4. Answer the following questions:

1. Give the definition of inflation. What can you add to it?

2. What can you say about the extent and severity of inflation?

3. Types of inflation (short characteristics). Are there any others?

4. What is demand-pull inflation? Name countries with this type of inflation.

5. What is cost-push inflation? Name countries with this type of inflation.

6. How do the monetarists explain the reasons of inflation?

7. How is inflation measured?

5. Suggest the Ukrainian equivalents.

• inflation varies considerably in its extent and severity

• mild inflation of a few %

• rate of inflation

• insurmountable problems

• demand-pull (cost-push) inflation

• the economy is already stretched

6. Match the terms with their definitions:

Terms	Definitions
1. inflation	a) a) Demand for goods and services exceeds the supply, causing buyers to bid up the prices for such goods and services.
2. cost-push inflation	b) b) Inflation, i. e. rising prices, which seem to be primarily related to increases in the costs of business inputs.
3. demand-pull inflation	c) c) Inflation at extremely high rates (say, 1000, 1 million, or even 1 billion per cent a year).
4. galloping or hyper­inflation	d) d) The steady decline in value of the currency unit evidenced by generally increasing prices.
5. creeping inflation	e) e) Inflation with a fairly stable rate from year to year, averaging less than 5%.

7. Replace the parts in italics by synonyms.

• a persistent rise

• hence

• may pose few difficulties

• which entails enormously high rates

• at length

• inflation occurs when

• firms face increasing costs

• owing to trade union militancy

8. Test yourself. "Economic Indicators." Mark the following sentences as True or False. If they are false, explain why.

1. Inflation is a measure of increasing prices.

2. High inflation generally means increasing unemployment.

3. A healthy consumer economy always means lower unemployment.

4. Higher investment in training and education is easier during a low point in the economic cycle.

5. A tight fiscal policy means high taxation and high government spending.

6. Governments need to control their borrowing requirement.

7. A high value of the local currency is good for exports.

8. House-building is seen as a good indicator of what is happening in the domestic economy.

9. Gross National Product (GNP) is a measure of the annual value of sales of goods and services in a country, and it does not include sales for companies abroad.

10. Capacity utilization is a measure of how many people are in work.

11. Generally, high levels of supply and low levels of demand means unemployment falls.

12. Growth creates wealth and wealth creates jobs.

13. Rationalization means cutting labour costs so people lose their jobs.

14. Increased investment in real terms means increased investment above inflation rates.

15. A balance of payments deficit means a company is spending more than it earns.

9. Financial Indicators. In order to get an overview of the health of an economy in a country, bankers may examine the financial indicators, which show the main economic figures. Look at the items in the box and match them with the definitions.

Gross Domestic Product annual inflation average monthly salary current account balance	Gross foreign debt bank prime rate industrial output unemployment figures	trade balance FX reserves discount rate Annual Percentage Rate

1. The amount of foreign currency held by the country.

2. The yearly interest rate.

3. Those people in a country who do not hold a job.

4. The rate between imports and exports.

5. The monthly payment paid to employees.

6. The yearly inflation figures.

7. The amount of goods produced by manufacturing companies.

8. The bank lending rate.

9. The amount of money owed by the country.

10. The sum held on the country's current account.

11. The interest rate at which central banks lend to commercial banks.

12. The total value of goods produced by a country in a specified period.