Read the text again and decide if the statements are true (T) or false (F). Give your arguments.

1.    Inflation is the phenomenon of sinking prices which is to be closely watched by the OECD.

2.    Hyperinflation means price increase by 50% for three consecutive months.

3.    Stagnation involves soaring inflation and sluggish growth.

4.    If inflation rate surpasses families' wages, their living standard is plunging.

5.    Leaping inflation is harmful to any economy because households and businesses start hoarding cash.

5. Read and translate the text. Answer the following questions:

1. What is inflation? What are the main reasons for inflation growth? How does rising inflation affect the markets(its negative and positive effects on economy? (if necessary, consult information sources)

2. Why is low inflation rate such a grave problem for consumers, central banks and policymakers?

3. Why is the inflation landscape not the same across all world economies?

4. Comment on the following statement: “ governments could cut taxes to zero, boost spending, print money to finance the resulting deficits and never see an inflationary downside.”

Inflation is Losing its Meaning as an Economic Indicator

Economic policy must adapt

 

Inflation used to be the curse of the world economy for quite a long while. Today most economies no longer struggle with runaway prices; instead they find inflation to be too low. A decade of interest rates at near-bottom level has not changed that. Nor has the printing of money by central banks in America, euro zone, Britain and Japan. Nor have the lowest in decades unemployment rates.

This shift in the inflation landscape reflects the ups and downs of economic policy. The advent of inflation-targeting central banks since the 1990s has gradually immunised economies, but policymakers seem to be unable to stop inflation falling short of their targets. Anchored inflation expectations, technological change and the flow of capital across borders have made inflation a less meaningful economic indicator. Banks are finding inflation targets hard to hit. Moreover, constraints on monetary policy mean that the risk of inflation shortfalls is larger than that of excessive price rises. New ways to adapt economic policy to this new world have to be found.

The rich world conquered price surge by the late 1990s as governments made central banks independent and gave them inflation targets. When oil prices crashed in 2014, inflation over 2% was a rare case. In emerging markets it is higher, but the direction of change is the same. For two decades now economists have been talking of an era of “ global disinflation ”.

Low inflation defies the classical inverse relationship between inflation and unemployment. In most developed countries a record proportion of population has jobs. According to economic models a “jobs boom” should have brought a pricerise, but it has not.

Inflation below target is by far a better problem than runaway prices, but it poses problems. Central banks that miss their inflation targets lose credibility. Low inflation causes lenders to profit and borrowers to suffer, as debts do not shrink as fast as they were expected to when loans were agreed.

Why is that? Some argue that governments have lost the ability to boost prices, which is not true. If it were, they could cut taxes to zero, boost spending, print money to finance the resulting deficits and never see an inflationary downside. Governments can always debase their currencies, as high inflation in Argentina and Turkey shows.

In fact, inflation has become harder to regulate as economies have changed in ways that are not yet understood. Monetary policy must adapt to rely less on classical models and take a longer-term view. And while central banks are challenged by low rates, fighting low inflation falls increasingly to fiscal policy. The case for reform rests first on an understanding of where economic models have gone wrong.

 

https://www.economist.com/special-report/2019/10/10/inflation-is-losing-its-meaning-as-an-economic-indicator

 

 

inflation growth	рост уровня инфляции
rising inflation	растущая инфляция
to regulate inflation	контролировать/ регулировать уровень инфляцию
inflation targets   to hit inflation targets     to miss inflation targets (Syn.) to fall short of inflation targets	целевые показатели уровня инфляции   достичь/ добиться контрольных показателей инфляции   не достичь контрольных показателей инфляции
inflation below target	уровень инфляции ниже запланированного
inflation-targeting central banks	центральные банки, регулирующие инфляцию
an inflationary downside	инфляционный спад
the risk of inflation shortfalls	риск падения уровня инфляции
inflation landscape   a shift in the inflation landscape	инфляционная ситуация   изменение уровня инфляции
global disinflation	мировая/ глобальная дефляция
inflation expectations   anchored inflation expectations	инфляционные ожидания   устойчивые инфляционные ожидания
to debase a currency	обесценивать валюту
runaway prices	стремительно растущие цены

 

Section 4 Unemployment

 

 

1. Notable Quotable. Comment on the following:

If one works to live, one has something worth working for. If one lives to work, hopefully one does not get fired. Siam Luu