Task 2 Answer the following questions.
1. How well is the global economy doing now?
2. How well is the economy doing in your country?
3. When was the last significant change to the world economy? What was the most probable cause?
4. When do you expect the economic situation to change again, and why?
5. What are the main causes of the alternate periods of growth and contraction of the business cycle?
Task 3 Read the quotations and speculate on their meaning.
1. “I like to tell people that all of our products and business will go through three phases. There's vision, patience, and execution.” (Steve Ballmer)
2. “A business has to be involving, it has to be fun, and it has to exercise your creative instincts.” (Richard Branson)
3. “Business is recognizing the role it can play in combatting climate change. Thank God, is all I can say, for there is a desperately urgent need for business to play that role. Your lobbying influence can be substantial, but together, united and in large enough numbers it could prove decisive in turning the tide.” (Prince Charles)
4. “I think the most important CEO task is defining the course that the business will take over the next five or so years. You have to have the ability to see what the business environment might be like a long way out, not just over the coming months. You need to be able to both set a broad direction, and also to take particular decisions along the way that make that broad direction unfold correctly.” (Chris Corrigan)
5. “You can't overestimate the need to plan and prepare. In most of the mistakes I have made, there has been this common theme of inadequate planning beforehand. You really can't over-prepare in business!” (Chris Corrigan)
6. “It doesn’t matter how many times you fail. It does not matter how many times you almost get it right. No one is going to know or care about your failures, and neither should you. All you have to do is learn from them and those around you because... All that matters in business is that you get it right once. Then everyone can tell you how lucky you are.” (Mark Cuban)
7. “In business as in life, sometimes bad things happen to good people, and sometimes good things happen to bad people. But over time, if you play long enough, everybody gets what he deserves… good and bad.” (Jeffrey Immelt)
8. “In general, an asset should be sold when it has greater value to a buyer. This happens when a buyer has a complimentary business or capability that would enable them to do more with that business. Many businesses we have exited were not failures, but had simply reached a point in their life cycle where they no longer provided a core capability or served as a platform for growth.” (Charles Koch)
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9. “My first six years in the business were hopeless. There are many times when you sit and you say, "Why am I doing this? I will never make it. It is just not going to happen. I should go out and get a real job, and try to survive." (George Lucas)
10. “In my experience, in the real-estate business past success stories are generally not applicable to new situations. We must continually reinvent ourselves, responding to changing times with innovative new business models.” (Akira Mori)
11. “Today the strategies of many companies in the real estate industry are premised on low interest rates, an assumption that has resulted in the rapid expansion of the real estate securitization business. This trend could be regarded as a risk factor, as it exposes the real estate sector to at least three potential problems: first, interest rate hikes; second, revisions to securitization business accounting standards; and third, overheating in the real estate market.” (Akira Mori)
12. “We are imperfect beings in a very imperfect world, and the one thing we can count on is that things will go wrong, and that each and every one of us will have problems.” (Bob Parsons)
READING
Task 4 You are going to read a text about business cycle . What is the message of the text?
The business cycle or trade cycle is a permanent feature of market economies: gross domestic product alternately grows and contracts. During an upturn, parts of the economy expand to the point where they are working at full capacity, so that production, employment, business investments, profits, prices, and interest rates all tend to rise. A long period of expansion is called a boom. But at some point there will inevitably be a downturn. The economy will hit a peak and start to contract again, the demand for goods and services will decline and the economy will begin to work at below its potential. Investment, output, employment, profits, commodity and share prices, and interest rates will generally fall. A downturn that lasts more than six months is called a recession, one that lasts for a year or two is generally called a depression or a slump. Eventually the economy will bottom out, and there will be a recovery or an upturn.
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The most probable cause of the business cycle is people's spending or consumption decisions, which in turn are based on expectations. A country's output, investment, unemployment, balance of payments and so on, all depend on millions of decisions by consumers and businesses on whether to spend, borrow or save. When economic times are good or when people feel confident about the future, they spend, and run up debts. At a certain point, spending has to slow down and debts have to be paid. If interest rates unexpectedly rise, a lot of people find themselves paying more than they anticipated on their mortgage or rent, and so have to consume less. Similarly, if people are worried about the possibility of losing their jobs in the near future they tend to start saving money and consuming less, which leads to a fall in demand and consequently a fall in production and employment. Investment is closely linked to consumption, and only takes place when demand is growing. As soon as demand stops growing, investment in new factories, machines, etc. falls, which contributes to the downturn. Butifsupply exceeds demand, prices should fall, and encourage people to start buying again. Eventually the economy will reach a trough or bottom out, and there will be a recovery or an upturn.
This is the internal (or endogenous) theory of the business cycle; there are also external (or exogenous) theories, which look for causes outside economic activity, such as scientific advances, natural disasters, elections or political shocks, demographic changes, and so on. The economist Joseph Schumpeter believed that the business cycle is caused by major technological inventions (e.g. the steam engine, railways, automobiles, electricity, microchips), which lead to periods of “creative destruction” during which radical innovations destroy established companies or industries.
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Comprehension
Task 5 Complete the following sentences with the information from the text.
1. A downturnbeginswhen…
2. People spend, and borrow money, when …
3. People tend to spend less when…
4. When interest rates rise…
5. Companies only invest while…
6. Creative destruction means that…
Task 6 Answer the questions on the text.
1. What phases of the business cycle can you name?
2. What is the business cycle?
3. What economic indicators are taken into consideration when estimating the phase of the business cycle?
4. What theories of the business cycle does the author review?
5. How do internal theories consider the business cycle?
6. What factors are considered important in external theories?
VOCABULARY
Collocations
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