Economic stability. Comprehension check

UNIT 7

Comprehension check.

ECONOMIC FLUCTUATIONS IN THE U.S. ECONOMY

SUPPLEMENTARY READING

The United States economy was booming in 1987, continuing the long expansion that began in 1982. But there were also signs that inflation was beginning to heat up. To counteract inflationary pressures, the Fed* began in early 1987 to tighten monetary policy. The Fed began to tighten more in 1988, and by the end of 1989 the short-term interest rate had risen from under 6 percent to about 10 percent. This tightening of policy led to high interest rates on business and consumer loans. Business investment and purchases of automobiles and other durable goods declined. As a result of the drop in demand, the economy began to slow down in 1989.

As inflationary pressures eased, the Fed lowered interest rates. But monetary policy works with a lag, and slow economic growth continued into 1990 culminating in the recession that began in July 1990. The United States might have avoided a recession if there had not been a drop in consumer confidence and a rise in oil prices associated with Iraq’s invasion in Kuwait. But the growth slowdown would have occurred anyway because of these monetary policy developments.

* the Fed – the Federal Reserve System (the Central Bank of the USA)

1. Explain the Fed’s policy to counteract inflationary pressures in the 1980s.

2. What two events influenced the recession in the early 1990s?

Grammar: Modal Verbs: expressing degrees of certainty

Assignment 1. Read and learn the following words and word combinations.

to smooth (out/away/down) – вирівнювати; заспокоювати; згладжувати;

to stabilize – стабілізувати; stability – стабільність; stable – стабільний;

fiscal policy – фіскальна політика;

monetary policy – монетарна політика; tight ~ – жорстка монетарна політика;

tax – податок;

to raise taxes – збирати податки;

government spending – урядові витрати;

social and defense programs – соціальні та оборонні програми;

revenue – надходження, доход;

to balance – збалансовувати, врівноважувати;

budget – бюджет;

to provide – забезпечувати;

means – заходи; спосіб;

to time – встановлювати/визначати час; розраховувати (в часі);

to apply – застосовувати;

independent institution – незалежний заклад/орган;

goal – мета;

to encourage – заохочувати, сприяти;

to restrict – обмежувати;

interest rate – відсоткова ставка;

to discourage (from) – не заохочувати, не сприяти;

to borrow – позичати;

to slow (down) – сповільнювати;

to lower – знижувати;

intervention – втручання; інтервенція;

consequence – наслідок, результат;

Assignment 2. Read and translate the following text.

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