Task 7 Use the words given below to complete the sentences.
recovery, peak, trough, economic growth, GDP, business cycle, recession
1. Recurrent rises and falls in real GDP over a period of years is called the ___________.
2. A ________ is officially defined as two consecutive quarters of real GDP decline.
3. _________ is the increase of per capita GDP: it is measured by the annual percentage change in real GDP in a nation.
4. _________ of a country is defined as the total market value of all final goods and services produced within a country in a given period of time.
5. The phase of the business cycle during which real GDP reaches its maximum after rising during a recovery is called a ________.
6. A _______ is a phase of the business cycle during which real GDP reaches its minimum after falling during a recession.
7. An upturn in the business cycle during which real GDP rises is called a ________.
Task 7 Choose the right option to complete the statements.
1) The _______ phase of the business cycle follows a recession.
a. recovery
b. contraction
c. peak
d. trough
2) The upper turning point of a business cycle is a _________ .
a. boom
b. trough
c. peak
d. expansion
3) A recession is a business contraction lasting at least________ .
a. one years
b. six months
c. three months
d. one month
4) A serious, long-lasting recession is called a ________ .
a. boom
b. depression
c. growth
d. contraction
5) Technological advances, natural disasters, elections are _______ factors causing the business cycle.
a. internal
b. endogenous
c. exogenous
d. demographic
Task 8 Match up the words and definitions below.
| 1. Balanceofpayments | a. a decline in economic activity |
| 2. consumption | b. an increase in economic activity |
| 3. demand | c. beliefs about what will happen in the future |
| 4. downturn | d. purchasing and using goods and services |
| 5. expectations | e. the difference between the funds a country receives and those it pays for all international transactions |
| 6. grossdomesticproduct (GDP) | f. the total market value of all the goods and services produced in a country during a given period |
| 7. save | g. the willingness and ability of consumers to purchase goods and services |
| 8. supply | h. the willingness and ability of businesses to offer goods or services for sale |
| 9. upturn | i. to put money aside to spend in the future |
Task 9 Read the following text and choose a heading for each paragraph from the list below.
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Headings:
A. Countercyclical policies don't work until too late
B. Keynesianism returns
C. The Keynesian argument
D. The lesson of the 1930s
E. The monetarist argument
The 1930s great depression demonstrated that, at least in the short term, the market system does not automatically lead to full employment. John Maynard Keynes argued that market forces could produce a durable equilibrium with high unemployment, fewer goods being produced; fewer people employed, and reduced rates of income and investment. The classical economic theory stated that in the long run, excess savings would cause interest rates to fall and investment to increase again. Keynes famously riposted that in the long run, we are all dead.
Therefore he recommended governmental intervention in the economy, to counteract the business cycle. During an inflationary boom, governments could decrease their spending or increase taxation. During a recession, on the contrary, they could increase their expenditure, or decrease taxation, or increase the money supply and reduce interest rates, so as to boost the economy and increase output, investment, consumption and employment.
The monetarist economists, most notably Milton Friedman, in the 1950s and 1960s, began to argue that Keynesian fiscal policy had negative effects in the long term. They insisted that money is neutral, meaning that in the long run, increasing (or inflating) the money supply will only change the price level (lead to inflation) and have no effect on output and employment. All of them argued that governments should abandon the attempt to manage the level of demand in the economy. On the contrary, they should try to make sure that there is constant and noninflationary growth in the money supply
The monetarists and believers in free markets argue that since governments are not able to foresee a coming recession any more quickly than the companies that make up the economy, their fiscal measures usually only begin to take effect when the economy is already recovering, and simply make the next swing in the business cycle even much greater
By the beginning of the 21st century, the argument that free markets and competition are efficient, and should be allowed to operate with a minimum of governmental intervention, seemed to be dominant. But when the subprime crisis occurred in 2008, and financial institutions and large automobile companies began to go bankrupt, Keynesianism suddenly came back into fashion. Governments around the world poured huge amounts of money into the economy. The monetarists were outnumbered, but continued to argue that this would inevitably lead to massive inflation in the future.
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