XIII. Speak on the topic “Marketing”. Use your own studies, ideas and conclusions on the subject.

UNIT 8

INFLATION

I. Study the list of topical vocabulary to avoid the difficulties in understanding the text of this unit. Consult a dictionary to pronounce the words correctly.

Affect _v – воздействовать, влиять

bank interest – банковский процент

buying power – покупательная способность

Consumer Price Index (CPI) – индекс цен на потребительские товары

cost of living – прожиточный минимум

cost-push inflation – инфляция, вызванная ростом издержек производства

demand-pull inflation – инфляция, вызванная превышением спроса над предложением

hurt _v – вредить

inflationary gap – инфляционный разрыв (превышение совокупного спроса над совокупным предложением)

keep up with smth/smb = keep pace with smth/smb – не отставать от ч-л/к-л

labor costs – затраты на рабочую силу

savings account – сберегательный счет

scalp _v – наживаться путем мелкой спекуляции (AmE)

sellers' inflation – инфляция, вызванная целенаправленной рыночной стратегией продавцов товаров и услуг

 

II. Read the international words. Say what Russian words help to guess their meaning. Make up sentences using these words.

 

Inflation, popular, index, medicine, percent, ruble, person, stadium, automobile, produce, productive, argue, leader, spiral, reason, pension, fixed, public, business, bank, scale, promotion.

III. The words below can function as different parts of speech (zero affixation). Find their meanings, consult a dictionary if necessary.

 

Measure, cost, change, show, call, cause, work, raise, balance, charge, income, benefit, rent, rise, rate.

IV. Read and translate the sentences paying attention to the word scale used in different meanings.

 

scale n –

1) масштаб, степень; 2) уровень, положение; 3) шкала.

 

1. Pollution can cause changes to weather on a global scale.

2. The company begins production of soft drinks on a large industrial scale.

3. She gradually made her way up to the social scale.

4. The earthquakes were measured 7 on the Richter scale.

5. The President made significant changes to the company’s pay scale.

6. Your academic performance will be assessed on a scale of 2 to 5.

 

V. Look through the table with suffixes added to existing nouns and verbs to describe people, their jobs and professions. Do the exercise in the third column putting the suitable suffix to the words, translate them.

Suffix	example	exercise
-er	banker	work, buy, sell, produce, lead, own, rent, consume, manage
-or	operator	translate, act, direct, debt
-ist	chemist	journal, art, economy, paint, psychology, biology, therapy, dent, ego, type, capital
-ian	physician	music, politics, mathematics, statistics
-ee	interviewee	employ, retire
-ant -ent	participant student	consult, depend, serve, assist, account preside, respond

VI. Read and translate the text.

Inflation

Inflation is an economic event affecting everyone. Inflation is a continuing increase of prices, or the rate at which prices increase.

The most popular measure of inflation is the Consumer Price Index. The Consumer Price Index (CPI) measures how the cost of goods and services changes. The CPI measures changes in the cost of such things as food, clothing, housing, medicine and transportation. The change is stated as a percent. If the CPI shows 10% yearly increase, you will need 1100 rubles to buy what 1000 rubles bought a year before.

There are two basic kinds of inflation. One is called demand-pull, or buyers’ inflation. The other is called cost-push, or sellers’ inflation.

Demand-pull inflation occurs when demand goes up faster than supply. This causes an inflationary gap. The only way to fill the gap is to raise prices. The people who scalp, or sell illegally, for example, tickets at sporting events or pop concerts, know this very well. Millions of people would like to see the Super Bowl in person. But no stadium has that much seating. There is a huge demand with a limited supply of tickets. That is why $60 tickets are scalped for $500 or more. This is the way demand-pull inflation works.

Cost-push inflation is a different story. In this case, inflation comes from supply. The cost of making a product or providing a service goes up. If workers of an automobile plant get a raise, the price of cars goes up. The demand for cars does not cause the price increase. The demand stays more or less the same. However, the labor costs at an automobile plant have gone up, so the price of cars has to go up. This is the way cost-push inflation works.

Every wage increase does not cause cost-push inflation. If a worker gets a 10% raise for being 10% more productive, there is no inflation. But if the worker gets a 10% raise for doing the same thing, there is inflation. Assume that a worker who produces 100 units an hour gets a 10% raise. If the worker now produces 110 units an hour, there is no inflation. The raise is balanced by increased production. If production stays at 100 units an hour, there is cost-push inflation.

Labor leaders often argue that workers need more pay to keep up with the cost of living. However, each round of increased wages means another round of increased prices. This is called a wage-price spiral. Prices go up. Then wages go up. So prices go up again, and so forth. That is one reason why inflation occurs almost every year.

Inflation does not hurt everyone equally. Inflation hurts retired people living on pensions because they have fixed incomes. Their income does not rise with inflation. Employees of public companies are hurt because their salaries do not keep up with inflation. People who keep their money in savings accounts at a bank are hurt. Their balances increase, but the buying power of the money decreases. What good is to earn 5.5% interest from a bank if the inflation rate is 15%? The only thing to do is to put your money where it will earn interest at least equal to the rate of inflation.

Banks are in the business of lending money. Banks charge interest for this service. The rate of this interest must be higher than the rate of inflation. Otherwise, the bank will lose money. Suppose the inflation rate is 12.5% and the bank charges 17.5% interest. In this case, the bank makes a 5% profit on the loans.

Today, banks often use adjustable interest rates. When inflation goes up, the banks’ interest rate also goes up. This protects the banks against inflation.

Inflation raises the value of land and housing. Owners benefit when their property values increase faster than the overall rate of inflation. Renters are not so lucky. They do not own what is increasing in value. In general, low-income people, who often rent, are hurt more by inflation than high-income people, who often own property.

People who owe money are sometimes helped by inflation. Suppose you borrow 1000000 rubles at 10% interest, and inflation shoots up to 15%. Inflation makes the ruble you are paying back worth less than the ruble you borrowed. In this case, the 5% loss for the bank is your 5% gain.

Some young workers and employees can also benefit from inflation. They are just beginning to climb up the wage or salary scale. They are more likely to get promotions or change jobs than older employees. As a result, their salaries are more likely to keep pace with rising inflation. Compared to some older employees, young employees are getting richer. They are moving up while others are standing still. Inflation is not always bad for everyone. It hurts everyone in some way, but it can help certain people.