Fif A Vocabulary

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Choose the correct word.

When something is in the, it

is an important story in the news.

When parents are unemployed it is difficult for a family to make ends

The of living in cities like London and

Tokyo is very high.

People prefer to shop in supermarkets because they find a wide of goods there.

The: i industry includes shops,

supermarkets and department stores.

' In statistics, when a number is it is multiplied by another number to show its importance.

The is the person or thing that is

responsible for doing somelliing bad.

It is difficult for old people to with

living on a small pension.

• In maths, a/an is a sum which

is equal on both sides.

The speed that something travels at is called

82 м.,„ j i G i. • d m I с f «■>••• m - • Unit 16

velocity / capacity.

Jadinq 1

Inflation

Inflation is an overall increase in prices over,i certain period of time. Its also i worry tor anybody who's trying to make ends meet, ami a headache tor many governments. The rate of inflation is often in the headlines. However, inflation isn't really news. In most of Кurope, for example, prices have risen year after year for at least the last 5" years. Deflation (overall deercasi in prices) does happen occasionally, but the trend is mostly for the cost of liv ing to increase.

There are lots of ways to measure inflation. (>ne of the most popular ways is the retail price ituic.x This is calculated by recording increases in priee for a range of gomls and serv ices. This is sometimes called a haxkci of goods. Some of the goods are weighted more heavily than others Kcause they are more important For example, food will be weigh let I more than the cost of a cinema ticket, because a 5'V> increase in food is more important than a 10% increase in the cost of seeing a film. Inflation is worked out from an average of all the price increases in the basket.

Inflation can happen lor a number ot reasons, hut economists say there are two main culprits. These are demuml-pull inflation and cost-push inflation. Demand-pull inflation can happen when tIn- economy is growing last. Aggregate demand begins to grow faster lhan suppliers can cope with. This causes,i shortage, and prices rise. At first, customers may he able to pay the higher prices, and demand grows again. This forces prices tip even more, and the cycle continues.

< >ne of the characteristics of demand-pull inflation is that there is often too much money going round the economy I bis is explained by the quantity theory of mone> This theory use's the following equation

money supply x velocity average price x transactions

Wlocity К the speed that money is passed on from one jx-rson to another. Some economists say that velocity and the numlvr of transactions don't really change. The only things that change in this equation are the money supply and average prices This means that when the money supply increases, prices will increase too. For this reason, printing money is rarely a solution for economic crises.

(lost-push inflation, on the other hand, occurs when prices rise without an increase in demand This happens when suppliers' variable costs increase sharply. For example, workers may demand higher wages or raw materials may become more expensive. Producers then pass these increases on to consumers hy raising prices. So, as usual, we arc tile ones who pay!

Now read the text again and match each paragraph with the correct heading.

PARAGRAPH 1..................

PARAGRAPH 2...................

PARAGRAPH 3...................

PARAGRAPH 4...................

PARAGRAPH....................

Measuring inflation. Too much cash

The effocts of aggregate demand on inflation Production cost changes Inflation is a fact o£ life

Before you listen

Discuss the following with your partner.

1people on a fixed income 2banks 3 businesses 4exporters

High inflation affects the whole economy in different ways. How do you think inflation affects the people and organisations listed below? Try to match the people and organisations 1 -4 with the effects A-D.

A lose money on loans

В can't get investment

С are not so competitive

D can't buy as much with their money

Before you read

Discuss these questions with your partner.

Look at the photo and answer these questions:

What are these people doing? -» Нот» do you think they feel? Why? -* Why do you suppose they are in this situation?

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