Пермь 2006

Part I. Texts on Economics

THE SCIENCE OF ECONOMICS

Economics, like physics or meteorology, is a science to the extent that it comprises a set of analytical principles that work with consistent regularity. Unlike the so-called natural sciences, however, economics is a social science because it studies human behavior rather than the disembodied workings of nature. Thus it is appropriate to describe the subject, by analogy, as a set of tools. Just as a carpenter's tools may be used to build a house, a printer's tools to make a book, so an economist uses tools to build understanding - in this case, understanding of human behavior and its consequences. Each social science makes the same claim, however. So what distinguishes economics from its “sister” social sciences, such as sociology or psychology? The unique feature of economics is that it studies human behavior within the context of markets. A market is an institutional arrangement that fosters trade or exchange. Modern economics, therefore, is the study of how markets work - of how value is determined, and how inputs relate to each other in production, for example. But there is a larger set of questions involved: where did the market come from? Is it the only way to organize economic activity? What are its alternatives? How might they work?

The history of economic thought is replete with writers who sometimes addressed the former set of questions (i.e. how markets work) and sometimes the latter (what are its alternatives). Occasionally, but rarely, a writer will address both. Marx was such a writer. Most of the writers who achieved lasting fame as architects of the discipline of economics stuck to the former set of questions, however. So dominant was this tendency that it may be termed mainstream, or orthodox. By contrast, attempts to explore the second set of questions are typically regarded as unorthodox, or outside the mainstream. Surely the market place of ideas encourages variety.

Although others might present the subject differently, the important point that should be derived from any historical survey of the subject is that economics is a vibrant form of intellectual discourse, not a set body of principles.

Even in this new millennium, there is increasing evidence that economics continues to ferment. Even among mainstream economists, gnawing questions persist about the nature, scope and method of economic inquiry, and the value and place of economics among competing social sciences. Disagreement persists about the proper boundaries of the subject, the role of the individual versus the group, the method of analysis to be employed, and the usefulness of the field itself.

TASKS

I. Give the English equivalents to:

Родственная дисциплина, факторы производства, обмен, экономическое исследование, в условиях рынка, обеспечивать торговлю, определять стоимость, метод анализа, альтернатива, масштаб, основное направление.

II. Find words with similar meanings in the text:

Resources required for production, to promote commerce, the way people act, academic discussion, economic research, to remain, a related science, the first of two, to develop, a definite set of concepts, a dominant tendency.

III. Answer the following questions:

1. Why can economics be called a science?

2. What kind of science is economics? Why?

3. What other social sciences do you know?

4. What is the difference between economics and other social sciences?

5. What are the two sets of questions connected with modern economics?

6. What questions were addressed by the mainstream economists?

7. Can Marx be regarded as a mainstream economist?

8. What evidence is there that economics continues to develop?

9. What are the main areas of disagreement among contemporary economists?

IV. Are the following statements true or false? Correct the false ones:

1. To build understanding all economists use the same tools as carpenters and printers do.

2. Modern economics studies problems connected only with the market.

3. Economics is based on a set body of principles.

4. There are a lot of authors addressing both sets of questions mentioned in the text.

5. Most scientists agree on the methods and scope of economic research.

V. Render the text in English:

Экономика, подобно родственным социальным наукам (например, социологии), изучает поведение человека. Однако, в отличие от других дисциплин, экономика анализирует поведение человека в условиях рынка. Рынок - это институт, обеспечивающий торговлю и обмен.

Исследованием вопросов, связанных с рынком, занимались многие ученые. Некоторые из них рассматривали проблемы функционирования рынка (данное направление получило название основного, или ортодоксального), другие искали альтернативы рынку. В работах Карла Маркса затрагиваются оба аспекта.

Экономика - постоянно развивающаяся наука: среди экономистов не прекращается полемика по ряду ключевых моментов, таких как место экономики среди других социальных наук, методы экономического исследования и др.

VI. Give a summary of the text.

MACROECONOMICS AND MICROECONOMICS

“Macro” is derived from the Greek word makros meaning “large”. Macroeconomics considers the whole economy from a national point of view. In studying macroeconomics we turn our attention to the major forces acting and interacting within the economy. Macroeconomics in a modern economy is largely a study of government economics. Central and local governments play such a significant role in the formation and application of economic policies that it has become essential for businessmen to appreciate the bases of government economic policy. In former times, and in a very few countries perhaps still today, the free play of market forces was left to decide the level of national income, and the rate of growth of the economy. As a result of this policy of laissez-faire (“let the thing work itself out”) the economy tended to grow in spiral-like movements of business activity. Years of rapid expansion, called “booms”, were followed by years of consolidation and slower progress, called “slumps”. The economy was always growing, but it suffered from cycles of activity spiraling upwards. The more exposed members of society, the poor, and the immigrant, suffered great misery. A cry went out for more conscious control of business activity, and eventually Keynesian^* The British economist, John Maynard Keynes, is one of the most influential economists of the 20th century. In 1936 his book The General Theory of Employment, Interest, and Money transformed the economic thinking of that time. economics showed the way to achieve it.

Under this final group of studies we must consider:

a) The national income; what it is, how it may be increased, and how it may be fairly shared;

b) Business cycles; their causes and cures. This involves a study of deflation, inflation, and equilibrium levels of activity in the economy;

c) Problems associated with full employment, structural unemployment, and regional under-employment;

d) The public sector of the economy; its conflict with the private sector and their reconciliation with one another;

e) Public finance;

f) The balance-of-payments problem presents itself mainly at macroeconomics levels;

g) The international implications of national policies and co-operation with other countries.

Though macroeconomics has been defined as the study of the whole, or of the aggregate, of a national economy, the central problem of it in the second half of the twentieth century is the management of prosperity to maximize individual welfare. In fact, the whole economy stands or falls by what is achieved for the individual. If I am not prosperous, what use is it to me that society as a whole is prosperous? What satisfaction do I get, when I am poor, to know that others are rich? If I am unemployed, high levels of general employment do me no good, and what use is the general security if I am insecure?

The application of economic theory to the aggregate level is a process subject to a reasonably high degree of uncertainty. No one can be absolutely sure what the outcome of a particular macroeconomic policy will be. There is though, in practical terms, every reason for the study of macroeconomics. That a point cannot be made 100% clear ought not to detract from the achievement of a highly probable prediction. Business itself is founded upon the principle of exploiting uninsurable risk. Those who operate businesses ought to appreciate what is likely to happen within the national and international economy so that they can reduce the risk element in their own businesses.

Microeconomic analysis offers a detailed treatment of individual decisions about particular commodities. For example, we might study why individual households prefer cars or bicycles and how producers decide whether to produce cars or bicycles. We can then aggregate the behavior of all households and all firms to discuss total car purchases and total car production. Within a market economy we can discuss the market for cars. Comparing this with the market for bicycles, we may be able to explain the relative price of cars and bicycles and the relative output of these two goods. The sophisticated branch of microeconomics known as general equilibrium theory extends this approach to its logical conclusion. It studies simultaneously every market for every commodity. From this it is hoped that we can understand the complete pattern of consumption, production, and exchange in the whole economy at a point in time.

Microeconomists tend to offer a detailed treatment of one aspect of economic behavior but ignore interactions with the rest of the economy in order to preserve the simplicity of the analysis. A microeconomic analysis of miners' wages would emphasize the characteristics of miners and the ability of mine owners to pay. It would largely neglect the chain of indirect effects to which a rise in miners' wages might give rise. When microeconomic analysis ignores such indirectly induced effects it is said to be partial analysis.

TASKS

I. Answer the following questions:

1. What do macroeconomics and microeconomics consider?

2. Why does the study of modern macroeconomics involve governments?

3. Is there any interaction of “general” and “individual” in economics? Give your reasons.

4. Despite a high degree of uncertainty macroeconomics is necessary to study. Do you agree with the statement or not? Explain your point of view.

5. What is the interconnection of macroeconomics and microeconomics?

6. What is known as a “partial analysis”?

7. John Maynard Keynes said that: “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else”. (What do you think Keynes meant by this last statement? Do you agree or disagree? Give the reasons that would support your opinion.)

II. Fill in the blanks using the correct term: microeconomics, macroeconomics, microeconomists or macroeconomists:

1. …is concerned with what actions governments can take to achieve desired ends.

2. …deliberately simplifies the individual building blocks of the analysis in order to retain a manageable analysis of the complete interaction of the economy.

3. …worry about the breakdown of consumer goods into cars, bicycles, televisions, and calculators.

4. …prefer to treat cars, bicycles, televisions, and calculators as a single bundle called “consumer goods”.

5. …ignore interactions of one aspect of economic behavior with the rest of the economy in order to preserve the simplicity of the analysis.

6. The conflict between public and private sectors exists mainly at … levels.

III. Consider which of the following matters might be classified as macroeconomic and which as microeconomic:

1. The size of aggregate output.

2. The assortment of commodities to which resources are devoted.

3. The distribution of the wealth created by the production of cars.

4. The rate of growth of output from one period to another for the economy as a whole.

IV. Match a line in A with a line in B:

V. Give a summary of the text.

VI. Render the text in English:

В экономике существуют два основных раздела. В обоих разделах применяются одни и те же основные принципы. Макроэкономика изучает функционирование экономики в целом, сосредоточиваясь на таких вопросах, как инфляция, безработица и рост совокупного выпуска; почему наблюдаются спады и подъемы; почему цены растут быстрее в одном периоде, чем в другом; почему общее число безработных в экономике иногда бывает высоким, а иногда низким. Микроэкономика, наоборот, сосредоточена на изучении функционирования отдельных рынков и их взаимодействия, отдельных экономических элементов - в основном домашних хозяйств и фирм. Упор делается на цены и объемы выпуска конкретных товаров и услуг и на то, как в результате взаимодействия рынков формируется распределение ограниченных ресурсов по миллионам альтернативных направлений использования.

THE FUTURE OF ECONOMICS

The modern word “economics” has its origin in the Greek word oikonomos meaning a steward. The two parts of this word - oikos, a house, and nomos, a manager, show what economics is all about. How do we manage our house, what account of our stewardship can we render to our families, to the nation, to our descendants ?

From Socrates and Aristotle to J. M. Keynes, and Prof. J. K. Galbraith is a span of 2,250 years. It takes us from a slave society, where all but a few were poor, to an affluent democracy. Great changes of taste and fashion have occurred. Socrates rose in the morning, put on his cloak and went out into the public square to engage in conversation and discussion. His needs were few. Today we are obsessed with material wants, and struggle to the beach with a car loaded with deck chairs and aqua-lungs, towing a yacht or a power boat behind us.

Economics is the study of mankind in the everyday business of providing this enormous variety of goods and services. This book has attempted to describe the major aspects of production, distribution and exchange. It is clearly only a beginning to the vast study of specialized aspects of the economy.

Certainly economics is a liberal study. Everyone needs to know some economics, for it explains the framework of prosperity and a liberal life is only possible when prosperity exists. Historically follow the flowering of art, literature and science around the world, and you will find they flourished most where prosperity was to be found. Even today only where the economy is strong can men be spared from production to think sublime thoughts, create beautiful objects, paint immortal pictures, or compose imperishable melodies. The humblest worker in such societies is ennobled by his labour, for it alone makes possible the culture of his times.

Within the last 30 years Thomas Carlyle's characterization of economics as “the Dismal Science” has been invalidated. The new economics can handle the cycles of depression which gave such distress in the early years of the capitalist system. There are still problems to be solved, but reasonable affluence appears to be within the reach of all men if the political and social framework can be adjusted to suit the new situation. No longer do the greatest economists of their age stand aghast at the enormity of the problems. Instead they look blithely and optimistically forward to a future where the stockpiling of consumer goods ceases to be the major preoccupation of men's minds. When private wealth is assured, social well-being becomes a possibility. We turn from investment in things to investment in man himself.

Part of that investment must include a reappraisal of our attitude to material things. If we are to avoid the exhaustion of the earth's resources, to preserve natural beauty, to prevent the destruction of our traditional environment and protect what little innocence is left we must examine what economic growth implies for world society. Inevitably controls over economic activity seem bound to increase unless individuals can show restraint. The fullest development of man requires a return to Socratic contemplation of the state of “The Republic”.

TASKS

I. Give the English equivalents to:

Экономический рост, распределение, потребительские товары, материальные потребности, благосостояние, спад, экономический цикл, блага, капиталистическая система, изобилие, услуги, инвестиции, экономическая деятельность.

II. Find words and expressions that mean:

1. a man who is employed to look after a house and lands (old use);

2. a period of time;

3. a prosperous democratic society;

4. to spend much time in communication;

5. to move violently in a certain direction;

6. fast growth in any sphere of life;

7. deathless and timeless things;

8. to adapt to new conditions.

III. Match the terms with their definitions:

IV. Divide the text into 4 parts and formulate the main idea of each of them.

V. Answer the following questions:

1. Where does the word “economics” come from?

2. How can the word oikonomos be interpreted?

3. How can you describe a slave society and the modern world in terms of prosperity? Give your own examples.

4. What is the aim of business?

5. What are the three components of business?

6. What is the connection between prosperity and a liberal life? Can you explain your point of view?

7. How did Th. Carlyle characterize economics? Do you think Carlyle's definition is still applicable?

8. Why is it important for us to change our attitude to material things?

VI. Give a summary of the text.

ECONOMIC SYSTEMS: TWO IMPORTANT DISTINCTIONS

Economic systems can be distinguished along many lines, but two are most fundamental. The first is: How is economic activity coordinated - by the market or by the plan?

The question does not, of course, demand an “either, or” answer. Rather the choice extends over a wide range from pure laissez-faire to rigid central planning. Society must decide which decisions it wants made in markets by individual businesses and consumers acting in their own self-interests, and which decisions it wants centrally planned so that businesses and consumers act more “in the national interest”.

The second crucial distinction among economic systems concerns who owns the means of production. Specifically, are they privately owned by individuals or publicly owned by the state? Again, there is a wide range of choice and, to our knowledge, there are no examples of nations at either the capitalist extreme where all property is privately owned or at the socialist extreme where no private property whatever is permitted. For example, while most industries are privately owned in the United States, a few are not. Many business owners face restrictions on what they can do with their capital. Automobile companies must comply with environmental and safety regulations. Private communication and transportation companies may have both their prices and conditions of service regulated by the government. Even in China, where large enterprises are publicly owned, anyone who can afford it can own a car, a bank account, or even a small business.

People tend to merge the two distinctions and think of capitalist economies as those with both a great deal of privately owned property and heavy reliance on free markets. By the same token, socialist economies typically are thought of as highly planned, as were those in the former Soviet bloc.

However, while there is an undeniable association between private ownership in a country and the degree to which it relies on markets, it is a mistake to regard these two features as equivalent. Socialism can exist with markets and capitalism can exist with rigid state planning. So, in thinking abstractly about a society's choice among economic systems, it is best to keep the two distinctions separate.

History holds examples of planned, capitalist economies-such as Germany under Hitler, Italy under Mussolini, and Argentina under Juan Peron. To a much lesser extent, Japan and the other “Asian tigers” have also planned their capitalist economies-apparently with great success.

TASKS

I. Give the English equivalents to:

Экономическая система, невмешательство, жесткое центральное планирование, средства производства, частная собственность, сталкиваться с ограничениями, правила безопасности, предприятие, частное предприятие, общественное предприятие.

II. Answer the following questions:

1. What are the two fundamental distinctions of economic system?

2. Give examples of the capitalist extreme or the socialist extreme?

3. Are all the industries in the US privately owned?

4. Can socialism exist with markets and can capitalism exist with rigid state planning?

III. Complete the following sentences:

1. The first fundamental distinction among economic systems is…

2. The second crucial distinction among economic systems is…

3. Capitalist economies are based on a great deal of…

4. Socialist economies are thought of as…

IV. Match a line in A with a line in B:

V. Are the following statements true or false? Correct the false ones:

1. There are three fundamental distinctions among economic systems.

2. Most industries are privately owned in the US.

3. Business owners don't face restrictions on what they can do.

4. In China anyone (who can afford it) can own a small business.

5. Socialism can exist with markets.

6. There are examples of nations who are at either a capitalist extreme or at a socialist extreme.

7. Capitalism can't exist with rigid state planning.

VI. Render the text in English:

Все экономические системы имеют две фундаментальные отличительные черты. Первая: как координируется экономическая система - рынком или планированием. Вторая: кто владеет средствами производства - государство или частные лица. Смешение этих двух характеристик приводит к появлению таких понятий, как абсолютный капитализм и абсолютный социализм. Однако абсолютного капитализма не существует. Так, в капиталистическом США частные компании могут контролироваться и регулироваться государством, а в социалистическом Китае каждый, кто может себе это позволить, имеет право владеть личной машиной, банковским счетом и даже заниматься мелким бизнесом. Социализм может сосуществовать с рынком, а капитализм может иметь строгое государственное планирование, как Германия при Гитлере, Италия при Муссолини, и в более мягкой форме Япония и другие «Азиатские тигры» также планируют свою капиталистическую экономику.

VII. Give a summary of the text.

LABOUR

“Labour” is the supply of human resources, both physical and mental, which is available to engage in the production of goods and services. The supply of labour depends on two things:

- the total labour force available, i.e. the population less any sections of the population who do not work

- the number of hours per week the population is prepared to work

The Working population. The groups who do not work consist of:

Young People. The number of young people available for work varies with the education available. If education is largely a matter of parental instruction and the handing down of techniques from father to son, as in many peasant communities, children will participate in production from an early age. If education is a matter of specialist tuition by professional educators the labour supply will be correspondingly reduced as pupils and students are withheld from the labour force during their schooling.

Retired Persons. The age of retirement affects the supply of labour. If, for example, retirement at the age of 65 is normal, so that perfectly healthy and energetic men and women retire compulsory at that age, the supply of labour is reduced. Many people of retirement age today are quite capable of continuing in productive employment.

The Hours Worked per Year. If the working week is reduced the supply of labour falls, unless the resultant improvement in health enables more efficient labour to take place in the shorter working week. Today reducing the 40-hour week to 35 hours almost certainly lowers the supply of labour. Holiday periods reduce the supply of labour. Some workers prefer extra income to shorter working hours, so that “moonlighting” (doing one job by day and another in the evening) is quite common. “Moonlighting” therefore increases the supply of labour available to entrepreneurs.

The Quality of Labour. More important than the actual supply of labour is the quality of labour. It is skilled, semi-skilled, or unskilled. Skilled labour is labour which has either mastered a particular craft, like toolmaking or printing, or has been professionally trained, like doctors, dentists, lawyers, and accountants. Semi-skilled labour is in some way a misnomer, since the operatives who are described as semiskilled have in fact reached very high degrees of skill over a very limited range of activities. Such labour can be very quickly trained, in from 4 to 6 weeks at the most. Unskilled labour, as its name implies, requires little specialized training.

Skilled labour tends to be more specific than semi-skilled or unskilled labour. The idea of “specificity” is an important one in economics. If a factor of production is specific it can be used in only one particular task: for instance, a dentist must be employed in dentistry if his true talents are to be used. If we take a dentist and turn him into the fields to cut sugar cane we shall be wasting his talents. Of course it may do the dentist a world of good to find out what a hard life the cane-worker leads, but this is no substitute for the efficient use of his services in caring for his patients' teeth.

Unfortunately, specialization can have some negative consequences. The most significant drawback is the boredom and dissatisfaction many employees feel when they do the same job over and over. Monotony can be deadening. Bored employees may be absent from work frequently, may not put much effort into their work, and may even sabotage the company. Because of these negative side effects, managers have recently begun to search for alternatives to specialization in the design of jobs. The three most common antidotes to the problems that job specialization can breed are job rotation, job enlargement, and job enrichment.

Job rotation is the systematic shifting of employees from one job to another. For example, a worker may be assigned to a different job every week for a four-week period and then return to the first job in the fifth week. The idea behind job rotation is to provide a variety of jobs so that other workers will be less likely to get bored and dissatisfied. Companies that use job rotation include Ford, Xerox, the Prudential Insurance Co. of America, and the US Nissan subsidiary.

In job enlargement, the worker is given more things to do within the same job. For example, under job specialization, each worker on an assembly line might connect three wires to the product as it moves down the line. After job enlargement, each worker might connect five wires. AT&T, IBM, and the Maytag Co. have all experimented with job enlargement.

Job enrichment is perhaps the most advanced alternative to job specialization. Whereas job rotation and job enlargement do not really change the routine and monotonous nature of jobs, job enrichment does. It is, in essence, providing workers with both more tasks to do and more control over how they do their work. In particular, under job enrichment many controls are removed from jobs and workers are given more authority. Moreover, employees are frequently given new and challenging job assignments. By blending more planning and decision making into jobs, job enrichment builds more depth and complexity into jobs. These changes tend to increase the employee's sense of responsibility and provide motivating opportunities for growth and advancement.

Factors affecting the efficiency of labour include:

1. The general education and background knowledge of the labour force. If it has been born into the television era of an advanced society it will be knowledgeable, adaptable, and sophisticated. If it has only recently left a peasant community it will be unsophisticated, superstitious, nervous, and slow to adapt itself.

2. The general health of labour force. This may be improved by diet, and adequate welfare services of all sorts. A developing nation's progress may be slow because a fully effective labour force depends on raising the standard of living. This is a slow process and depends on an efficient labour force. We therefore have a vicious circle, which spirals slowly upwards, but at an increasing pace as the years go by.

3. The incentives offered to labour. Where there are few incentives labour will be less efficient. Where the incentives are great labour will apply itself more assiduously.

4. The availability of other factors of high quality. This is the commonest method of increasing the efficiency of labour. If it is backed by good quality land, labour itself will be more efficient. If it is backed by well chosen tools and adequate power supplies, even a poor labour force will be highly productive.

TASKS

I. Give the English equivalents to:

Людские ресурсы, общая рабочая сила, предложение труда, пенсионный возраст, обязательный выход на пенсию, дополнительный доход, работа по совместительству, квалифицированный труд, неквалифицированный труд, полуквалифицированный труд, социальные услуги, повышать уровень жизни, стимул, повышать эффективность труда, высокопродуктивный.

II. Match the terms with their definitions:

III. Answer the following questions:

1. What is labour?

2. What does the supply of labour depend on?

3. What are the main population groups “who do not work”?

4. How does education influence the number of young people available for work?

5. In what way does the age of retirement affect the supply of labour?

6. What are the results of reducing of the working week?

7. What is “moonlighting”? How does it affect the supply of labour?

8. What is more important than the actual supply of labour?

9. What is skilled, semi-skilled, unskilled labour?

10. How do you understand the idea of “specificity”? Give some examples.

11. Enumerate the major factors affecting the efficiency of labour. Speak on each of them.

12. Think of possible disadvantages of job rotation, enlargement and enrichment.

IV. Are the following statements true or false? Correct the false ones:

1. Labour is the supply of physical human resources which is available to engage in the production process.

2. The number of young people available for work depends on the education available.

3. Pupils and students are usually withheld from the labour force if education is a matter of parental instruction.

4. Moonlighting decreases the supply of labour available to entrepreneurs.

5. The quality of labour is as important as the actual supply of labour.

6. Where there are more great incentives, labour will be more efficient.

7. If labour is supported with well-chosen tools and adequate power supplies, it will be highly productive.

V. Render the text in English:

Человеческий капитал включает врожденные способности и талант, а также образование и приобретенную квалификацию. Человеческий капитал создается тогда, когда человек инвестирует в самого себя. Инвестиции в человеческий капитал со временем окупаются, давая отдачу в виде более высокой заработной платы или способности выполнять работу, приносящую большее удовлетворение. Студенты имеют возможность производить огромные инвестиции в образование, а наниматели могут платить образованным людям больше. Высшее образование не увеличивает производительность работника, однако оно свидетельствует о том, что работник обладает качествами, полезными для фирмы. Образование увеличивает доходы, и поэтому инвестиции, вложенные в образование, окупаются. Однако время, проведенное на работе, также приносит свои плоды. Опытный работник гораздо ценнее для своей фирмы, чем новичок. Работники, имеющие некоторый опыт, являются более производительными, чем неквалифицированные; соответственно с приобретаемым опытом растет и оплата.

UNEMPLOYMENT

Not everyone wants a job. Those people who do are called the labor force. The labor force comprises all those people holding a job or registered as being willing and available for work.

The participation rate is the percentage of the population of working age who declare themselves to be in the labor force. The postwar growth of the labor force has been caused less by an increase in the population of working age than by an increase in participation rates, most notably by married women. The unemployment rate is the percentage of the labor force without a job but registered as being willing and available for work.

Of course, some people without a job are really looking for work but have not bothered to register as unemployed. These people will not be included in the official statistics for the registered labor force, nor will they appear as registered unemployed. Yet from an economic viewpoint, such people are unemployed. This is an important phenomenon. Economists used to classify unemployment as frictional, structural, demand-deficient, or classical.

Frictional Unemployment. This is the irreducible minimum level of unemployment in a dynamic society. It includes people whose physical or mental handicaps make them almost unemployable, but it also includes the people spending short spells in unemployment as they move between jobs in an economy where both the labor force and the jobs on offer are continually changing.

Structural Unemployment. In the longer run the pattern of demand and production is always changing. In recent decades industries such as textiles and heavy engineering have been declining in the UK. Structural unemployment refers to unemployment arising because there is a mismatch between skills and job opportunities when the pattern of demand and production changes. For example, a skilled welder may have worked for 25 years in shipbuilding but is made redundant at 50 when the industry declines in the face of foreign competition. That worker may have to retrain in a new skill which is more in demand in today's economy. But firms may be reluctant to take on and train older workers. Such workers become the victims of structural unemployment.

Demand-deficient Unemployment. This refers to Keynesian unemployment, when aggregate demand falls and wages and prices have not yet adjusted to restore full employment. Aggregate demand is deficient because it is lower than full-employment aggregate demand. Until wages and prices have adjusted to their new long-run equilibrium level, a fall in aggregate demand will lead to lower output and employment. Some workers will want to work at the going real wage rate but will be unable to find jobs. Only in the longer run will wages and prices fall enough to boost the real money supply and lower interest rates to the extent required to restore aggregate demand to its full-employment level, and only then will demand-deficient unemployment be eliminated.

Classical Unemployment. This describes the unemployment created when the wage is deliberately maintained above the level at which the labor supply and labor demand schedules intersect. It can be caused either by the exercise of trade union power or by minimum wage legislation which enforces a wage in excess of the equilibrium wage rate.

The modern analysis of unemployment takes the same types of unemployment but classifies them rather differently in order to highlight the behavioral implications and consequences for government policy. Modern analysis stresses the difference between voluntary and involuntary unemployment.

The natural rate of unemployment is the rate of unemployment when the labor market is in equilibrium. This unemployment is entirely voluntary. A worker is involuntarily unemployed if he or she would accept a job offer at the going wage rate. So, frictional, structural and classical types are voluntary unemployment and demand-deficient is involuntary unemployment.

TASKS

I. Give the English equivalents to:

Рабочая сила, процент рабочих, временная безработица, структурная безработица, классическая безработица, безработица вследствие снижения совокупного спроса, добровольная безработица, вынужденная безработица, структура спроса производства, совокупный спрос, полная занятость, уровень полной занятости, денежная масса, ставка реальной заработной платы, ставка равновесной заработной платы, естественная норма безработицы.

II. Match the terms with their definitions:

III. Answer the following questions:

1. What is labour force?

2. What is unemployment rate?

3. Who is considered to be unemployed?

4. How do economists classify unemployment?

5. How is functional unemployment characterized?

6. Who becomes a victim of structural unemployment?

7. What does demand-deficient unemployment refer to?

8. How is classical unemployment described?

IV. Are the following statements true or false? Correct the false ones:

1. The labour force only comprises those people holding a job.

2. People who haven't bothered to register as unemployed will not be included in the official statistics for the registered labour force.

3. Frictional unemployment refers to unemployment arising because there is a mismatch between skills and job opportunities when the pattern of demand and production changes.

4. Demand-deficient unemployment happens when aggregate demand falls and wages and prices have not yet adjusted to restore full employment.

5. Classical unemployment arises when the wage is deliberately maintained below the level at which the labour supply and labour demand schedules intersect.

6. The natural rate of unemployment is the rate of unemployment when the labour market is in disequilibrium.

7. Voluntary unemployment only includes classical unemployment.

V. Render the text in English:

Чтобы измерить безработицу, необходимо знать, сколько людей хотят иметь работу при текущих ставках заработной платы, но в действительности не имеют ее.

Человек, который не работал предыдущую неделю, но был болен, находился в отпуске, бастовал или не мог работать из-за плохой погоды, считается занятым. Человек, ожидающий разрешения возвратиться на работу или приступить к работе на новом месте в течение следующих 30 дней, но не работавший предыдущую неделю, считается безработным.

Существуют три способа потерять работу и стать безработным. Первый - если человека увольняют, поскольку фирма, в которой он работает, закрывается. Второй случай, когда человек временно отстранен от работы. Например, в автомобильной промышленности, когда спрос на автомобили резко понижается, фирма заявляет рабочим, что работы нет, но она надеется нанять их вновь в случае, если спрос возрастет. Третий способ - добровольно оставить работу и стать безработным по собственному желанию.

Безработица растет во время спадов и уменьшается в периоды подъемов и роста экономической активности. Каждый раз, когда наступает спад, доля безработных растет. Как только начинается подъем и расширяется экономическая активность, доля безработных снижается.

SUPPLY AND DEMAND

Demand. If production is undertaken in order to supply the “wants” of mankind demand must be the most basic idea in economics. Every individual demands goods and services. When all the individual demands are put together the resulting composite demand is what the industry must supply if people are to achieve satisfaction. In defining demand economists cannot equate “demand” with “want”, because an industry cannot be expected to supply goods and services without payment. In attempting to discover the demand for a particular commodity we only consider demand that is backed by purchasing power. Man's wants are unlimited, but his demand for a particular item is very often limited if the price he must pay is too high. The demand for goods or services is therefore that quantity consumers will be prepared to buy at a given price, in a given period of time.