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Closer reading. Topical vocabulary 2. 1. Decide whether the following expressions mean expensive or cheap. Word Choice. Rich well-off wealthy affluent prosperous
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Closer reading
Now take a closer look at the texts to find the specific information and answer the questions below:
Text A
1. Could the euro be found in cash in the previous century? 2. Are the western states which are not in the Eurozone willing to change their local currencies? 3. In what economic situation does the euro look the most attractive currency? 4. Make a graph illustrating the euro’s dynamics against other currencies. How does it affect exports? 5. What is the criticism of the euro about? Is it well-grounded?
Text B
1. Is the dollar’s status as the main reserve currency safe? 2. What were the reasons of the dollar’s strength in the 90-ies? 3. Does the strong dollar of the 90-ies agree with the Big Mac Index? 4. Make a graph illustrating the dollar’s dynamics against other currencies. How does it affect exports? 5. Do the experts have any doubts about dollar’s resilience?
Topical vocabulary 2
1. Decide whether the following expressions mean expensive or cheap
1. It cost the earth.
2. It cost a bomb.
3. It was going for a song.
4. It cost peanuts.
5. It cost a fortune.
6. They were practically giving it away.
7. It cost an arm and a leg.
8. It was a real bargain.
9. It cost a packet.
Word Choice
Rich well-off wealthy affluent prosperous
In English they prefer less direct ways of speaking about people’s wealth That is why the word rich is often replaced by well-off, wealthy ( a slightly more formal word) e. g. My parents were pretty well-off. He came from a wealthy family. Affluent and prosperous are fairly formal words, often used to describe societies where the economy is successful and the standard of living is good. On the opposite, poor is substituted by disadvantaged, underprivileged or by the expressions to be hard up/be broke or to be skint (informal).
How do you understand the expressions given below? When do we say the following?
To be on a tight budget
To be cash-strapped
It was a rip-off
High- net-worth individuals
Word Partnerships 1
All the words below form strong partnerships with the words price and prices. Restore the words with missing vowels. Use collocations in the sentences of your own.
| VERB + price(s) | ADJECTIVE + price(s) | Price + NOUN |
| c _ t | f _ x _ d | c _ t |
| f _ x | c _ mp _ t _ t _ v _ | W _ r |
| Sl _ sh | r _ s _ n _ bl _ | r _ s _ |
| R _ d _ c _ | _ ttr _ ct _ v _ | r _ d _ c t _ _ n |
| R _ _ s _ | _ l _ s t _ c | s _ n s _ t _ v _ t _ |
| Q _ _ t _ | _ n b _ _ t _ b l _ | _ l _ s t _ c _ t y |
| Fr _ z _ | _ n d _ x | |
| _ q _ _ l _ z _ | h _ k _ |
READING I
Money supply and control
Monetarism
is a school of economic thought that maintains that the money supply (the total amount of money in an economy, in the form of coin, currency, and bank deposits) is the chief determinant on the demand side of short-run economic activity. American economist Milton Friedman is generally regarded as monetarism’s leading exponent. Friedman and other monetarists advocate a macroeconomic theory and policy that diverge significantly from those of the formerly dominant Keynesian school. The monetarist approach became influential during the 1970s and early ’80s.
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Underlying the monetarist theory is the equation of exchange, which is expressed as MV = PQ. Here M is the supply of money, and V is the velocity of turnover of money (i. e., the number of times per year that the average dollar in the money supply is spent for goods and services), while P is the average price level at which each of the goods and services is sold, and Q represents the quantity of goods and services produced.
The monetarists believe that the direction of causation is from left to right in the equation; that is, as the money supply increases with a constant and predictable V, one can expect an increase in either P or Q. An increase in Q means that P will remain relatively constant, while an increase in P will occur if there is no corresponding increase in the quantity of goods and services produced. In short, a change in the money supply directly affects and determines production, employment, and price levels. The effects of changes in the money supply, however, become manifest only after a significant period of time.
One monetarist policy conclusion is the rejection of fiscal policy in favour of a “monetary rule. ” In A Monetary History of the United States 1867–1960 (1963), Friedman, in collaboration with Anna J. Schwartz, presented a thorough analysis of the U. S. money supply from the end of the Civil War to 1960. This detailed work influenced other economists to take monetarism seriously.
Friedman contended that the government should seek to promote economic stability, but only by controlling the rate of growth of the money supply. It could achieve this by following a simple rule that stipulates that the money supply be increased at a constant annual rate tied to the potential growth of gross domestic product (GDP) and expressed as a percentage (e. g., an increase from 3 to 5 percent).
Monetarism thus posited that the steady, moderate growth of the money supply could in many cases ensure a steady rate of economic growth with low inflation. Monetarism’s linking of economic growth with rates of increase of the money supply was proved incorrect, however, by changes in the U. S. economy during the 1980s. First, new and hybrid types of bank deposits obscured the kinds of savings that had traditionally been used by economists to calculate the money supply. Second, a decline in the rate of inflation caused people to spend less, which thereby decreased velocity (V). These changes diminished the ability to predict the effects of money growth on growth of nominal GDP.
Central banks control the narrowest measure of the money supply, called the monetary base—typically, currency plus the reserves that commercial banks hold with the central bank. But the relationships between the monetary base, broader monetary aggregates and nominal income is highly unstable.
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Central banks have mostly given up trying to target inflation via the money supply. Instead, they study the “output gap” between total demand and the economy’s potential to supply goods and services, determined by such things as the labour force and capital stock, as well as inflation expectations. When demand exceeds supply, inflation rises. When it falls short, inflation falls, and in the extreme becomes deflation. To influence demand, the central banks move a short-term interest rate up or down by adjusting the supply of bank reserves.
1 Answer the questions below providing examples where needed:
What are the dominant nouns used by the author? What is the significance of money supply? How is the equation of exchange relevant to the monetarism theory? What other school held a dominant position in macroeconomics?
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