Types of economic

IB

Discussion What is economic environment?

ECONOMIC ENVIRONMENT

UNIT3.

1. What is environment?

2. Does it differ from the economic environment?

3. What does economic environment include?

reading THE ECONOMIC ENVIRONMENT

The economy comprises millions of people and thousands of firms as well as the government and local authorities, all taking decisions about prices and wages, what to buy, sell, produce, export, import and many other matters. All these organizations and the decisions they take play a prominent part in shaping the business environment in which firms exist and operate.

The economy is complicated and difficult to control and predict, but it is certainly important to all businesses. You should be aware that there are times when businesses and individuals have plenty of funds to spend and there are times when they have to cut back on their spending This can have enormous implications for business as a whole.

When the economy is enjoying a boom, firms experience high sales and general prosperity. At such times, unemployment is low and many firms will be investing funds to enable them to produce more. They do this because consumers have plenty of money to spend and firms expect high sales. It naturally follows that the state of the economy is a major factor in the success of firms.

However, during periods when people have less to spend many firms face hard times as their sales fall. Thus, the economic environment alters as the economy moves into a recession. At that time, total spending declines as income falls and unemployment rises. Consumers will purchase

PART I. ECONOMICS

cheaper items and cut expenditure on luxury items such as televisions and cars.

Changes in the state of the economy affect all types of business, though the extent to which they are affected varies. In the recession of the early 1990s the high street banks suffered badly. Profits declined and, in some cases, losses were incurred. This was because fewer people borrowed money from banks, thus denying them the opportunity to earn interest on loans, and a rising proportion of those who did borrow defaulted on repay­ment. These so-called "bad debts" cut profit margins substantially. Various forecasters reckoned that the National Westminster Bank's losses in the case of Robert Maxwell's collapsing business empire amounted to over £100 million.

No individual firm has the ability to control this aspect of its environ­ment. Rather, it is the outcome of the actions of all the groups who make up society as well as being influenced by the actions of foreigners with whom the nation has dealings.

VOCABULARY to comprise - включати в себе, містити

NOTES local authorities - місцеві органи влади

to take (syn. to make) decisions -приймати рішення

to shape the environment - формувати навколишнє середовище to predict (syn. to forecast) -передбачати, віщувати to be aware - усвідомлювати, знати to cut back on spending = to cut expendi­ture - скоротити витрати enormous implications - велике значення/вплив general prosperity - загальне процвітання to alter - змінюватися

a recession - занепад

to decline - знижуватися

luxury items - предмети розкоші

to incur (syn. to bear, to suffer) losses -

зазнавати збитків

to deny the opportunity - позбавляти

можливості

to earn interest - одержувати

процентний дохід

to default on repayment - не виконати

зобов'язання з виплати (боргів,

процентів і т. п.)

profit margin - маржа прибутку

the outcome of the actions - результат дій

to have dealings - мати торговельні

(ділові) зв'язки

EXERCISES

Answer the following questions:

1. What does the economy comprise?

2. What's a boom in the economy? What characterizes the state of the economy at that time?

3. What happens when the economy moves into a recession?

4. What are "bad debts"?

5. What happened to some banks in the early 1990s and why?

II. Suggest Ukrainian equivalents:

the government and local authorities

firms experience high sales

their sales fall

total spending declines as income falls

luxury items

the high street banks

suffered badly

to earn interest on loans

so-called "bad debts"

UNIT 3. ECONOMIC ENVIRONMENT

з*

III. Replace the parts in italics by synonyms:

• the economy comprises millions of people;

• losses were incurred;

• the nation has dealings;

• changes in the state of the economy affect all types of business;

• profits declined;

• losses amounted to over £100 million.

IV Put the right word from the boxes in the sentences.

economy economic economics economist economical economically

1. Marx and Keynes are two famous____.

2. Those people are studying the science of_____.

3. We sometimes call a person's work his_____ activity.

4. People should be very____ with the money they earn.

5.__ The___ system of a country is usually called the national.

6. The people in that town live very_____.

produce product producer productive production productivity

1. The company___ a new____ every year.

2. The company's newest____ is a high-speed computer.

3. The___ of computers met last year to discuss prices.

4. That factory is not as___ now as 5 years ago.

5. The___ of that factory has gone down over the last 5 years.

6. The manager of the factory has decided that they must increase their______ of software.

V The Economy. Match what people are saying (1-13) about the economy with what the experts say (a-m).

1. Things seem to be getting a bit better at last - better than last year at any rate.	a) The service sector is getting bigger.
2. At least prices aren't going up as quickly as they used to.	b) The cost of living is high.
3. But things are still far too expensive.	c) Unemployment is high.
4. The problem nowadays is that no one can get a job.	d) People are worried about the future of the Welfare State.
5. The only new factories round here belong to foreigners.	e) There are signs that the recession is coming to an end and that economic recovery is on the way.
6. The government just won't put any money into business.	f) Public investment is weak.
7 And even if you do manage to get a job, it's not in a factory.	g) The public would accept higher taxation in return of improved public services.
8. It's more likely to be serving hamburgers in some fast food place.	h) The manufacturing base is getting smaller.
9. And either way, the union can't do anything for you.	i) The rate of inflation is going down.
10. No one's got the qualifications for the jobs you see advertised in the papers.	j) Inward investment is stable.
11. I reckon we've got less in the bank than we had a couple of years ago.	k) There is a serious skills shortage.
12. And now they say we're going to have to start paying to go into hospital.	1) Organized labour is weak.
13. I wouldn't mind a bit more taken off my pay if I thought it would mean a bit more for schools and hospitals.	m) Personal savings are low.

PART I. ECONOMICS

VI. Financial Headlines. Match the newspaper headlines with the descriptions.

HEADLINES	DESCRIPTIONS
1. SALES BOOM	a) Attractive price reductions
2. FOREIGN TADE CURB	b) Sudden, high price increases
3. ITALIAN LIRA CRASHES	c) A negative currency movement
4. MARKETING BUDGET AXED	d) Support for fiscal change
5. ВАТА FLOAT SHARES	e) Reduced expenditure
6. GOVERNMENT WOOS DEAL WITH U.S.	f) Financial assistance to one foreign country
7. VOLKSWAGEN DISCOUNT SCHEMES ENTICE	g) Consumers buying an unusually high volume of goods
8. SOFT LOANS AID GEORGIA	h) A company raising new money
9. CONSUMER PRICES SOAR IN ROMANIA	i) An entity keen to attract a foreign trade transaction
10. POLITICIANS BACK NEW TAXPLAN	j) Restrictions on overseas imports and exports

VII. The Language of Headlines. Verbs in the box are often used in newspapers to describe financial activities. Rearrange them into groups under the headings below.

curb	loom	woo	back
axe	slash	fold	collapse
rocket	assist	glide	slump
regulate	entice	chop	restrict
support	plunge	supervise	finance
plummet	court	take off	materialize
allure	become visible	limit	hover

AID

APPEAR

ATTRACT

SOAR

CONTROL

CRASH

CUT

VIII. Writing Practice. Write short information on current economic events in our country and abroad using the active vocabulary of the lesson.

UNIT 3. ECONOMIC ENVIRONMENT

UNIT 4.

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