Vocabulary notes

a persistent rise – постійне зростання

with no corresponding rise in output – не супроводжується підйомом виробництва

briefly – коротко, стисло

potential benefits – потенційні вигоди

varies considerably in its extent and severity – буває різною по тривалості і гостроті

hence – отже

mild inflation – помірна, низька інфляция

may pose few difficulties - особливих проблем не являє

entails enormously high rates of inflation – означає (веде до) величезне зростання інфляції

insurmountable – незліченні, колосальні

at length – і зараз

to pull – тягнути

demand-pull inflation – інфляція, викликана перевищенням попиту над пропозицією, інфляція попиту

to push – штовхати

cost-push inflation –інфляція, викликана зростанням витрат виробництва, інфляція витрат

to occur – відбуватися

to outstrip – обганяти, випереджати, перевершувати

to stretch – розтягувати, напружувати

little available labour – мало робочої сили

there is little scope – є мало можливостей

owing to trade union militancy – завдяки войовничості профспілок

in order to improve their profit margins – з метою підвищення свого прибутку

Assignments

I. Suggest the Ukrainian equivalents

inflation varies considerably in its extent and severity; mild inflation of a few%; rate of inflation; insurmountable problems: demand-pull (cost-push) inflation; the economy is already stretched

II. Replace the parts in italics by synonyms

a persistent rise; hence; may pose few difficulties; which entails enormously high rates; at length; inflation occurs when; little scope to increase its level of activity; firms face increasing costs; owing to trade union militancy

III. Fill in the gaps with the words and expressions from the text

1. Inflation varies considerably in its __ and __.

2. Mild inflation may __ few difficulties for business.

3. Businesses would have experienced great difficulty in __ and __ their production while __ for people to save would have been removed.

4. Demand-pull inflation occurs when __ for a nation's goods and services __ that nation's ability to __ these goods and services.

5. An alternative way that we can look at this type of inflation is to say tliat it occurs when injections __ withdrawals.

6. An increase in costs for firms, for example, can be caused by an increase in wages __ trade union militancy.

IV. Find in the text English equivalents/or the following

підвищення (падіння) попиту (купівельної спроможності); гіперінфляція; запити випереджають можливості економіки; запропонувати товари і послуги; войовничість профспілок; рівень прибутку

V. Translate into English using all the active possible

1. Слід відрізняти інфляцію попиту від інфляції, зумовленої зростанням витрат.

2.Суть інфляції попиту інколи пояснюють однією фразою: "Надто багато грошей полює за надто малою кількістю товарів".

3.Теорія інфляції, зумовленої зростанням витрат, пояснює зростання цін такими чинниками, які призводять до збільшення витрат на одиницю продукції.

UNIT 8

THE IMPACT OF INFLATION ON BUSINESS (ВПЛИВ ІНФЛЯЦІЇ НА БІЗНЕС)

Inflation can adversely affect business in a number of ways:

1. Accounting and financial problems. Труднощі бухгалтерського обліку та фінансування

Significant rates of inflation can cause accounting and financial problems for businesses. They may experience difficulty in valuing assets and stocks, for example. Such problems can waste valuable management time and make forecasting, comparisons and financial control more onerous.

2. Falling sales. Зниження обсягу продажу

Many businesses may experience falling sales during inflationary periods for two broad reasons. Firstly, it may be that saving rises in a time of inflation. We would expect people to spend more of their money when prices are rising to avoid holding an asset (cash), which is falling in value. However, during the mid-1970s, when industrialized nations were experiencing high inflation rates, savings as a proportion of income rose! It is not easy to identify the reason for this, but some economists suggest that people like to hold a relatively high proportion of their assets in a form which can be quickly converted into cash when the future is uncertain. Whatever the reason, if people save more they spend less and businesses suffer falling sales. The economic model predicts that if savings rose the level of activity in the economy would fall. Clearly, if this happened we would expect businesses to experience difficulty in maintaining their levels of sales.

I Businesses may be hit by a reduction in sales during a time of inflation for a second reason. As inflation progresses, it is likely that workers' money wages (that is, wages unadjusted/or inflation) will be increased broadly in line with inflation. This may well take a worker into a higher tax bracket and result in a higher percentage of his or her wages being taken as tax. This process, known as fiscal drag, will cause workers to have less money available to spend on firms' goods and services. The poverty trap has a similar impact. As money wages rise, the poor may find that they no longer qualify for state benefits to supplement their incomes and at the same time they begin to pay income tax on their earnings. Again, this leaves less disposable income to spend on the output of firms. Finally, it may be that the wages of many groups are not index-linked and so they rise less quickly than the rate of inflation, causing a reduction in spending power and demand for goods and services.

Once again, the economic model can be used to predict that increases in the level of taxation will increase withdrawals, lowering the level of economic activity and depressing firms' sales

Not all businesses will suffer equally from declining demand in an inflationary period. Those selling essential items, such as food, may be little affected whilst others supplying less essential goods and services, such as foreign holidays, may be hard hit.

3. High interest rates. Високі процентні ставки

Inflation is often accompanied by high interest rates. High interest rates tend to discourage investment by businesses as they increase the cost of borrowing funds. Thus, investment may fall. Businesses may also be dissuaded from undertaking investment programmes because of a lack of confidence in the future stability and prosperity of the economy. This fall in investment may be worsened by foreign investment being reduced as they also lose some confidence in the economy's future.

Such a decline in the level of investment can lead to businesses having to retain obsolete, inefficient and expensive means of production and cause a loss of international competitiveness. Finally, a fall in investment can lower the level of economic activity, causing lower sales, output and so on. Thus, to some extent, businesses can influence the economic environment in which they operate.

4. Higher costs. Зростання витрат виробництва

During a bout of inflation firms will face higher costs for the resources they need to carry on their business. They will have to pay higher wages to their employees to compensate them for rising prices. Supplies of raw materials and fuel will become more expensive as will rents and rates. The inevitable reaction to this is that the firm has to raise its own prices. This will lead to further demands for higher wages as is called the wage-price spiral. Such cost-push inflation may make the goods and services produced by that enterprise internationally less competitive in terms of price. An economy whose relative or comparative rate of inflation is high may find that it is unable to compete in home or foreign markets because its products are expensive. The economic model tells us that a situation of declining exports and increasing imports will lower the level of activity in the economy with all the consequent side-effects.