? The United Nations uses three measures: life expectancy, education and real individual income. If we use these measures to deseribe the world, we quickly understand that only a privileged few live in developed countries Poverty, for instance, causes the deaths of a bout 30, 000 children every day. Over я billion people cannot read or write. Half the world earns less than $ 2 a day. Clearly, most of the world 's population live in less developed countries. Hut why is development so difficult for these nations?

There arc many reasons Some countries lack the raw materials and capital needed for growth. Others regularly suffer from natural disasters such as droughts and floods. Diseases such as cholera and AIDS are widespread in many less developed countries. This causes suffering to millions of individuals and families, but it is also disastrous for the economies of these nations Lack of education also holds back development. This may be because governments cannot afford to provide schools and colleges. However, millions of families in these nations arc caught in a poverty trap. This prevents their children from getting a basic education even when it is available. Without quality human capital, these economies cannot grow.

 

 

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Political insecurity is another reason for underdevelopment. Many of these countries belonged to colonies in the past. When the foreign powers finally left, these countries often fell into years of political instability and war. Even when рeace comes to these countries, political corruption makes development difficult as there is still a climate of political instability. Foreign companies do not want to invest in a country which suffers from corruption. Similarly, foreign governments are reluctant to give aid when they see that their money is spent badly or simply disappears.

All of these problems make it very difficult for less developed countries to i mprove their economies.

However, there are other more complex issues

which hamper development. The fust of these debt. The second is unfair trading. Many people believe that these two problems are the cause of all the other problems that developing countries face.

Many of the worlds poorest countries are trapped in a cycle of debt. This is because they need to borrow money in order 60 pay the interest on debts they already have. The poorest 60 countries owe many hundreds of billions of dollars. However, they spend more money paying off debts than they receive in aid. Unless these debts are cancelled, these countries will never escape the cycle

After years of slow development, it is hard for poorer countries to compete with developed countries for international trade Without mature industries of their own. they must rely on exports of primary goods. These primary goods do not earn as much money as the products that developed countries export. What's more, because poor countries rely on grants from rich countries, they arc often forced to spend the money on manufactured imports. This means they cannot buy the things they really need: capital goods to help their economies grow.

 

В Comprehension

Now read the text again and choose the best answer А, В or С to complete each sentence.

1 The majority of people in the world live... A in developed countries. В in less developed countries. С on less than a dollar a day.

2 Natural disasters and disease...

A happen more often in less developed countries.

B are worse in less developed countries. С have a serious impact on the economy of less developed countries.

3 Children often can't get an education because...

A there's not enough human capital. В governments don't wish to provide it. С their families are poor.

14Political instability... A prevents investment. В causes war. С causes corruption.

5 The poorest 60 countries... A receive many hundreds of billions of dollars in

aid annually. В receive less money in aid than they spend

on repayments. С spend less money on repayments than they

receive in aid.

6 Less developed countries are not able to spend enough money on... A primary goods. В capital goods. С imported goods.

Before you listen_

Discuss this question with your partner.

Less developed countries have received aid (loans and grants) for decades. However, their economies have not grown. Why do you think this is?

 

С Listening)))

Listen to someone talking about this problem. They mention four reasons why aid often doesn't help. What reasons are mentioned? As you listen, make notes about each reason.

1...............................................................................

2...............................................................................

3...............................................................................

4...............................................................................

 

 

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Those pictures are all connected with Russia in the 19th century. What do they show?

D Vocabulary

Complete each sentence with a word from the box.

 

■ authorities ■ emancipation

■ engineering ■ estates ■ feudal

■ illiterate ■ landlord/landlady ■leap ■ peasant ■serf ■subsistence

■ textile

 

1 In a......................system, landowners owned the

land and the people who worked on it. 2 The Eiffel Tower is an amazing piece of

3 A person who makes their living from farming a small piece of land is often called a.......................

4 People who cannot read or write arc......................

5 Someone who owns properly and rents it to others

is a.......................

6 A......................was a person who belonged to the

owner of land.

7 The aristocracy own large areas of land called

8......................farming means you only just

manage to survive on what is produced.

9The......................industry produces cloth, cotton

and wool.

10 The people who rule the country are sometimes called the.......................

11......................is another word for jump.

12People have to be free - their......................is

necessary.

 

Reading 2