TASK 14.4 Writing
You have inherited €0.5mln from rich aunts (€1m total) and now want to start a business. Decide what your business will be (about 250 words).
TASK 14.5 Presentation on topic: How to manage your time more efficiently
SELF-STUDY 15
TASK 15.1 Reading
Read the text about variety of policy responses to changes in the economic climate and give definitions of underlined phrases. Learn new vocabulary and make your own sentences using them.
Fiscal policy refers to the government’s efforts to keep the economy stable by increasing or decreasing taxes and government spending.
High tax rates slow the economy because they take money out of the private sector and put it into the hands of government. They also discourage small businesses by decreasing profit margins and making effort less rewarding. But high taxes also mean that more money is available to spend on education health, defense, highways and social programs. In practice, most governments spend more than they collect in taxes, creating a national debt. Reducing this deficit is politically unpopular as it involves cutting public benefits.
Monetary policy refers to the role that central banks have in controlling the money supply. If there is more money in circulation, demand in the economy increases, but so does inflation. Central banks (‘the Fed’ in the US; ‘the ECB’ in the EU) can act in three main 'ways:
Raising and lowering interest rates
The central bank controls the ’base rate' (AmE discount rate) - how much commercial banks have to pay to borrow money from them. This rate is passed on (with some additional percentage as profit) to any customer who needs a loan. At this point it is referred to as the interest rate. When the economy is booming, the central bank raises rates. This makes borrowing more expensive. So businesses borrow less, and the economy slows as companies spend less on labour, plant, equipment, etc. The opposite is true when the central bank lowers rates: businesses borrow more and the economy takes off.
Reserve requirements
The central bank tells commercial banks what percentage of their customer accounts must be physically kept in the bank as cash. When reserve requirements are raised, banks have less money available to make loans and the economy cools.
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