Aggregate demand and aggregate supply

Aggregate demand and aggregate supply are (1) only if they help us understand why an economy may not always fully employ its (2), have price stability, or grow at an acceptable rate. Supply and demand help us organize the way we think about these markets because each directly corresponds to the intentions of self-interested (3).

Individuals can only do two things with their (4): they can consume it or save it. Individual consumption is directly influenced by individual income. While (5) is undoubtedly related to income, it is unlikely that consumption will vary exactly as income varies. Saving is foregone consumption.

Essentially, saving allows people (6) consumption from the present to the future. When a person's income (7) from month to month, he or she can smooth consumption by saving and consumption will be based on some expected or average monthly income rather than on actual monthly income. Aggregate consumption may differ from aggregate (8) because an individual wants to save in order to smooth consumption relative to income. What determines current consumption if we save for retirement?

In part, current consumption will be based on our best (9) of our lifetime income and how long we expect to live. This kind of smoothing behavior is known as life-cycle (10). We also save because of (11) about our future income and about how long we will live. We may get sick or injured in some way or we may become unemployed. If we do, our income will fall, perhaps dramatically.

Saving is a way of transferring current income into future consumption.

Investment occurs when real output is used to increase (12) stock or offset depreciation.

Many different kinds of adjustment might occur. Prices may change. (13) may change.

The production of real output may change. It turns out that with sticky prices, output changes (14) before prices fully respond. Individuals make consumption and saving (15). Firms make investment decisions. But there is another participant in the economy — the government. (16) may affect the economy in one of two ways. First, government (17) directly affects aggregate demand. Second, (18) and subsidies directly affect consumption, saving, and investment and, hence, indirectly affect aggregate demand. Government spending, taxes, and subsidies are the fiscal activities of government. Increased government expenditure increases aggregate demand. Decreased government (19) decreases (20).

 

Task 2. Match each of the words or phrases on the left to an appropriate definition.

1 account	a) the amount of money that you receive regularly as payment for your work or as interest on money you have saved
2 budget	b) 1) a person, company or country that grows or makes food, goods or materials 2) a person who is in charge of the practical and financial side of making a film or a play
3 currency	c) a record of all the money that a person or business has received or paid out
4 expenses	d) beliefs about what is the right and wrong way for people to behave; moral principles
5 income	e) the number of items sold
6 market	f) the particular group of people that a product, etc. is aimed at
7 producer	g) the system or type of money that a particular country uses
8 sales	h) business or commercial activity; the amount of buying and selling of a particular type of goods
9 target market	i) money that you spend while you are working that your employer will pay back to you later
10 values	j) the amount of money that is available to be spent on a particular task or activity

 

Task 3. Fill in the blanks using the word combinations given below, translate the letter.

Letter 1.

This letter is (1) John Smith, General Manager of ABC Company is planning to travel to China for one week (2). While in China, he will be meeting with XYZ Company in Shanghai (or other city) to explore business and (3) (or sign contract, form partnership and joint-venture project, service equipment, etc.).

Our company (4) for Mr. Smith, including round-trip international airfare.

(5), please feel free to contact us. Thank you for your assistance (6) for John Smith.

 

a) trade opportunities

b) if you have any questions

c) to inform you that

d) starting on March 18, 2005

e) in granting this business visa

f) trade opportunities

Letter 2.

It was very enjoyable (1) about the assistant account executive position at the Smith Agency. The job, (2), seems to be a very good match for my skills and interests. The creative approach to account management that you described (3).

In addition to my enthusiasm, I will bring to the position strong writing skills, assertiveness and the ability to encourage others to work cooperatively with the department.

I understand your need for administrative support. My detail orientation and organizational skills will help to free you (4). I neglected to mention during my interview that I had worked for two summers as a temporary office worker. This experience helped me to (5).

I appreciate the time you took to interview me. I am very interested in working for you and (6) about this position.

 

a) as you presented it

b) to speak with you

c) develop my secretarial and clerical skills

d) look forward to hearing from you

e) to deal with larger issues

f) confirmed my desire to work with you

 

Task 4. Choose the correct variant.

1. We cannot guarantee you good quality of ….

a) sale

b) trade

c) service

d) discount

 

2. Usually a wholesaler has a large … of items.

a) range

b) channel

c) quality

d) need

 

3.He is the… reliable partner in our business.

a) more

b) less

c) most

d) best

 

4.Last year Anna … a reward for her creativity.

a) has got

b) had got

c) get

d) got

 

5. Demand for these goods … yet.

a) hasn’t increased

b) haven’t increased

c) wasn’t increased

d) won’t increase

 

6. It was only in 2006 that the first Cooler’s Shop… in California.

a) has been launched

b) launched

c) was launched

d) launch

 

7. If you … increase the salary, I’m afraid we won’t be able to take up these contracts.

a) don’t

b) won’t

c) didn’t

d) wouldn’t

 

8. We … sign the contracts now, if you don’t want to come tomorrow.

a) can

b) can’t

c) will be able to

d) were able to

 

9. I’m not sure if we … sign today or tomorrow.

a) will be going

b) are going to

c) is going to

d) were going to

 

10. He promised he … back soon.

a) had come

b) came

c) would come

d) will come

LESSON 3

Task 1. Complete the text with the words in the box.

 

1. plans	5. common features	9. fashions	13. profits	17. advantages
2. a production target	6.disadvantages	10. to comply with	14. inefficient	18. central planning
3. waste resources	7. command economies	11. incentive	15. available	19. proper
4. goods and services	8. control	12. standard of living	16. start	20. to produce

 

 

Planned economy

 

Planned economies are sometimes called "(1)" because the state commands the use of resources (such as labour and factories) that are used to produce (2), as it owns factories, land and natural resources. Planned economies are economies with a large amount of (3) and direction, when the government takes all the decisions. Planning of this kind is obviously very difficult, very complicated to do, and the result is that there is no society, which is completely a command economy. The actual system employed varies from state to state, but command or planned economies have a number of (4).

Firstly, the state decides precisely what the nation is (5). It usually (6) five years ahead. It is the intention of the planners that there should be enough goods and services for all.

Secondly, industries are asked (7) these plans and each industry and factory is set (8) to meet. A planned economy is simple to understand but not simple to operate. It does, however, have a number of (9):

► Everyone in society receives enough goods and services to enjoy a basic (10).

► Nations do not (11) duplicating production.

► The state can use its (12) of the economy to divert resources to wherever it wants. As a result, it can ensure that everyone receives a good education, (13) health care or that transport is (14).

Several (15) also exist. It is these disadvantages that have led to many nations abandoning planned economies over recent years.

► There is no (16) for individuals to work hard in planned economies.

► Any (17) are made are paid to the government.

► Citizens cannot (18) their own businesses and so new ideas rarely come forward.

► As a result, industries in planned economies can be very (19). A major problem faced by command or planned economies is that of deciding what to produce. Command economies tend to be slow when responding to changes in people's tastes and (20).