Text 2. What are microeconomics and macroeconomics ?

Economists talk about microeconomics and macroeconomics. Microeconomics deals with people, like you and me, and private businesses. It looks at the economic decisions people make every day. It examines how families manage their household budgets. Microeconomics also deals with companies – small or large – and how they run their business. Macroeconomics, on the other hand, looks at the economy of a country – and of the whole world. Any economist will tell you, though, that microeconomics and macroeconomics are closely related. All of our daily microeconomic decisions have an effect on die wider world around us.

Another way to look at the science of economies is to ask, ‘what’s it good for? ’ Economists don’t all agree on the answer to this question. Some peciali positive economics. They study economic data and try to explain the behaviour

of the economy. They also try to guess economic changes before they happen. Others peciali normative economics. They suggest how to improve the economy. Positive economists say, ‘this is how it is’. Normative economists say, ‘we should...’

So what do economists do? Mainly, they do three things: collect data, create economic models and formulate theories. Data collection can include facts and figures about almost anything, from rates to coffee production. Economic models show relationships between these different data. For example, the relationship between the money people earn and unemployment. From this information, pecializi try to make theories which explain why the economy works the way it does.

Exercises

 

Match the words with the definitions.

1. budget         A the people who control a country and make laws

2. business B information

3 convenience C company that sells goods or services

4data               D easiness

5 demand        E the amount of money you have for something

6government  F how much people want something

7 inflation  G the number of people without work

8 resources H something such as money, workers or minerals belonging to an pecializing, country, etc which can be used to function properly

9 trade-off I rising prices

10 unemployment  J giving away something in exchange for something

 

Now read the text again and match each paragraph with the correct heading.

PARAGRAPH 1.......................

PARAGRAPH 2.......................

PARAGRAPH 3.......................

PARAGRAPH 4.......................

PARAGRAPHS.......................

A How economists work

B Making deals every day

C Various ideas about economics

D Two areas of economics

E Two types of economist

 

Text 3. Macroeconomics

In the 1930s one of the world’s strongest economies suffered a devastating collapse. It was the American economy, and the disaster was the Great Depression. The effects of the Great Depression were felt all around the world, and it brought about a change in economic thinking. Economists began to pecial that looking at the behaviour of individual consumers and suppliers in the economy was not enough. Economists and governments had to understand how the whole economy worked. In other words, they had to have an understanding of macroeconomics.

Microeconomics looks at how the details of the economy work. Macroeconomics takes a few steps back and looks at the whole picture. While microeconomics looks at supply and demand for a single product or industry, macroeconomics follows supply and demand patterns for the whole economy. Whereas microeconomics is about economic events at home, macroeconomics looks at how the domestic economy interacts with the economies of other countries.

However, macroeconomics isn’t only about knowing what’s happening in the economy. After the shock of the Great Depression, governments peciali that an economy needs to be managed. Most governments aim to have steady economic growth, to control inflation and to avoid recessions. Just managing an individual business is a hard enough task. How do you manage a whole economy? Governments have certain mechanisms which help them to do this.

The first of these mechanisms is fiscal policy. Fiscal policy refers to the tax system and to government spending. By increasing or decreasing the amount of tax people must pay, the government can affect how much money people have available to spend ( п disposable income). This, in turn, has an effect on demand in the market. By increasing or decreasing their own spending, governments can have a huge effect on the growth of the economy.

The second mechanism is monetary policy. With its monetary policy, a government sets interest rates and also controls the amount of money that circulates in the economy. The interest rate the government sets influences the rate that commercial banks set when they lend money to customers. Interest rates have a big impact on the economy. For example, they can affect people’s decisions about saving or spending money.

The third mechanism is administrative approach. This is a range of things that governments do to increase the supply of goods and services to the economy but without increasing prices. There are a number of ways governments try to do this. For example, improvements in education and training can make the workforce more productive. Investment in technology can make industry more efficient. Governments can also change employment and business laws to make the market more competitive.

With a combination of these methods, governments try to steer or guide the economy on a steady and predictable path. They aim for gradual economic growth and to avoid disasters like the Great Depression.

Exercises

2. Match the words and phrases with the definitions.

 

1 devastating collapse	A something that happens
2fiscal policy	B a method or tool for
	doing something
3domestic	C control of spending
	through taxation
4steady growth	D money you have to
	spend after paying tax
5monetary policy	E a serious slowing down
	of the economy
6recession	F at a slow, unchanging
	rate
7mechanism	Gmove around
8disposable income	H control of the cost
	of borrowing and
	movement of money in
	economy
9interest	I the members of the
	population able to work
10 circulate	G something you know will
	happen
11depression	K complete destruction
12 predictable	L the cost of borrowing
	money
13 event	M not foreign
14 vorkforce	N a very bad period for the
	economy

 

2. Now read the text again and answer the questions

1 Which countries were affected by the Great Depression?

A only America

B just America and Europe

C the whole world

2 Which of the following is interested in foreign economies?

A microeconomics

B macroeconomics

 C both micro and macro economics

3 The three different mechanisms which governments use are...

A all concerned with how much money people

have to spend.

B aimed at improving education and training.

C all different ways of managing an economy.

4 Which mechanisms involve changing interest rates?

A fiscal policy

B- monetary policy

C administrative approach

5 Which mechanisms might involve creating job training schemes for school leavers?

A fiscal policy

B monetary policy

C administrative approach

6 What do governments want to achieve with their macroeconomic policies? A to predict what will happen in the economy

 B to create steady economic growth

C to combine different paths for economic growth

 

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