Download The balance sheet shows a lot of useful financial information, but it

INCOME
The second of the three economic issues is the question of income, that is, income
distribution, the way in which income - that’s what people earn - is distributed or shared around.
A national income is not the money the government gets. The national income is the sum
total of the incomes of all the people living in that country, in other words, everyone's income
added together. In the same way one can think of world income as the total of all the incomes
earned by all the people in the world.
Concerning the distribution of national and world income, some questions are to be
asked: who, in the world, gets what share of these incomes. The distribution of income, either in
the world or in a country, tells us how income is divided between different groups or individuals.
Before people can consume anything, however, they must do two things. First they must
earn the income to buy the things they want. Then they must decide how the money will be
spent. There are two ways to earn income: from work and from the use of wealth.
Most of the income comes from work. In return for working, people receive a wage or a
salary. The term «wage» typically refers to the earnings of workers paid by the hour or unit of
production. «Salary» refers to earnings paid on a weekly or monthly basis. How much you earn
will depend on the kind of job, the abilities, the performance, and a number of other factors.
Wealth can be expressed as the value of the things you own. Adding the value of all your
possessions, bank accounts, savings, and the like will give you the total amount of your wealth.
Used in certain ways, wealth can earn income. If you owned a house, you might be able
to let others use it for a fee. In that instance economists would say that you used your wealth to
earn “rent”. Wealth, in the form of money that is loaned to others or deposited in a savings
account, will earn interest. As you can see, interest and rent are two forms of income that can be
earned by wealth.
Other types of income are dividends and capital gains that can be generated from the
wealth.
1) Mark these statements T (true) or F (false) according to the information in the text.
1.
2.
3.
4.
5.
There are two ways to earn income: from work and from the use of wealth.
Other types of income are wage and salary that can be generated from the wealth.
In that instance economists would say that you used your wealth to earn “wage”
Wealth can be expressed as the value of the things you own.
Interest and rent are two forms of income that can be earned by work.
2) Match heads and tails
1. A national income is not
2. The distribution of income, either
in the world or in a country,
3. In return for working,
4. How much you earn will depend on
5. If you owned a house,
3) Match these terms with their definitions
A. the kind of job, the abilities, the
performance, and a number of other
factors.
B. people receive a wage or a salary.
C. the money the government gets.
D. you might be able to let others use it
for a fee.
E. tells us how income is divided
between different groups or
individuals.
1. salary
A. the form of money that is loaned to
others
B. the price paid for the use of land
C. the earnings of workers paid by the
hour or unit of production
D. payment for the use of someone
else's money
E. the earnings paid on a weekly or
monthly basis
2. wage
3. interest
4. rent
5. wealth
4) Fill in the gaps
Most of the ___1___ comes from work. In return for working, people receive a wage or
a___2___. The term «__3___ » typically refers to the earnings of workers paid by the hour or
unit of production. «Salary» refers to ___4___paid on a weekly or monthly basis. How much you
__5___will depend on the kind of job, the abilities, the performance, and a number of other
factors.
A. Salary, B. earn, C. income, D. earnings, E. wage
INFLATION
Inflation is generally defined as a persistent rise in the general price level with no
corresponding rise in output, which leads to a corresponding fall in the purchasing power of
money.
Inflation varies considerably in its extent and severity. Hence, the consequences for the
business community differ according to circumstances. Mild inflation of a few per cent each year
may pose few difficulties for business.
However, hyperinflation, which entails enormously high rates of inflation, can create
almost insurmountable problems for the government, business, consumers and workers. In postwar Hungary, the cost of having was published each day and workers were paid daily so as to
avoid the value of their earnings falling.
Businesses would have experienced great difficulty in costing and pricing their
production while the incentive for people to save would have been removed.
Economists argue at length about the causes of, and «cures» for, inflation. They would,
however, recognize that two general types of inflation exist:
 Demand-pull inflation
- Cost-push inflation
Demand-pull inflation occurs when demand for a nation's goods and services outstrips that
nation's ability to supply these goods and services. This causes prices to rise generally as a means
of limiting demand to the available supply.
An alternative way that we can look at this type of inflation is to say that it occurs when
injections withdrawals and the economy is already stretched (i.e. little available labor or factory
space) and there is little scope to increase further its level of activity.
Alternatively, inflation can be of the cost-push variety. This takes place when firms face
increasing costs. This could be caused by an increase in wages, the rising costs of imported raw
materials and components or companies pushing up prices in order to improve their profit
margins.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. Inflation is generally defined as a persistent fall in the general price level with no
corresponding fall in output.
2. Inflation varies considerably in its extent and severity.
3. Businesses would never have experienced great difficulty in costing and pricing their
production while the incentive for people to save would have been removed.
4. Economists recognize that three general types of inflation exist.
5. Alternatively, inflation can be of the cost-push variety.
2) Match heads and tails
1. Mild inflation of a few per cent
A. services outstrips that nation's
each year may pose
ability to supply these goods and
services.
2. However, hyperinflation, which
B. few difficulties for business.
entails enormously high rates of
inflation,
3. Demand-pull inflation occurs when
C. of the cost-push variety.
demand for a nation's goods and
4. Alternatively, inflation can be
D. components or companies pushing
up prices in order to improve their
profit margins.
5. This could be caused by an increase
E. can create almost insurmountable
in wages, the rising costs of
problems for the government,
imported raw materials and
business, consumers and workers.
3) Match these terms with their definitions
1. inflation
2. cost
3. price
4. demand
5. profit
A. an amount that has to be paid or
spent to buy or obtain something
B. the desire of consumers, clients,
employers, etc. for a particular
commodity, service, or other item
C. a financial gain, especially the
difference between the amount
earned and the amount spent in
buying, operating, or producing
something
D. a general increase in prices and fall
in the purchasing value of money
E. the amount of money expected,
required, or given in payment for
something
4) Fill in the gaps
However, ___1____, which entails enormously ___2____of inflation, can create almost
insurmountable problems for the government, business, ____3___and workers. In post-war
Hungary, the ___4___of having was published each day and workers were paid daily so as to
avoid the _______of their earnings falling.
A. high rates, B. cost, C. consumers, D. value, E.hyperinflation
WHAT IS ECONOMICS?
Everyone goes through life having to make choices. Neither individuals nor societies can
have all the things they would like to have. There simply is not enough of everything. There is
no limit to the amount or kinds of things that people want. There is, however, a limit to the
resources, things used to produce goods and services, available to satisfy those wants.
Once that limit is reached, nothing else can be produced. In other words, when nation's
resources (all its workers, factories, farms, etc.) are fully employed, the only way it will be able
to increase the production of one thing will be by reducing the production of something else. To
summarize but: human wants are unlimited, the resources necessary to satisfy those wants are
limited. Thus, every society is faced with the identical problem, the problem of scarcity.
Economics deals with the problems of scarcity and choice that have faced societies and
nations throughout history, but the development of modern economics began in the 17 th century.
Since that time economists have developed methods for studying and explaining how
individuals, businesses and nations use their available economic resources. Large corporations
use economists to study the ways they do business and to suggest methods for making more
efficient use of their employees, equipment, factories, and other resources.
Economics deals with data on income, employment, expenditure, interest rates, prices and
individual activities of production, consumption, transportation, and trade. Economics deals
directly with only a tiny fraction of the whole spectrum of human behavior, and so the range of
problems considered by economists is relatively narrow.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. Economics deals with the problems of scarcity and choice.
2. Both individuals and societies can have all the things they would like.
3. The development of modern economics began in the 17th century.
4. If the limit is reached, everything can be produced.
5. Economics deals with data on income, employment, expenditure, interest rates etc.
2) Match heads and tails
1. Economics deals directly with
only a tiny fraction of the whole
spectrum of human behavior,
2. When nation's resources are
fully employed, the only way it
will be able
3. Large
corporations
use
economists to study the ways
they do business and
4. Since that time economists have
developed methods for studying
and
5. A limit to the resources, things
used to produce goods and
services,
A. to suggest methods for making more
efficient use of their employees,
equipment, factories, and other
resources.
B. explaining
how
individuals,
businesses and nations use their
available economic resources.
C. available to satisfy those wants.
D. and so the range of problems
considered by economists is relatively
narrow.
E. to increase the production of one thing
will be by reducing the production of
something else.
3) Match these terms with their definitions
1. scarcity
A. a stock or supply of money, materials,
staff, and other assets that can be drawn
on by a person or organization in order
to function effectively
2. resources
B. is the amount of interest that must be
paid. It is expressed as a percentage of
the amount that is borrowed or gained
as profit.
C. shortage, there is not enough of it for
the people who need it or want it
D. is the spending of money on something,
or the money that is spent on something
E. is the money that they earn or receive,
as opposed to the money that they have
to spend or pay out.
3. Income
4. interest rates
5. expenditure
4) Fill in the gaps
It is characteristic of any society that while wants of people are growing constantly, the
____1____resources required to satisfy these wants are limited and___2__. Economic __3__
may be classified as material resources (raw materials and capital) and labour resources (labour
force and ___4___). Scarcity of resources makes it necessary to ___5__ them.
A. scarce, B. resources, C. economic, D. save, E. entrepreneurship
BASIC ECONOMIC PROBLEMS
The central problem of economics is to determine the most efficient ways to allocate the
factors of production and solve the problem of scarcity created by society's unlimited wants and
limited resources. In doing so, every society must provide answers to the following three
questions:
What goods and services are to be produced, and in what quantities; how are they to be
produced; who will receive and consume them?
The resources that go into the creation of goods and services are called the factors of
production which include natural resources, human resources, capital and entrepreneurship. Each
factor of production has a place in economic system, and each has a particular function. People
who own or use a factor of production are expecting a «return or reward». This generates income
which, as it is spent, becomes a kind of fuel that drives the economy.
Natural resources or “land” include such things as minerals, wildlife and timber
resources. Economists also use the term «land» when they speak of natural resources as a factor
of production. The price paid for the use of land is called rent. Rent becomes income to the
owner of the land.
Economists call the physical and mental effort that people put into the creation of goods
and services labor. The price paid for the use of labor is called wages. Wages represent income
to workers, who own their labor.
To the economist, «capital» is something created by people to produce other goods and
services. A factory, tools and machines are capital resources because they can be used to produce
other goods and services. The term capital is often used by business people to refer to money
they can use to buy factories, machinery and other similar productive resources.
Closely associated with labor is the concept of entrepreneurship. The entrepreneur brings
together the other three factors of production. When they are successful, entrepreneurs earn
profits. When they are not successful, they suffer losses. The reward to entrepreneurs for the
risks, innovative ideas and efforts that they have put into the business, they obtain the money that
remains after the owners of land, labor and capital have received their payments.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. The factors of production include natural resources, human resources, capital and
entrepreneurship.
2. “Land” is something created by people to produce other goods and services.
3. The price paid for the use of money is called wages.
4. When the entrepreneurs are not successful, they suffer losses.
5. Each factor of production has a place in economic system, and each has a particular
function.
2) Match heads and tails
1. The resources that go into the
creation of goods and services
are called the factors of
production which include.
2. The reward to entrepreneurs for
the risks, innovative ideas and
efforts that they have put into
the business,
3. The term capital is often used by
business people to refer to
money that
4. The central problem of
economics is to determine the
most efficient ways to allocate
the factors of production and
5. Each factor of production has a
place in economic system,
A. they obtain the money that remains
after the owners of land, labor and
capital have received their payments.
B. and each has a particular function.
C. natural resources, human resources,
capital and entrepreneurship
D. can be used to buy factories, machinery
and other similar productive resources.
E. solve the problem of scarcity created by
society's unlimited wants and limited
resources
3) Match these terms with their definitions
1. natural resources
2. Capital
3. Labor
4. entrepreneurship
5. factors of production
A. are all resources that go into the
creation of goods and services.
B. is the forth factor of production that
helps in creating goods and services, is
the state of being an entrepreneur.
C. the physical and mental effort that
people put into the creation of goods
and services
D. is a large sum of money which you use
to start a business, or which you invest
in order to make more money.
E. are all the land, forests, energy sources
and minerals existing naturally in a
place that can be used by people.
4) Fill in the gaps
Economics is the study of how people choose to __1___ scare resources to __2___ their
unlimited wants. There are there basic issues what, how and for whom to ___3___. The
resources used for creation of goods and services are called ___4____ which include natural,
human resources, ___5___and entrepreneurship.
A. produce, B. the factors of production, C. satisfy, D. allocate, E.capital
ACCOUNTING
The accounting system in any given country is one of the key elements of the economic
system. It is determined to a significant extent by the level and direction of the economic
system's development.
The subject of accounting is the calculation of the financial results of an economic
entity's business activity. Accounting is used to describe the transactions entered into by all kinds
of organizations.
Accounting can be divided into three phases: capture, processing and communication of
financial information.
The first phase, the process of capturing financial information and recording it, is called
book-keeping. Accounting includes records analysis and interpretation; it shows the relationship
between the financial results and events which have created them.
Accounting is based on the accounting equation, which states that a firm's assets must
equal its liabilities plus its owners' equity. Assets and liabilities, profits or losses are listed in
financial statements. The two main types of financial statements are the balance sheet and the
income statement (profit and loss account). The balance sheet lists a firm's assets, liabilities and
owner's equity at a point of time.
Changes in the balance sheet are made according to the principle of double-entry
bookkeeping. This principle states that each transaction must be recorded on the balance sheet as
two separate entries so that the accounting equation will hold at all times, the totals of each side
will always equal one another, and that this will always be true no matter how many transactions
are entered into.
Balance sheets are drawn up periodically: monthly, quarterly, half-yearly, annually. The
double entry system divides each page into two halves. The left-hand side is called the debit side,
while the right-hand side is called the credit side.
The balance sheet shows a lot of useful financial information, but it does not show
everything. A firm's sales, costs, and profits for a given period are shown in an income
statement.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. The accounting system is independent from the level and direction of the economic
system's development.
2. The subject of accounting is the calculation of the financial results of a company’s
business activity.
3. Accounting equation states that a firm's assets must equal its liabilities plus its owners'
equity.
4. Balance sheets are drawn up only once a year.
5. The balance sheet shows all the financial information.
2) Match heads and tails
1. The accounting system is
A. the balance sheet and the income
2. Accounting is based on
3. Accounting shows
the relationship between
4. The two main types of financial
statements are
5. Accounting is used to describe
the transactions entered into
statement
B. the financial results and events which
have created them.
C. by all kinds of organizations.
D. one
of
the
key
of the economic system.
E. the accounting equation
elements
3) Match these terms with their definitions
1. loss
A. a written statement showing the
amount of money and property that a
company has and listing what has
been received and paid out
B. money that has been lost by a
business or an organization
C. an arrangement that smb has with a
bank: to keep money there, take some
out etc.
D. a thing of value, especially property,
that a person or company owns, which
can be used or sold to pay debts
E. the amount of money that you need in
order to buy, make or to do smth
2. assets
3. cost
4. account
5. balance sheet
4) Fill in the gaps
Balance sheets are drawn up periodically: monthly, quarterly, half-yearly, annually. The
double entry system divides each page into two halves. The left-hand side is called the __1__
side, while the right-hand side is called the __2___ side.
The balance sheet shows a lot of useful __3___ information, but it does not show
everything. A firm's sales, costs, and __4___ for a given period are shown in an ___5_ statement.
A. financial. B. debit, C. profits, D. income, E. credit
AUDITING
Auditing is a process in which an independent accountant-auditor examines a firm's
accounting records and financial statements and offers an opinion on their accuracy and
reliability.
The auditors do not monitor, they offer an opinion, and the audit process and audit
procedures are complicated and manifold. The auditor's opinion is gradually being built up from
a mass of detailed work to the final judgment through the planning and testing stages. The
auditor normally starts with a study of the business environment the audited company is working
in and performs a preliminary analytical review.
Then he should direct his attention to the financial statements, where the auditor's
attention is directed towards the correctness of various assumptions made by the management for
their preparation. For instance, the auditor needs to know if figures are complete and accurate
and reflect what they should reflect, if income and expenses are recorded in the proper periods
and if the legal position is reflected adequately.
Although the financial statements are the ultimate objectives of an audit, normally such
audits cannot be completed without a proper study and evaluation of the accounting system and
assessment of the internal accounting controls.
Defining the audit strategy the auditor has to decide whether to rely on internal controls
or to resort to substantive testing applying analytical review procedures, such as tests in totals,
comparison with budgets or even statistical analysis of figures.
The natural finalization of the audit process is the auditor's report, reflecting the auditor's
opinion on the financial statements. Unfortunately, audits do not always end up in an approval of
the financial statements. Any deviation from the unqualified opinion should be explained in the
auditor's report, including the uncertainty or the disagreement that caused the auditor to qualify
his opinion.
1) Mark these statements T (true) or F(false) according to the information in the text.
1. The audit process and audit procedures are rather simple and monotonous.
2. The auditor normally starts with a study of the business environment the audited
company is working in and performs a preliminary analytical review.
3. The auditor needs to know if figures are complete and accurate and reflect what they
should reflect.
4. Defining the audit strategy the auditor has to doubt internal controls.
5. Audits always end up in an approval of the financial statements.
2) Match heads and tails
1. Accountant-auditor offers an
opinion on the accuracy and
2. The auditor's opinion is
gradually being built up from
3. The auditor needs to know
if income and expenses are
4. The financial statements are
5. The auditor's report reflects the
1. opinion on the financial statements.
2. the ultimate objectives of an audit.
3. a mass of detailed work to the final
judgment.
4. reliability of financial statements and
accounting records.
5. recorded in the proper periods.
auditor's
3) Match these terms with their definitions
1. audit(ing)
2. auditor
3. auditor’s report
4. records
5. financial statement
A. an official document written by a group
of people who have examined a
particular situation or problem
B. a written account of smth that is kept so
that it can be looked at and used in the
future
C. accounting report
D. an official examination of business and
financial records to see that they are true
and correct
E. a person who officially examines the
business and financial records of a
company
4) Fill in the gaps
The auditors do not ___1____, they offer an opinion, and the audit process and audit
___2___are complicated and manifold. The auditor's opinion is gradually being built up from a
mass of detailed work to the final ___3___through the planning and testing stages. The auditor
normally starts with a study of the ___4___environment the audited company is working in and
performs a preliminary analytical __5___.
A. business , B. monitor, C. judgment, D. review, E. procedures
MONEY AND ITS FUNCTIONS
The main feature of money is its acceptance as the means of payment or medium of
exchange. Nevertheless, money has other functions.
Money, the medium of exchange, is used in one-half of almost all exchange. People buy
and sell goods in exchange for money. We accept money not to consume it directly but because
it can subsequently be used to buy things we wish to consume. Money is the medium through
which people exchange goods and services.
In barter economy there is no medium of exchange. Goods are traded directly or swapped
for other goods. In a barter economy, the seller and the buyer each must want something the
other has to offer. Each person is simultaneously a seller and a buyer. There is a double
coincidence of wants.
Trading is very expensive in a barter economy. People must spend a lot of time and effort
finding others with whom they can make mutually satisfactory swaps. Since time and effort are
scarce resources, a barter economy is wasteful.
Money is generally accepted in payment for goods, services, and debts and makes the
trading process simpler and more efficient.
Money can also serve as a standard of value. Society considers it convenient to use a
monetary unit to determine relative costs of different goods and services. In this function money
appears as the unit of account, is the unit in which prices are quoted and accounts are kept.
To be accepted in exchange, money has to be a store of value. Money is a store of value
because it can be used to make purchases in the future.
Finally, money serves as a standard of deferred payment or a unit of account over time.
When you borrow, the amount to be repaid next year is measured in money value.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. The main feature of money is its acceptance as the means of payment or medium of
exchange.
2. Money is the medium through which people produce goods and services.
3. Time and effort are scarce resources, so a barter economy is wasteful.
4. Money cannot serve as a standard of value.
5. If we borrow, the amount to be repaid next year is measured in money value.
2) Match heads and tails
1. Money is accepted
2. Money has to be a store of
value
A. to be accepted in exchange.
B. in exchange for money.
3. The seller and the buyer each
must want
4. People must spend a lot of time
and effort
5. People buy and sell goods
C. finding others with whom they can
make swaps.
D. in payment for goods, services, and
debts.
E. something the other has to offer in a
barter economy.
3) Match these terms with their definitions
1. money
2. borrow
3. Economy
4. exchange
5. barter
A. an act of giving one thing and receiving
another in return
B. the coins or bank notes that you use to
buy things, or the sum that you have in
a bank account.
C. exchange (goods or services) for other
goods or services without using money
D. take and use (something belonging to
someone else) with the intention of
returning it
E. the system according to which the
money, industry, and trade of a country
or region are organized.
4) Fill in the gaps
Money is generally accepted in (1) _______ for goods, services, and debts and makes the
trading process simpler and more efficient. Money can also serve as a standard of (2) _______.
Society considers it convenient to use a (3) __________ unit to determine relative costs of
different (4) ________ and services. In this function money appears as the unit of (5) ________ ,
is the unit in which prices are quoted and accounts are kept.
A. value, B. monetary, C. account, D. payment, E. goods
PUBLIC FINANCE
Finance is the provision of money at the time when it is needed. It is a system of
monetary relations leading to formation, distribution and use of money in the process of its
turnover between economic entities.
The financial system is the network of institutions through which firms, households and
units of government get the funds they need and put surplus funds to work.
Savers and borrowers are connected by financial intermediaries including banks, thrift
institutions, insurance companies, pension funds, mutual funds, and finance companies.
Finance in an economic system comprises two parts: public finance and finance of
economic entities.
Public finance is the provision of money by the community through taxes to be spent by
national and local government authorities on projects of national and local benefit. It is a
collective term for the financial flows and also the financial institutions of the public sector.
Public finance has the following four functions. They are the provision of essential
services, the encouragement or control of particular sectors of the economy, the implementation
of social policy in respect of social services, and the encouragement of the growth of economy as
a whole.
The major instrument of any financial system is the budget. In a market-oriented
economy, the budget is the most important tool for achieving national priorities and goals
through the allocation and distribution of resources, and the maintenance of a stable
macroeconomic environment.
The budget is an estimate of national revenue and expenditure for the ensuing fiscal year.
When expenditure exceeds the revenue the budget has a deficit. Revenue and expenditure
forecasting is the most fundamental step in the process of budget preparation. Adequate planning
of recurrent and capital expenditure depends critically on an accurate forecast of revenue
availability.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. The financial system is the network through which firms and units of government get the
funds they need.
2. Budget is one of the minor instruments of any financial system.
3. Finance usually comprises three main parts.
4. The budget is an estimate of national revenue and expenditure for a fiscal month.
5. There are four functions of public finance.
2) Match heads and tails
1. Savers and
connected
borrowers
are
2. When expenditure exceeds the
revenue
3. Finance is
4. The budget is the most
important
5. Banks,
thrift
institutions,
insurance companies, pension
funds, and finance companies
A. a system of monetary relations
leading to formation, distribution and
use of money.
B. by many financial intermediaries.
C. tool for achieving national priorities
and goals.
D. are
examples
of
financial
intermediaries.
E. the budget has a deficit.
3) Match these terms with their definitions
1. allocate
2. economy
3. money
4. resource
5. budget
A. an estimate of income and
expenditure for a set period of time
B. distribute for a particular purpose
C. a stock or supply of money, materials,
etc. that can be drawn on by a person
or organization in order to function
effectively
D. the system according to which the
money, industry, and trade of a
country or region are organized.
E. the coins or bank notes that you use to
buy things, or the sum that you have
in a bank account.
4) Fill in the gaps
Public finance __1__ are the provision of essential services, the encouragement or
___2____ of particular sectors of the economy, the implementation of social policy in respect of
social services, and the encouragement of the growth of economy as a whole. The major
___3___ of any financial system is the budget. In a __4___ economy, the budget is the most
important tool for achieving national priorities and goals through the ___5___ and distribution of
resources, and the maintenance of a stable macroeconomic environment.
A. instrument
B. market-oriented
C. allocation
D. control
E. functions
MACROECONOMICS
The word macroeconomics means economics in the large. The macroeconomist's
concerns are with such global questions as total production, total employment, the rate of change
of overall prices, the rate of economic growth, and so on. The questions asked by the
macroeconomist are in terms of broad aggregates — what determines the spending of all
consumers as opposed to the microeconomic question of how the spending decisions of
individual households are made.
Macroeconomists measure overall economic activity; analyze the determinants of such
activity by the use of macroeconomic theory: forecast future economic activity; and attempt to
formulate policy responses designed to reconcile forecasts with target values of production,
employment, and prices.
An important task of macroeconomics is to develop ways of aggregating the values of the
economic activities of individuals and firms into meaningful totals. To this end such concepts as
gross domestic product (GDP), national income, personal income, and personal disposable
income have been developed.
Macroeconomic analysis attempts to explain how the magnitudes of the principal
macroeconomic variables are determined and how they interact. And through the development of
theories of the business cycle and economic growth, macroeconomics helps to explain the
dynamics of how these aggregates move over time.
Macroeconomics is concerned with such major policy issues as the attainment and
maintenance of full employment and price stability. Considerable effort must first be expended
to determine what goals could be achieved. Experience teaches that it would not be possible to
eliminate inflation entirely without inducing a major recession combined with high
unemployment. Similarly, an overambitious employment target would produce labor shortages
and wage inflation.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. The questions asked by the macroeconomist are in terms of broad aggregates.
2. Macroeconomists measure overall economic activity; analyze the determinants of such
activity by the use of macroeconomic theory.
3. Experience teaches that it is quite possible to eliminate inflation entirely without inducing
a major recession combined with high unemployment.
4. An important task of macroeconomics is to develop ways of aggregating the values of the
economic activities of individuals and firms into meaningful totals.
5. Microeconomics doesn’t seek solutions to economic problems such as how employment
can be increased, and what can be done to increase the output of goods and services.
2) Match heads and tails
1. Microeconomics seeks solutions
to economic problems
2. An important task of
macroeconomics
3. Macroeconomic
attempts to explain
4. The word
means
analysis
macroeconomics
5. Experience teaches that it would
not be possible
A. how the magnitudes of the principal
macroeconomic
variables
are
determined and how they interact.
B. such as how employment can be
increased, and what can be done to
increase the output of goods and
services.
C. to eliminate inflation entirely without
inducing a major recession combined
with high unemployment.
D. is to develop ways of aggregating the
values of the economic activities of
individuals and firms into meaningful
totals.
E. economics in the large.
3) Match these terms with their definitions
1. macroeconomics
2. consumer
3. income
4. inflation
5. gross domestic product
A. a general increase in prices and fall in
the purchasing value of money
B. the branch of economics concerned
with large-scale or general economic
factors, such as interest rates and
national productivity
C. the total value of goods produced and
services provided in a country during
one year.
D. a person who purchases goods and
services for personal use
E. the amount of monetary or other
returns, either earned or unearned,
accruing over a given period of time
4) Fill in the gaps
An important task of __1__is to develop ways of aggregating the __2__of the economic
activities of __3__and firms into meaningful totals. To this end such concepts as __4__, national
income, __5__, and personal disposable income have been developed.
A. gross domestic product, B. individuals, C. macroeconomics, D. personal income, E.
values
MICROECONOMICS
The word «micro» means small, and microeconomics means economics in the small. The
optimizing behavior of individual units such as households and firms provides the foundation for
microeconomics.
Microeconomists may investigate individual markets or even the economy as a whole,
but their analyses are derived from the aggregation of the behavior of individual units.
Microeconomic theory is used in industrial organization, labor economics, international trade,
cost-benefit analysis, and many other economic subfields. The tools and analyses of
microeconomics provide a common ground for economists interested in a wide range of
problems.
Major distinctions remain between the two major branches of economics. For example,
the microeconomist is interested in the determination of individual prices and relative prices (i.e.,
exchange ratios between goods), whereas the macro-economist is interested more in the general
price level and its change over time.
Optimization plays a key role in microeconomics. The consumer is assumed to maximize
utility or satisfaction subject to the constraints imposed by income or income earning power. The
producer is assumed to maximize profit or minimize cost subject to the technological constraints
under which the firm operates. Optimization of social welfare sometimes is the criterion for the
determination of public policy.
Opportunity cost is an important concept in microeconomics. Many courses of action are
valued in terms of what is sacrificed so that they might be undertaken. For example, the
opportunity cost of a public project is the value of the additional goods that the private sector
would have produced with the resources used for the public project.
1) Mark these statements T (true) or F (false) according to the information in the text.
1. Microeconomics deals with global questions.
2. Macroeconomics means economics in the large because it asks more questions than
microeconomics.
3. Macroeconomist analyzes activities of families and large firms.
4. The microeconomist is interested in the determination of individual prices.
5. Microeconomics means economics in the small.
2) Match heads and tails
1. The
optimizing
behavior
of
individual units such as households
and firms
2. The tools and analyses of
microeconomics provide
3. Optimization of social welfare
sometimes is
4. Optimization plays a key role
5. Microeconomic theory is used
3) Match these terms with their definitions
A. a common ground for economists
interested in a wide range of problems.
B. in microeconomics.
C. in industrial organization.
D. the criterion for the determination of
public policy.
E. provides
the
foundation
for
microeconomics.
1. price
2. private
3. profit
4. market
5. welfare
A. a financial gain, especially the difference
between the amount earned and the
amount spent in buying, operating, or
producing something
B. the health, happiness, and fortunes of a
person or group
C. belonging to or for the use of one
particular person or group of people only
D. the amount of money expected, required,
or given in payment for something
E. an area or arena in which commercial
dealings are conducted
4) Fill in the gaps
Microeconomic __1__is used in industrial organization, __2__, international trade,
__3__analysis, and many other economic subfields. The tools and analyses of __4__provide a
common ground for __5__interested in a wide range of problems.
A. microeconomics
B. cost-benefit
C. theory
D. economists
E. labor economics