Public goods, information and uncertainty

Exercise 1. Read and memorize the following words and expressions.

 

public goods — суспільні товари

nonexclusive consumption — споживання без винятку

externalities — (позитивні) зовнішні вияви, екстерналії (позитивні чи негативні побічні наслідки виробництва або споживання, що здійснюється одним суб’єктом/суб’єктами, які напряму зачіпають іншого суб’єкта/суб’єктів)

noncompetitive consumption — неконкурентне спожи­вання

free riding — безоплатне користування, проїзд «зайцем»

searching for information — пошук інформації

reputation — репутація

brand name — торговельна марка

patent — патент

copyright — авторське право

registered trademark — зареєстрована торгова марка

 

 

Exercise 2. Read and translate the text.

 

Goods are called public goods, not because they are provided by the government, but because they differ from the usual goods and services that we privately enjoy. Public goods pose a serious problem for a market economy: markets are organized on the basis of individual decision-making, but in a sense, public goods require collective decisions.

A public good is any good or service whose consumption by one person is not affected by the consumption of the same good or service by someone else.

Public goods have three characteristics that create problems for markets. First, consumption of a public good by one individual is not competitive with consumption by another individual. Second, consumption is nonexclusive. Third, the production of public goods is accompanied by positive externalities.

Consumption of a public good by a single individual does not affect the ability of others to consume the same public good. Hence a public good can be jointly consumed by two, three, or many thousands of people, consumption of a public good is noncompetitive and there is no rationing problem.

It is generally not possible to keep those who do not pay for a public good from consuming it. Consumption of a public good is nonexclusive.

Finally, if it is not possible toexclude others from consuming a public good, the purchase or provision of a public good by one person creates a positive externality since others benefit from the purchase or provision without having to pay.

These three aspects of public goods create a special problem that makes it difficult for markets to produce them.

The problem is freeriding. Freeriding occurs when a person consumes a valuable good or service without having to pay. Because the consumption of public goods is nonexhaustive and noncompetitive, each of us has an incentive to free ride, that is, consume goods and services that others have purchased.

Information is enormously important in making decisions in a market economy.

Since this information is valuable, we might expect that there would be a market for it, a place where we could purchase information about automobiles, stereos, canned and frozen goods, and other commodities of, where a firm could purchase information about the quality of potential employees. However, these markets arevery difficult to create because of the public-good nature of the information.

Searching for information is a very important way for individuals to gain the information necessary for individual economic choice; searching produces information that cannot in general be purchased in some market.

Reputation is important because it lowers search costs by allowing information gathered in the past to be used in the future. Frequently, reputation becomes associated with a label or brand name.

Use of an economically valuable idea by one person does not lessen the value when the idea is used by another person.

One response to these problems is to create property rights in ideas, particularly when the ideas are embodied in piece of equipment or are written down. For technological innovations we have patents and for other kinds of ideas in printed or recorded form we have copyrights. We even protect the information about quality of goods associated with brand names by allowing for legally registered trademarks.

 

 

Exercise 3. Answer the following questions.

 

1. What is the difference between public goods and private goods?

2. What three characteristics do public goods have?

3. How do we call a phenomenon, when a person consumes a valuable good or service without having to pay?

4. Why is information a public good?

5. Why is reputation important?

6. How does the state attempt to stimulate technological or recorded innovations?

 

 

Exercise 4. Give English equivalents of the following.

 

створювати проблеми для ринку, безоплатне користування, вимагати колективних рішень, проблема нормування, знижувати витрати на пошук, споживання без винятку, супроводжуватися позитивними зовнішніми ефектами, мати зиск з купівлі, технологічні новини, втілити ідею.

 

 

Exercise 5. Find words or phrases in the text with the opposite meaning.

 

1. be similar 6. rival

2. collective 7. include

3. exceptional 8. destroy

4. negative 9. seldom

5. separately 10. lawlessly

Exercise 6. Define the terms.

 

registered trademark copyright

patent brand name

Exercise 7. Read the text below. Choose the best word to fill each gap from A, B, C or D below. There is an example at the beginning. 0).

Public Goods

The government spends billions of pounds each year on public goods. To understand the 0)__ B __ of these goods more clearly, and why the government is left to 1)_____ these for people throughout the economy, we must consider the characteristics of private goods.

A private good has three main 2)_____:

Excludability: Consumers can be excluded from consuming the product if they are not willing to pay for it (for example – a ticket to the theatre or a meal in a restaurant)

Rivalry: One person's consumption of a product reduces the amount available for other people to consume – because 3)_____ economic resources are used up in producing and supplying the good or service

Rejectability: Private goods and services are rejectable – if you don't like the look of the soup on the college menu, you can reject the 4)_____ to consume it and use your money to buy something else.

The characteristics of pure public goods are the opposite of private goods. They are services which are clearly in demand, but which must be provided 5)_____ by the Government for two main reasons:

Non-excludability – goods cannot be 6)_____ those who have paid for it. In this sense, non-payers can take a free ride and enjoy the benefits of consumption

Non-rivalry in consumption – consumption by one person does not reduce the 7)_____ of a good to others.

Examples of public goods include flood control systems, street lighting and national defence. Public goods (in fact most of them are services!) are not normally provided by the private sector in an economy. Partly this is because of the free-ride problem.

The "free rider" principle says that you cannot charge an individual a price for the 8)_____ of a non-excludable good because somebody else would gain the benefit from consumption without paying anything.

Consider the case of the provision of traffic wardens and safety 9)_____ on roads. One person's benefit from these services is not unique – other motorists benefit from the service as well – but they cannot be stopped and asked to pay for the benefits they derive.

Why is there market failure with public goods? The main reason is that private sector producers will not supply public goods to people because they cannot be sure of making an economic 10)_____. This is due to the characteristics of public goods outlined earlier. Consumers can take a free ride without having to pay for the good or service.

The obvious solution is that these goods are provided collectively by the government, and then financed through taxation of individual households and businesses.

 

0 A similarity B nature C value D sense

 

1. A supply B give C provide D secure

2. A distinctions B types C characteristics D uses

3. A abundant B scarce C poor D scant

4. A chance B will C destiny D luck

5. A privately B collectively C individually D personally

6. A limited by B confined to C included in D excluded to

7. A presence B use C convenience D availability

8. A provision B buy C supply D purchase

9. A notices B signs C symbols D signals

10. A benefit B good C income D profit

 

 

Exercise 8. Complete the text using the words from the box in the correct form.

 

border global concern aviation control priority regional generation community travel

Global public goods

Global public goods are public goods whose benefits reach across 1)_____, generations and population groups. They form part of the broader group of international public goods, which include as another sub-group, 2)_____ public goods.

To make the notion of a global public good more concrete, consider, for example, the eradication of small pox. Once accomplished, the whole of humanity benefits – people in all parts of the globe, present as well as future 3)_____, rich and poor. Similarly, if the international 4)_____ were to succeed in ensuring peace, everyone would be able to enjoy it. Much the same holds true for well-functioning international markets. And averting the risk of 5)_____ climate change would secure inter-generational as well as geographically widespread benefits, although people in various parts of the world might benefit in different ways. Similarly, international regimes such as those for civil 6)_____, postal services, and telecommunications, or those recognising a document such as a passport, all have significant properties of "global publicness".

But it is essential to recognise that the publicness of a good does not automatically imply that all people value it in the same way. Poor people, who cannot afford to 7)_____, may not place the highest value on an international passport regime. They may give preference to ensuring global health or to truly free trade so that their goods can also find new markets. Other people may rank the 8)_____control of international terrorism or stability of international financial markets highest. In establishing a global public goods agenda, it is, therefore, important to ensure that the top 9)_____ of different population groups are being considered equitably.

Also, global public goods must not be allowed to further exacerbate existing inequities. Although public, some may not be accessible to the poor. The internet poses this challenge. And others, such as a free trade regime in an unequal world, may give rise to a winner-take-all situation. If these 10_____ are neglected, people’s and states’ willingness to cooperate will suffer – and so will global public goods. Equity is an important element of an effective global public goods strategy.

Exercise 9. Read the given definitions and fill in the crossword puzzle.

 

Across

3 a term used to indicate an advantage, profit, or gain attained by an individual or organization

6 the world of commercial activity where goods and services are bought and sold

7 data obtained from different sources; knowledge

8 the final use of goods and services to provide utility

10 benefits or costs that are not included in the market price of goods or services

 

Down

1 the ability to benefit from a situation, etc without having to bear any of its costs and responsibilities

2 the opinion (more technically, a social evaluation) of the public toward a person, a group of people, or an organization

4 introduction of a new idea into the marketplace in the form of a new product or service, or an improvement in organization or process

5 those goods that provide benefits to all members of a community as soon as it is made available to any one person

9 those goods whose benefits are rival in consumption and for which exclusion of those who refuse to pay is relatively easy

Exercise 10. Translate into English.

 

1. Суспільні товари відрізняються від товарів особистого вжитку.

2. Ринки організовуються шляхом прийняття інди­відуальних рішень, тоді як вироблення суспільних товарів потребує колективних рішень.

3. Споживання суспільного товару однією особою не створює конкуренції для спожи­вання його іншими особами.

4. Виробництво суспільного товару супроводжується позитивними зовнішніми виявами.

5. Споживання суспільного товару необмежене.

6. Ми спостерігаємо безоплатне користування суспільними товарами та послугами, оскільки споживання суспільних това­рів є необмеженим і неконкурентним.

7. Інформація дуже важлива для прийняття рішень в умовах ринкової економіки.

8. Репутація дуже важлива, оскільки вона заощаджує витрати на пошуки, даючи можливість використовувати в майбутньому інформацію, зібрану в минулому.

Exercise 11. Communicative situations.

 

1. A movie theatre shows a film to a large number of people at the same time. Is this a public good?

2. Mail-order catalogues often offer clothing and other goods at lower prices than local stores. Why doesn't everyone purchase these goods by mail?

INFLATION

 

Exercise 1. Read and memorize the following words, word-combinations and word-groups.

 

deflation — дефляція

relative price — відносна ціна

nominal income — номінальний доход

real income — реальний доход

money illusion — грошова ілюзія

Consumer Price Index — індекс споживчих цін

inflation rate — темп інфляції, процент інфляції

price stability — стабільність цін

demand-pull inflation — інфляція попиту

cost-push inflation — інфляція витрат (спричиняється ростом виробничих витрат при незмінному попиті)

Exercise 2. Read and translate the text.

Most people associate inflation with price increases on specific goods and services. The economy is not necessarily experiencing inflation, however, every time the price of a cup of coffee goes up. We must be careful to distinguish the phenomenon of inflation from price increases for specific goods. Inflation is an increase in the average level of prices, not a change in any specific price.

We first determine the average price of all output — the average price level — then look for changes in that average. A rise in the average price is referred to as inflation.

The average price level may fall as well as rise. A decline in average prices — a deflation — occurs when price decreases on some goods and services outweigh price increases on all others. Relative price is the price of one good in comparison with the price of other goods.

Because inflation and deflation are measured in terms of average price levels, it is possible for individual prices to rise or fall continuously without changing the average price level. Nominal income is the amount of money you receive in a particular time period; it is measured in current dollars. Real income, by contrast, is the purchasing power of that money, as measured by the quantity of goods and services your dollars will buy. If the number of dollars you receive every year is always the same, your nominal income doesn't change — but your real income will rise or fall with price changes.

There are two basic lessons about inflation to be learned:

· Not all prices rise at the same rate during an inflation. Typically, some prices rise very rapidly, others only modestly, and still others not at all.

· Not everyone suffers equally from inflation. Those people who consume the goods and services that are rising faster in price bear a greater burden of inflation; their real incomes fall more. Other consumers bear a lesser burden, or even none at all, depending on how fast the prices rise for the goods they enjoy.

Money illusion is the use of nominal dollars rather than real dollars to gauge changes in one's income or wealth.

The most common measure of inflation is the Consumer price Index (CPI). As its name suggests, the CPI is a mechanism for measuring changes in the average price of consumer goods and services.

Inflation Rate is the annual rate of increase in the average price level.

Price stability is the absence of significant changes in the average price level; officially defined as a rate of inflation of less than 3 percent. Our goal of «full» employment is defined as the lowest rate of unemployment consistent with stable prices.

The most familiar form of inflation is called demand-pull inflation. Demand-pull inflation is an increase in the price level initiated by excessive aggregate demand. The name suggests that demand is pulling the price level. If the demand for goods and services rises faster than production, there simply won't be enough goods and services to go around.

Cost-push inflation is an increase in the price level initiated by an increase in the cost of production. In 1979, for example, the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of oil. For domestic producers, this action meant a significant increase in the cost of producing goods and services. Accordingly, domestic producers could no longer afford to sell goods at prevailing prices. They had to raise prices. The result was a cost-push inflation.

 

 

Exercise 3. Answer the following questions.

 

1. What is inflation?

2. What is deflation?

3. What is referred to as inflation?

4. What do we call the price of one good in comparison with the price of other goods?

5. What is the influence of price changes on your nominal and real income?

6. What are the two basic lessons about inflation?

7. What phenomenon do economists call money illusion?

8. What is the most common measure of inflation?

9. How can we calculate the inflation rate?

10. What do we call the absence of significant changes in the average price level?

11. What do we observe when the demand for goods and services increases faster than production?

 

Exercise 4. Give English equivalents of the following.

 

підвищення ціни, середній рівень цін, стабільні ціни, відрізняти явище інфляції від підвищення цін на окремі товари, темп інфляції, витрати на виробництво товарів та послуг,певний відрізок часу.

 

 

Exercise 5. Complete the text with the words from the box in correct form.

measure accepted independent transaction clause debt value incentives natural risky stock media consumption supply currency

Money and Inflation

Money is anything widely 1)__ accepted __ as final payment for goods and services. Money makes it easier to trade, borrow, save, invest, and compare the 2)_____ of goods and services. Money makes trading easier by replacing barter with 3)_____ involving currency, coins, or checks. People consume goods and services, not money; money is useful primarily because it can be used to buy goods and services. Producers use 4)_____ resources, human resources, and capital goods (not money) to make goods and services. Most countries create their own 5)_____ for use as money.

As a store of value, money makes it easier for people to save and defer 6)_____ until the future. As a unit of account, money is used to compare the market value of different goods and services. Money encourages specialization by decreasing the costs of exchange.

The basic money 7)_____ in the United States consists of currency, coins, and checking account deposits.

Inflation is a general increase in the level of prices throughout the economy. The most widely recognized 8)_____ of inflation is the Consumer Price Index.

Unanticipated inflation alters the 9)_____ normally created by price signals in the economy. The incentive to save diminishes as inflation erodes the value of savings accounts and fixed incomes. The incentive to spend and to accumulate 10)_____ increases as consumers act in anticipation of rising prices and wages. Inflation creates additional uncertainty. Predicting the future is more 11)_____ and mistakes are more costly.

Long-term and/or expected inflation may cause individuals and firms to alter their behaviours in response to anticipated changes.

· Interest rates rise to cover the expected inflation rate.

· Investors search for "inflation proof" investments.

· Unions demand cost-of-living 12)_____ in contracts.

Inflation rarely occurs except as a consequence of rapid increases in a society's 13)_____ of money. The Federal Reserve System, an agency 14)_____ of but established by the federal government, controls the stock of money in the United States through monetary policy. The Fed enacts monetary policy by changing the discount rate, by changing the reserve requirement, and/or through open market operations. The Fed often faces political pressures from government, private interests, and the 15)_____ to follow policies that cause the money stock to grow too rapidly for price stability.

The use of price controls in the aftermath of an increase in the money supply disguises inflation without eliminating it, and may lead to complete disruption of the system of resource allocation.

Exercise 6. Match the terms (1-10) with their definitions (a-j).

1. Consumer Price Index (CPI) a. rewards or punishments for behaviour

2. Discount rate b. all paper bills and coins in circulation, currency, travellers checks, and checkable deposits

3. Federal Reserve System c. the demand by the Federal Reserve that banks hold a minimum percentage of deposits on reserve, unavailable for lending

4. Incentives d.the buying and selling of government securities by the Federal Reserve System

5. Inflation e. the accepted common medium of exchange for goods and services in the marketplace that functions as the unit of account, a means of deferred payment, and a store of value

6. Interest rate f. an increase in the overall level of prices over an extended period of time

7. Money g. the price paid for borrowing or saving money

8. Money supply h. the most commonly used measure of inflation, calculated by comparing the price of a designated "market basket" of goods and services in the current year to its price in a base year

9. Open market operations i. it serves as the nation's central banking organization; its functions include processing checks, serving as the government's banker, and controlling the rate of growth of the money supply

10. Reserve requirement j.the interest rate charged to member banks on funds borrowed from the Federal Reserve

Exercise 7. Define the given terms.

inflation rate deflation price stability

demand-pull inflation real income nominal income

cost-push inflation money illusion

 

Exercise 8. Read the text below. Choose the best word to fill each gap from A, B, C or D below. There is an example at the beginning. 0).

What Causes Inflation?

 

Ask any person today what causes inflation and they will tell you that it is 0)__ B __ prices. Like many issues on money, the inflation issue is clouded and 1)_____. That is because the inflationists want it that way. By focusing attention on rising prices, it takes the attention away from the cause, which is 2)_____ money creation. Instead, all of the attention is focused on the symptoms of the disease rather than the root of it.

There are only three 3)_____ that prices can rise. The most important influences are as follows:

1. the supply of money and 4)_____

2. supply of goods and services

3. demand for goods and services

Prices can increase by:

1. increasing the supply of money

2. a decrease in the supply of goods and services

3. an increase in demand, i.e. 5)_____ increase

Conversely, prices can decrease by the same three measures when:

1. the supply of money declines

2. the supply of goods and services increases

3. demand decreases

There is very little understanding of where inflation comes from or where it 6)_____. Most individuals define inflation as rising prices. They speak about symptoms rather than 7)_____. If inflation is simply rising prices, then what causes it? You’ll find that inflation is attributed to many sources – none of which are accurate. The common misperceptions by policymakers and the public is that inflation has three principal causes:

1. 8)_____ inflation as a result of arbitrary demands of labour unions.

2. 9)_____ inflation resulting from the greed of businesses raising prices.

3. 10)_____ inflation resulting from acts of God or weather.

The general belief that inflation is the result of something other than its true cause makes it hard to understand and resolve. Most people believe that inflation is conspiratorial such as OPEC raising crude oil prices, businessmen wanting to make higher profits, or unions looking to 11)_____ worker benefits and pay. Somehow inflation has become an evil caused by greedy individuals and businesses. To most people inflation has become a causeless phenomenon inexplicable and born of 12)_____ will.

0 A stable B rising C falling D high

 

1. A puzzled B uncertain C confused D clear

2. A low B excess C scarce D exceed

3. A methods B means C causes D ways

4. A credit B bills C loans D goods

5. A producers B population C citizens D sellers

6. A starts B originates C goes D rises

7. A cause B cure C prevention D recovery

8. A longterm B shortterm C cost-push D profit-push

9. A cost-push B profit-push C longterm D unanticipated

10. A expected B induced C uncontrolled D crisis-driven

11. A secure B enhance C reduce D multiply

12. A good B bad C ill D demon

Exercise 9. Translate into English.

 

1. Явище інфляції треба відрізняти від підвищення цін на окремі товари.

2. Впродовж останнього місяця інфляція на споживчі товари зросла на 5 відсотків.

3. З, Відносна ціна — це ціна одного товару в порівнянні з ціною Інших товарів.

4. Інфляція найчастіше має місце в країнах Із нестабільною економікою.

5. Номінальний доход — це кількість грошей, які ви отримаєте за певний період.

6. Він досліджує про­блеми інфляції у цій країні вже протягом двох років.

7. Не всі ціни підвищуються однаково під час інфляції: деякі зростають дуже швидко, інші — помірно, а деякі зовсім не змінюються.

8. Темп інфляції— це щорічний середній темп підвищення рівня цін.

 

 

Exercise 10. Communicative situations.

 

1. Can you identify any groups of who are particularly helped or hurt by inflation? Explain.

2. Does an increase in the price level automatically lower society's real income? Explain.

3. Would it be advantageous to borrow money if you expected prices to rise? Why, or why not? Provide a numerical example.

 

 

Exercise 11. Change the following sentences using the Future Perfect Tense.

 

EXAMPLE: Inflation will increase by 3% next month.

Inflation will have increased by 3% by the end of the month.

1. Average price level will fall next month.

2. His nominal income won't change next year.

3. She will finish her report on inflation tomorrow.

4. Inflation rate will change next month.

5. Prices on specific goods and services will increase next week.

 

 

Exercise 12. Translate into English.

 

1. Наш номінальний прибуток зміниться до кінця року.

2. Ціни на деякі товари та послуги зростуть до кінця тижня.

3. Виробництво цих товарів зросте на 5 відсотків до кінця місяця.

4. Ціни на споживчі товари не зміняться до кінця року.

5. Реальний прибуток компанії збільшиться на 10 від­сотків до кінця бюджетного року.

 

THE GLOBAL ECONOMY AND

INTERNATIONAL TRADE

Exercise 1. Read and memorize the following words, word-combinations and word-groups.

 

to benefit — отримувати користь

transaction — справа, угода; ведення ділових операцій

advantage — перевага

to restrict — обмежувати

revenue — прибуток; джерело прибутку

to levy — оподаткувати

surplus — надлишок

revenue tariff — тариф на прибуток

protective tariff — пільговий тариф для вітчизняного ви­робника

dumping — демпінг; розвантажування

administrative red tape — адміністративне регулювання e

 

 

Exercise 2. Read and translate the text.

 

Nations trade with one another for the same reason that individuals and business firms within a country trade: both sides expect to benefit from the transaction. They benefit because trade enables them to exchange things they don't need (their surplus goods and services) for the things they do need and want. Some areas can produce things that others cannot. Because of its warm climate and the type of soil it has, Florida grows oranges but not wheat. Kansas grows no oranges, but it does grow wheat. The people in Florida and Kansas would like to have wheat and oranges, and so each specializes in one of those crops and trades its surplus with the other.

Manufacturing can also be performed more efficiently in some parts of our country than in others. Natural resources, an adequate labour supply, and transportation facilities have promoted the development of certain industries in particular regions of the country. For example, the computer industry is concentrated in northern California, the steel industry developed in western

Pennsylvania, and large automobile factories were first built in southern Michigan.

Absolute Advantage. Nations will gain because of differences in terms of climate, natural resources, labour supply, capital, and technology. These differences make it sensible for them to specialize in the production of some products and to buy the other things they need from other countries.

Despite the many advantages of trade between nations, most countries, including our own, often restrict that trade in a number of ways. Some of these ways are discussed below.

Tariffs. A tariff is a duty, or tax, on imports. There are two basic types of tariffs. Revenue Tariffs are levied as a way to raise money. Through most of its history (until 1910), the United States looked to the revenue tariff as its principal source of income.

Protective Tariffs are levied to protect a domestic industry from foreign competition. The goal is to make the foreign product more expensive than a similar item produced in the United States. Then people will stop buying the foreign made item and purchase its domestic counterpart.

Quotas. Restrictions on the numbers of certain specified goods that can enter the country from abroad are called quotas. Like protective tariffs, quotas limit the amount of foreign competition a protected industry will have to face. In the 1980's, for example, the government protected the U.S. automobile industry by placing a quota on the number of automobiles that could be imported from Japan.

Other Tactics. There are a number of other devices that directly affect the flow of trade among nations. One of these is the expect subsidy — a payment by a country to its exporters that enables them to sell their products abroad at a lower price than they could sell them for at home. Selling the same product for a lower price abroad than at home is called dumping.

Still another tactic that has been used torestrict foreign trade can be classified as «administrative red tape». This is the deliberate use of governmental rules and regulations to make it difficult to import goods from abroad.

Exercise 3. Answer the following questions.

 

1. Why do countries trade with each other?

2. What is absolute advantage?

3. Why do nations gain when they specialize?

4. How can you explain the term «comparative advantage»?

5. What does the law of comparative advantage explain?

6. Why do most countries restrict trade?

7. In what ways do some countries restrict trade?

8. What is tariff?

9. How can quotas restrict trade?

 

Exercise 4. Give English equivalents of the following.

 

отримувати прибуток від операцій; спеціалізація з виробництва деяких товарів; виробляти товар з меншими витратами; імпортувати товар із-за кордону транспортні засоби; мати переваги; природні ресурси; джерело прибутку; обмежувати торгівлю; вести торгівлю.

Exercise 5. Define the terms.

 

transaction revenue

to specialize tariff

to restrict trade quota

dumping administrative red tape

Exercise 6. Translate into English.

 

1. Держави ведуть торгівлю з тих самих причин, що й приватні особи та фірми.

2. Держави отримують зиск від торгівлі тому, що вона дає їм можливість обмінювати над­лишок товару, який вони виробляють, на товар, у якому вони мають потребу.

3. Природні багатства, транспортні засоби, трудові ресурси дали поштовх розвиткові окремих видів промисловості.

4. Різниця в кліматичних умовах, при­родних багатствах, трудових ресурсах зробила можливою спеціалізацію з виробництва окремих видів товарів.

5. Незважаючи на значні переваги торгівлі, більшість країн запроваджує обмеження на торгівлю.

6. Упродовж історії свого існування США розглядали фіскальні тарифи як головне джерело надходжень.

7. Для того щоб захистити вітчизняну промисловість від іноземної конкуренції, існують тарифи, мета яких — зробити зарубіжний товар дорожчим за такий самий товар, виготовлений у країні.

8. Квоти знижують рівень конкуренції, з якою може зіткнутися вітчизняна промис­ловість, обмежуючи кількість імпортованого товару.

Exercise 7. Read and dramatize the following dialogue.

 

A.: It's amazing!

B.: What's amazing?

A.: We had an assignment the other day to discover how much we depend on foreign trade.

B.: What's so amazing about that?

A.: I found that my clock radio was made in Japan, my slippers came from Taiwan, my robe from India, my comb was made in Mexico, my sweater was from Scotland and my shoes were from Italy.

B.: And I want to treat you to the hot chocolate made by a Swiss company out of cocoa beans from Ghana and sweetened with sugar from Ecuador.

A.: I see that we are all dependent upon the goods and services from other countries, and imports have risen steadily almost every year in the past.

B.: But why do countries trade with each other?

A.: Trade among nations takes place for the same reasons that it does within a nation; to obtain goods and services that a region could not produce itself, or to obtain them at a lower cost than they could be produced for at home. This is explained by the principle of comparative advantage.

B.: But I've heard that some countries put up barriers to trade and what is the reason for that?

A.: Despite the advantage of international trade, most nations have erected artificial barriers to that trade. These barriers are usually in the form of tariffs or quotas.

B.: And how are payments made in international trade?

A.: Imports must be paid for in a currency that is acceptable to the seller. In order to facilitate these transactions, there is a market for the currencies of all trading nations. The selling price of one nation's currency in term of the cu­rrencies of other nations is known as its ‘exchange rate’. Exchange rates fluctuate in accordance with the law of supply and demand.

B.: How do exchange rates' fluctuations influence the nation's exports and imports?

A.: When the value of a nation's currency is decreasing in terms of other currencies, its exports are likely to increase because they will be less expensive to people in foreign countries. Imports, in these circumstances, are likely to decrease because foreign goods will become more expensive. When a nation's currency is appreciating in terms of other currencies, the opposite is likely to occur.

В.: I see. And why do economists look to the balance of payments?

A.: The balance of payments summarizes the transactions that have taken place in international trade over a given period of time, usually one year, Economists look to the balance of payments for clues to future trends in the value of a nation's currency and other consequences of its foreign trade.

Exercise 8. Make up your own dialogue using the following expressions.

 

to levy protective tariffs to benefit from the transaction

to specialize in the production of to limit the amount of foreign competition

to place a quota to exchange things

to be concentrated to restrict trade

Exercise 9. Problem solving.

 

1. American steel production is down. Many steelworkers are unemployed. The equipment sits idle. A bill before Congress proposes high tariffs and quotas to protect the steel industry from imported steel.

a) Explain how each of the following parties might respond to the issue.

Steel industry Iron and steelworkers Consumers Auto industry

b) Considering the position of different groups in the economy, do you believe it would be a wise or unwise economic decision to protect the steel industry from foreign producers? Explain your position.

2. Describe the position you would take on high tariffs, quotas or voluntary restraints on automobiles manufactured in Japan if you were:

a) the owner of an American automobile company;

b) a worker in that automobile plant;

c) a consumer interested in buying a new automobile;

d) an American manufacturer of computer parts to be sold in Japan.

 

Exercise 10. Advantages and Disadvantages of International Trade.

 

International trade is enormously beneficial for entrepreneurs and enables producers of goods and services to move beyond the domestic market. But ‘every medal has the reverse’ and international trade has its advantages and disadvantages.

 

Read the following statements and fill in the table which follow.

 

• Enhance your domestic competitiveness
• Hire multilingual staff to launch international trading
• Increase sales and profits
• Gain your global market share
• Modify your product or packaging to enhance competitiveness
• Reduce dependence on existing markets
• Incur added administrative costs
• Exploit international trade technology
• Develop new promotional material to meet cultural requirements
• Extend sales potential of existing products
• Stabilize seasonal market fluctuations
• You may need to wait for long-term gains
• Dedicate personnel for travelling
• Enhance potential for expansion of your business
• Wait long for payments
• Sell excess production capacity
• Apply for additional financing
• Deal with special licenses and regulations
• Maintain cost competitiveness in your domestic market

 

Advantages of International trade	Disadvantages of International trade

 

 

Exercise 11. Fill in the gaps providing the translation of the words and expressions given in brackets.

 

International trade is the 1) e _____e (обмін) of goods and services across international 2) b _____ (кордони). In most countries, it represents a 3) s _____ (значний) share of GDP. While international trade has been present throughout much of history, its economic, social, and political importance have been on the rise in recent centuries, mainly because of industrialization, advanced transportation, globalization, multinational corporations, and outsourcing. In fact, it is probably the increasing 4) p _____ (переважання) of international trade that is usually meant by the term "globalization".

International trade is also a branch of economics, which together with International finance, forms the larger branch of International economics.