Self-study 1 Task

Task 3.3.Writing : Write the summary to the given text

Inflation

A period of increased sending that causes rapid rises in price is referred to as inflation. This is not necessarily a part of the busi­ness cycle. Rather, it is a kind of weakness in an economic system. When your money buys fewer goods so that you get less for the same amount of money as before, inflation is the problem. There is a general rise in the price of goods and services. Your money buys less. Sometimes people describe inflation as a time when "a dollar is not worth a dollar anymore."

One major cause of inflation is a rising demand for goods and' services. As people spend more money, their rate of spending may increase faster than the goods and services available. More and more people are willing and able to pay more for the fewer things that are available. As a consequence, the prices keep going up.

A second cause of inflation is a rise in the cost of the factors of production. Prices are pushed up by costs. For instance, if the labor cost of producing a good or service goes up, so will the price of the good or service.

A third cause of inflation is a lack of competition. If sellers have little or no competition, they are free to set prices as they want. If there is little competition, buyers must buy from businesses that are selling, and they must pay the price asked.

Inflation is a problem for all consumers. People who live on a fixed income are hurt the most. Retired people, for instance, cannot count on an increase in income as prices rise. Elderly people who no longer can work face serious problems in stretching their incomes to meet their needs in times of inflation. Retirement income or any fixed income usually does not rise as fast as prices.

Even for working people whose incomes are going up, inflation can be a problem. The cost of living goes up, too. People who work must have even more money just to keep up their standard of living.

— natural resources, labor, capital goods, and entrepreneurship. All countries must make decisions about how these factors of production will be used to provide goods and services for its people. Let's take another look at these factors of production.

Natural resources are all the things like trees water, minerals, and fish that come from the land or the sea. Labor is the work done by people to produce goods and services. Through their work, people change the raw materials taken from the land and the sea. Another factor of production is capital goods, the machines, buildings, and equipment used to produce goods and services and to move them to the consumer. Capital goods are also made by labor. Entrepreneurship is provided by individuals who are willing to take the risk of starting and managing businesses. The wants people have for goods and services are unlimited. However, each country has a limited amount of resources from which to provide goods and services. Suppose you live in a country in which everyone does what his or her mother or father does. If your father is a farmer, you become a farmer. If your mother weaves baskets, you weave baskets. An economic system in which people do things the way they have always done them is called a traditional system. The same tools and methods used by parents and grandparents are used by people today. Most traditional economic systems have found it hard to grow. They fall behind other countries. They use their resources as they always have because they value their traditional ways of living. New methods and products are not accepted, so the system does not grow.

Sometimes the government of a country — and the government alone — gives the answers to what kind of economic system the country will have. The government owns the resources and employs the workers. It decides what workers will do, what goods and services they will produce, how much will be produced, and what income they will receive. This type of economic system is called a command system.

In a command system, the government decides what will be produced. In a command economy, a central planning committee sets the goals. The committee may also decide who will use the goods and services. In many command economies, consumer goods and services rank low on the priority list.

A market system is an economic system in which the interaction between buyers and sellers determines what is bought and sold. In a market system the questions are answered through the market, which is made up of all individuals' buying and selling decisions put together. The market is not a place; it is a concept.

In a market system, the consumer is all-important. Every time a consumer buys a product, he or she is telling the market to supply more of that product. Interaction of consumers and producers is what makes a market system work.

However, everyone has certain needs such as food, clothing, and shelter that must be satisfied. The economic system that does the best job of satisfying those needs obviously is the most successful. No economic system is perfect… Most economic systems in the world today are mixed systems. Mixed systems combine some parts of other systems. They may be a mixture of traditional, command, and market economic systems.