16 Labour and capital, 17 Money, 18 Banks, 19 Aggregate supply, 20...

16 Labour and capital, 17 Money, 18 Banks, 19 Aggregate supply, 20 Aggregate supply

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Labour
is any work performed for an employer at a negotiated rate while profit is the
surplus, which accumulates as a result of productive work. The employer obtains this
surplus after he pays the necessary expense of his business and the wages of his
employees. He may be required to share the surplus with others who have provided the
capital with which he started his business. Most businesses need capital in order to
start productive work, and the capital pays for the accommodation,
machinery and other items, which the business needs.
There is always an element of risk in providing capital and starting
a business. The business may not be successful. The employers
and the providers of capital bear the risk. If the business is successful,
the risk has been justified and the invested capital earns part of the profits as a
return on the investment.


The
capital which people provide to help new businesses is an accumulation of previous
surpluses on previous business activities. In this way the past is used to finance
the future. Such capital is accumulated by a deliberate policy of saving surpluses.
This policy may be personal and individual, or it may be public and collective. As
such, it is common to both the capitalistic and communistic systems. In both systems,
a certain part of the profits is “ploughed back” into the system in order to
create capital.


In general terms, capital can be defined as (1) a factor of production
(for example, machinery
or cash); (2) the assets possessed by a person, a company or a nation. Land, houses
and shares in a business are capital. In terms of the state, all railways, docks,
roads, airports and state funds of money are part of the nation’s capital.

Vocabulary

employer
– роботодавець

at
a negotiated rate – на договірній основі (тарифі)

surplus
– надлишок

to
accumulate – накопичувати

employee
– працівник

accommodation
– приміщення

machinery
– машинне устаткування

to
bear the risk – ризикувати

to
justify – оправдовувати

to
earn profits – заробляти прибутки

previous
surpluses – попередні надлишки

a
deliberate policy – обміркована політика

“ploughed
back” – повертається назад.

I.
Complete the sentences using the text:

1.

Labour is any … .

2.

Profit is the … .

3.

Most businesses need
capital in order to … .

4.

The employers and the
providers of capital bear … .

5.

The capital which people
provide to help new businesses is an ..

6.

A deliberate policy of
saving surpluses may be … .

7.

Capital can be defines as
… .

II.
Answer the questions, basing your answers on the text

1.

What is profit?

2.

At what point does an
employer obtain his surplus?

3.

Who may he be required to
share it with?

4.

What do most businesses
need?

5.

Why is there always an
element of risk in providing capital?

6.

Who bears the risk?

7.

What justifies the risk?

8.

How is the past used to
finance the future?

9.

What do people plough back
into the system?

10.

Why is it ploughed back?

11.

What examples of private
capital are given?

12.

What examples of public
capital are given?

III.
Say whether these statements are true or false and if they are false, say why.

1.

Labour is work performed
by an employer at a negotiated rate.

2.

The expenses of a business
are part of its surplus.

3.

Usually new businesses
need capital.

4.

Because businesses may not
always be successful, there is always risk involved in financing them.

5.

Employers and employees
share the risk in financing new enterprises.

6.

The surpluses, which
people provide to help new businesses arise from previous economic activities.

7.

Communistic economies also
have policies of saving surpluses.

8.

A nation’s capital in
economic terms is the city where the government is situated.

The
term “currency”, in its general economic sense, is applied to the money of a
particular country, such as the U.S. dollar, the French franc, the Swiss franc, the
Belgian franc, the Dutch guilder, the German mark, the Austrian shilling, the
British pound, the Italian lira, the Japanese yen, Mexican peso, the Spanish peseta,
the Australian dollar, the New Zealand dollar, the Hong Kong dollar, etc..


According to their convertibility, currencies can be grouped into
three general categories:
“convertible currencies”, “semi-convertible currencies”, and
“non-convertible currencies”. Convertible currencies are those which can be
freely bought and sold in the foreign exchange markets, at the rates of exchange
prevailing at the time of purchase or sale. Semi-convertible currencies can be
bought and sold only through the local central bank, at predetermined rates of
exchange. A large number of third-world currencies fall into this category.
Transactions are limited to commercial deals. Non-convertible currencies are those
whose circulation is restricted by the local monetary authorities. The rates of
exchange are artificially pegged, usually at a level much higher than the rates
prevailing on the black market, or parallel market, which inevitably develops. Most
Eastern European countries had non-convertible currencies.

In
practice, there are three main convertible currency areas: the U.S. area, which
comprises essentially the U.S. and Canadian dollars; the European area, with the
currencies of Western Europe; and the Asian area, with the Japanese yen and the Hong
Kong, Malaysian, and Singapore dollars. The
governments of these countries allow unregulated

purchases and sales, and the amounts of
money exchanged in the foreign
exchange markets are very large.


The
world’s major currency is the U.S. dollar, followed by the pound sterling, the D-mark,
and the Japanese yen. The importance of the U.S. dollar stems from a number of
factors, some domestic and some international: the United States has the world’s
largest capital market, and there are more dollars in the world than all other major
currencies put together. Invoicing for raw materials and commodities, especially oil,
gas, and wheat, is in U.S. dollars. It is also interesting to note that the dollar
is by far the largest component of the foreign currency reserves held by the
world’s major central banks (reserve currency).


Vocabulary

in
economic sense – з економічної точки зору

convertibility
– конвертованість

foreign
exchange market – ринок обміну валюти

to
predetermine – зумовлювати

commercial
deal – комерційна угода

to
be artificially pegged – штучно підтримувати

to
comprise – вміщати, охоплювати

to
stem – опиратися

invoicing
– фактурування

І.
Complete the sentences using the text:

1.

The term “currency” is
applied to … .

2.

According to their
convertibility, currencies can be grouped into.

3.

Convertible currencies are
those … .

4.

Semi-convertible
currencies can be … .

5.

Non-convertible currencies
are those… .

6.

In practice, there are
three main convertible currency areas … .

7.

The world’s major
currency is … .

II.
Answer these questions, basing your answers on the text:

1.

What is the term «currency»,
in its economic sense, applied to?

2.

What three general
categories can currencies be grouped into?

3.

What are convertible
currencies?

4.

How can semi-convertible
currencies be bought and sold?

5.

What currency falls into
this category?

6.

What are non-convertible
currencies?

7.

What countries have non-convertible
currencies?

8.

In practice what three
main convertible currency areas are there?

9.

What is the world’s
major currency?

10.


What can you say about the
importance of the U.S. dollar?

III.
Say whether these statements are true or false and if they are false, say why.

1.

The term “currency” in
its general economic sense is applied to the money of a particular country.

2.

According to their
convertibility, currencies can be grouped into three general categories: convertible,
semi-convertible and non-convertible currencies.

3.

Convertible currencies can
be freely bought and sold in the foreign exchange markets.

4.

Most European countries
have non-convertible currencies.

5.

In practice, there are
three main convertible currency areas.

6.

The world’s major
currency is the U.S. dollar.

7.

The United States has the
world’s largest capital market.

8.

The term “currency”
sometimes refers to paper money only.

9.

It is interesting to note
that the dollar is by the largest component of the foreign currency reserves held by
the world’s major central banks.

Every
country needs a central institution with a wide range of powers to look after its
monetary system; in other words, it needs a central bank. Central banks, such as the
Bank of England, the Federal Reserve System of the United States (comprising 12
federal reserve banks), the Deutsche Bundesbank, and the Österroichische
National bank, are typically charged with all, or at least most, of the following
functions.


1.
Central banks are responsible for an adequate supply of legal tender, i. e. of
banknotes and coins that have to be accepted in settlement of debts. Usually, the
central bank is the sole note-issuing bank in a particular country. The minting of
coins in frequently the responsibility of a separate institution under the control
of a central government department (e.g., the Royal Mint in Great Britain).


2.
Central banks are bankers’ banks, i.e. they perform certain tasks for commercial and specialised banks, just as these banks perform
services for their own clients. Commercial banks keep accounts with the
central bank. These accounts may be used to settle the net positions resulting from
the clearing of cheques and credit transfers.
Moreover, the commercial banks borrow directly or indirectly
from the central bank, especially if funds are not available from other
sources, the central bank acting as a lender of last resort. In addition, central
banks are frequently charged with supervising and regulating the banking system of
the country in which they operate.


3. A central bank also acts as a banker to its government, typically
managing the national
debt, handling or superintending the issue of
government stocks and Treasury bills, making, shorter advances
to the government, providing advice on financial matters, etc.

4.
More importantly, central banks are concerned with the implementation
of monetary policies. They regulate a country’s money
supply by open-markets operations, by calling for special deposits (U.S.:
legal reserves), by influencing interest rates, and by operating direct controls on
bank lending. But they are also active on the external front, intervening in the
foreign exchange markets to control the rates of exchange, and generally managing
the external aspects of monetary policy, such as exchange controls, foreign exchange reserves
(including Special Drawing Rights), etc.


In
performing these tasks, central banks in different countries enjoy different degrees of autonomy from their governments.
The Bank of England, for instance, is closely controlled by the Treasury,
which since 1946 has had statutory powers to give directions
to it. The Federal Reserve System of the United States, on the other hand,
is able to steer a much more independent course.


Vocabulary

a
wide range of powers – широка сфера повноважень

to
be responsible for – бути відповідальним за

legal
tender – законний платіжний засіб

settlement
– вирішення

to
issue – випускати

clearing
– безготівкові розрахунки

last
resort – останнє звернення

to
be charged with supervising – надано право нагляду

to
handle – керувати, регулювати

to
superintend – управляти, наглядати, завідувати

to
provide advice – надавати поради

implementation
– здійснення, втілення

money
supply – грошові ресурси

external
– зовнішній

to
interfere – втручатися

for
instance – наприклад

to
steer – вести, направляти, керувати

independent
course – незалежний курс

І.
Complete the sentences using the text:

1.

Every country needs a
central institution with … .

2.

Central banks are
responsible for … .

3.

Central banks perform
certain tasks for … .

4.

A central bank also acts
as a banker to … .

5.

Central banks regulate a
country’s money supply by … .

6.

The bank of England is
closely controlled by … .

7.

The Federal Reserve System
of the United States is able to .

II.
Answer these questions, basing your answers on the text:

1.

What does every country
need to look after its monetary system?

2.

What central banks do you
know?

3.

Central banks are
responsible for an adequate supply of legal tender, aren’t they?

4.

Are central banks bankers
“or producers” banks?

5.

Where do the commercial
banks borrow from?

6.

Does a central bank also
act as a banker to its government?

7.

What do central banks
regulate?

8.

Central banks in different
countries enjoy different degrees of autonomy from their governments, don’t they?

III.
Say whether these statements are true or false and if they are false, say why.

1.

Usually, the central bank
is the sole note — issuing bank in a particular country.

2.

The minting of coins is
exclusively the responsibility of a separate bank.

3.

Central
banks perform certain tasks for commercial and specialised
banks.

4.

These accounts may be used
to settle the net positions resulting from the clearing of cheques and credit
transfers.

5.

The commercial banks
borrow directly or indirectly from each other.

6.

A central bank typically
manages the national debt.

7.

Central banks are not
concerned with the implementation of monetary policies.

8.

A central bank regulates a
country’s money supply.

Just
as economists study the amount of goods and services brought to market by a single
producer, they also study the total amount of goods and services produced by the
economy as a whole. Thus, they examine aggregate supply

the total amount of goods
and services produced by the economy in a given period, usually one year.

A
number of factors affect an economy’s aggregate supply. Two of these are the
quantity of resources used in production and the quality of these resources. For
example, an economy must have an adequate supply
of natural resources and capital goods to be productive.



It
also needs a skilled and highly motivated labour force. A third factor affecting
aggregate supply is the efficiency with which the resources are combined. If they
are combined in a productive way, aggregate supply will increase.


In
order to measure aggregate supply, statistics must be kept.
To keep with this task economists use national income accounting


a system of statistics that keeps track of production, consumption; saving and
investment in the economy. National income accounting also makes it possible to
trace long-run trends in the economy and to form new public policies to improve the
economy.

The
most important economic statistics kept in the national income accounts is Gross
National Product (GNP). This is the dollar measure of the total amount of final
goods and services produced in a year. It is one of the most important and
comprehensive statistics kept on the economy’s performance.


Vocabulary

aggregate
supply – сукупна пропозиція

a
skilled labour force – кваліфікована робоча сила

efficiency
– дієвість, ефективність

track
– дорога, шлях

to
trace – простежувати

Gross National product (GNP) – валовий
національний продукт


comprehensive
– всебічний, глибокий.

І.
Complete the sentences using the text:

1.

Aggregate supply is the
total amount of goods and … .

2.

There are two factors that
affect an economy’s aggregate supply, they are … .

3.

Aggregate supply needs a
skilled and … .

4.

A third factor affecting
aggregate supply is …

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