0 D Vocabulary

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

disrupt go on strike

gross national product knock-on effect

miner sharply stagflation • unrest

The total value of a country's goods and services consumed in one year is called the If something done affects something else, which then again affects something else, we call this a

If people are not happy with their government, there may be political

Being a

and digging underground

Economic shocks

to bring out minerals, must be very dangerous. Some people as a way of showing their unhappmoss with work conditions or pay.

Governments try their K-st to control economic growth, but there are some things that nolxjdy can control For example war, political unrest

If we have

there is a sharp drop

ill another country or simply a change in the

in production of some goods causing their price to rise.

A fallen tree can the electricity supply to thousands of homes. Prices have risen but unfortunately wages haven't.

weather ean all affect an economy in unexpected ways. Sometimes the effect of these events will cause a sudden sliiit in aggregate demand or aggregate supply. This is an economic к}пн'к.

The causes oi demnnd-Hidi s/юе/г.ч may be events in the local economy [domestic <h tnutul) or events abroad uwtennd demundV An example of

A-95

A-92

A-76

HEI

НЕТ

domestic demand was when house prices in the I K dropped suddenly in the late l'<SOs Because a home is one of the largest assets most people have, homeowners suddenly felt that they were not as wealthy as they had been. As a result, people started to spend less. This had a knock-

Д T НЕТ on effect on the resi of the economy. Aggregate demand tell sharply and the gross national

product tell with it.

Ma in ( I ' l l I» I . n г и tJml 79

Kxternal demand-side slux'ks happen when a country relies heavily on exports or on foreign investment. The (ireat Depression in the W.Vts is a classic example of this. At the time of the (ireat Depression, many countries exported their goods to the I'SA. and many other countries relied on American money for investments lo help their industries grow. When the American economy collapsed, if had disastrous effects for other economies, too.

Supply-side shocks occur when the supply of goods is disrupted. If the commodity is an important raw material for many industries, then the supply from these industries will drop dramatically. When raw materials are in short supply, they become more expensive. This will cause an increase in manufacturers' variable costs Manufacturers will then have to increase their prices

Imagine, for example, that miners in the iron industry went on strike. The supply of iron and steel to manufacturers would be disrupted. This would mean a drop in supply of all sorts of goods, from teaspoons to aeroplanes. As you can see from figure 2 below, the sudden drop in supply will cause a shift in the supply curve. As a result, prices rise even though aggregate demand stays the same. This unfortunate situation is called stagflation

Now read the text again and choose the best way to finish each sentence.

An economic shock causes ...

prices to rise, a demand or supply shift, demand to fall.

Demand-side shocks of a domestic nature ...

are caused by events in another country, are only caused because of a fall in property prices, are caused by events at home.

The Great Depression is an example of...

an external demand-side shock, an external supply-side shock, a domestic demand-side shock.

Supply-side shocks can cause ...

a fall invariable costs, an increase in variable costs, a fall in fixed costs.

Stagflation is when ...

prices fall but output rises, prices rise and output rises, prices rise and output falls.

A positive supply-side shock is when ...

prices fall but output rises, prices rise and output rises, prices rise and output falls.

Before you listen

Prk*i

Figure 7: Aggr egate Supply Shock

Before the sb<K к

Discuss the following with your partner.

An embargo happens when a country stops trading with another. In 1973, there was an embargo on oil. What effects do you think this had on the world's economies?

Ris* in pnevs

В F Listening H)))

Aggregate Demand

Fall in ou -uut <

Real National Output

The good news, however, is that sometimes positive supply-side shocks happen. These occur when there is a sudden increase in supply while demand stays the same This can happen when new technology makes the production of materials or products much easier or more efficient. T h e result - prices fall and output grows.

80 Чип а * Gu'tfe lo Econeiric* Uf Ь

Now listen and complete the notes.

1 After industrial nations enjoyed

economic growth.

2 They used huge amounts of 3 A lot of oil came from countries in the

4 The embargo began on the 1973. 5 Prices of oil rose to times higher

than before.

6 The New York Stock Exchange lost

dollars in a few weeks. 2 The embargo ended in

G Speaking H Writing

Discuss the following with your partner. Write an essay describing how interest rates

are set in the money market. First read through

Look at figure i on page 78 and figure 2 on page 80 again.Take turns explaining to your partner what the diagrams show.

W o r k in groups of three or four. Discuss the effects that these events might have on the economy in your country. Use phrases to describe economic shocks as seen in text 2. Use the space below to make your notes.

coal miners go on strike

large amounts of oil and gas are discovered

in Australia the government provides a free Internet service to anyone who wants it the interest rate doubles in just a few weeks

text 1 again and make notes.Then use the plan to help you organise your essay.

Essay

INTRODUCTION

What are interest rates and w'ny art? they important for the economy?

PARAGRAPH 1

What does the money supply consist of? What is demand and supply m the money market?

PARAGRAPH 2

How is the interest rate set by the money market?

PARAGRAPH 3

How does the government try to influence the interest rate?

CONCLUSION

Sum up in a couple of sentences what you have said in paragraphs one to three.

W r i t e 200-250 words

Pronunciation guide

Equilibrium i:kvu ibnam

Asset a-set

H o m e o w n e r ii.% ,n> n Disastrous <J

Stagflation sta-<1 lie1111 Embargo miKopi.

MiimiUm Guidt to Kteieititt Unit IS 81

Unit

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Before you read

Discuss these questions with your partner.

Inflation is the rising cost in prices over time.

-» Does your country suffer from inflation? -> Why do you think this is?

fif A Vocabulary

Choose the correct word.

When something is in the is an important story in the news.

, it

Sf

jadinq 1

When parents are unemployed it is difficult for a family to make ends The of living m cities like London and