4. Higher costs

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.

Vocabulary notes

impact	удар, влияние, воздействие
make more onerous	сделать более затруднительным
to avoid holding an asset	чтобы избавиться от наличности
businesses may be hit by	фирмы могут пострадать от...
wages unadjusted for inflation	заработная плата без учета уровня инфляции
a higher tax bracket	следующая группа, категория
fiscal drag	финансовый тормоз экономического роста с помощью налоговых изъятий
they no longer qualify for	они больше не подпадают под…
to supplement their incomes	что является дополнением к их доходу
less disposable income	меньшие средства
index-linked	индексированный
a reduction in spending (syn. buying, purchasing) power	снижение покупательной способности
declining demand	падение спроса
tend to discourage investment	не способствуют инвестированию
may also be dissuaded from	могут также отказаться от...
a bout (syn. period, spell) of inflation	период инфляции
less competitive in terms of price	менее конкурентоспособный в смысле цены

2. Answer the questions to the text.

1. What is the impact of inflation on business (in brief): accounting and financial problems; falling sales; high interest rates?

2. How can businesses influence the economic environment?

3. Do you believe in the advice to borrow heavily in a period of inflation? Give your reasons.

3. Suggest the Russian equivalents for the following word-combinations and make up sentences with them.

Difficulty in valuing assets and stocks; to avoid holding an asset; wages unadjusted for inflation; increased in line with inflation; this may well take a worker into a higher tax bracket; fiscal drag; poverty trap; wages are not index-linked; spending power; the cost of borrowing funds; the wage-price spiral; in terms of price.

4. Find in the text English equivalents for the following.

Делать что-либо затруднительным; периоды инфляции; назвать причину чего-либо; превратить в наличные; распространяться на кого-либо (о государственных льготах); доход, остающийся после уплаты налогов; товары первой необходимости; компенсировать кому-либо что-либо.

5. Replace the parts in italics by synonyms.

Broad reasons; to identify the reason for this; businesses may be hit by a reduction in sales; wages unadjusted for inflation; in line with; to supplement incomes; will increase withdrawals depressing firms' sales; may be dissuaded from undertaking.

6. Translate into English using all the active possible.

Концепция инфляции спроса предполагает, что если экономика стремится к высокому уровню производства и занятости, то умеренная инфляция необходима. Однако сторонники концепции инфляции издержек утверждают, что умеренная инфляция, которая может сначала сопутствовать оживлению экономики, потом, нарастая как снежный ком, превратится в более жестокую гиперинфляцию (чрезвычайно быстрые темпы роста инфляции, которая оказывает разрушительное действие на объем национального производства и занятость).

7. Discuss with your partner the ways to overcome financial difficulties in the company.

8. Read the example of an invitation to tender and answer the following questions.

PUBLISHED NOTICE OPEN INVITATION TO TENDER No. 241/01 The supply of 120 sets of office furniture

1. Awarding authority:

Tilborough Municipal Council, 36 High St., Tilborough TN1 4H.I.

2. Award procedure:

Public invitation to tender with discretionary award of contract.

3. Description of the contract:

A. Purpose of the contact:

The supply of 120 sets of office furniture for the new local government offices in the Bristol Road, Tilborough.

B. Division into lots:

Lot 1: desks and pedestal drawer units

Lot 2: cupboards and shelving units

The two lots may both be awarded to one bidder or may be separately awarded to 2 bidders.

C. Terms of payment:

Payment will be made following acceptance of the furniture.

4. Place and period of performance:

A. Place at which the contract is to be performed:

Tilborough Local Government Offices, 132 Bristol Road, Tilborough TN1 9FG.

B. Duration of contract or time limit for completion/delivery of work/goods:

The furniture is to be delivered between October and December 2001.

5. Receipt of bids:

The final date for the receipt of bids is 15th. March 2001, 12 noon. 2 copies must be submitted in addition to the original, which is to be marked as such. Bids to be sent to the address in point 1.

6. Period during which the bidder is bound by his bid:

One year following the final date for receipt of bids in pant 5.

7. Criteria for the award of contract:

The contract shall be awarded to the bidder whose bid is to be preferred with regard to the bidder’s ability to meet the awarding authority’s needs and requirements, to be measured primarily by the technical quality of the bid, the bidder’s experience with projects of a similar nature and economic advantage.

8. Other information:

As part of its evaluation of the bids, the awarding authority may request bidders to supply, free of all costs and charges to the awarding authority, sampling of their furniture. It is anticipated that sampling will take place at the beginning of April 2001.

1. What organisation is asking for tenders? 2. What exactly is this organisation asking for? 3. What are the terms of payment? 4. What is the delivery time? 5. What address are the goods to be delivered to? 6. When is the final date for receiving tenders? 7. Using your own words, describe the factors which the organisation will consider when deciding which tender is the best.

UNIT 8