VIII. Answer the questions
1. What are the three main questions of the economy?
2. What do you need in order to understand economics?
3. What happened to the price of oil from 1900 to 1973?
4. What did OPEC decide in 1973?
5. Why was there only a small reduction in oil sales?
6. What is an oil price shock? What did the oil price shocks lead to?
7. How do people respond to a higher price for a commodity?
8. What effect do higher oil prices have on the economy?
9. What happens throughout the economy when there are high oil prices? 10 What 2 effects did high prices have on oil-importing countries?
11. When did oil become scarce?
12. What is a scarce resource?
IX. Translate using all the active possible
1. () , , .
2. , , .
3. 70- . .
4. .
5. . .
6. . .
INCOME ()
The second of the three economic issues is the question of income, that is, income distribution, the way in which income that's what people earn is distributed or shared around.
You, and your family, have an income. You have an annual income, that is what you earn in a year. This income allows you to enjoy various goods and services. It means you have a certain standard of living. Your standard of living, of course, includes what you think of as necessary to your life, things like food, water, somewhere to live, health and education. But your income doesn't just cover the necessities of life. It also includes recreation, whether that's sport or TV or a holiday. Your income will be less than some of your neighbours', but it will be more than some of your other neighbours'. Your neighbours mean not just people living in your own country, but also people living in other countries.
Just as you and your family have an income, so nations, different countries, also have an income the national income, it's often called. A national income is not the money the government gets. The national income is the sum total of the incomes of all the people living in that country, in other words, everyone's income added together. In the same way one can think of world income as the total of all the incomes earned by all the people in the world.
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Concerning the distribution of national and world income, some questions are to be asked: who, in the world, gets what share of these incomes? The distribution of income, either in the world or in a country, tells us how income is divided between different groups or individuals. Table 1 shows the distribution of world income. There are three headings down the left-hand side of the table: income per head, percentage of world population and percentage of world Income. In poor countries, like India, China and the Sudan, the income per head is only one hundred and fifty-five pounds per year. But at the same time, they have fifty point seven per cent of the world's population. These poor countries only have five per cent of the world's income.
In middle-income countries the income per head is eight hundred and forty pounds, that's in countries like Thailand and Brazil. In the major oil countries, like Kuwait and Saudi Arabia, it's seven thousand, six hundred and seventy. In industrial countries it's six thousand, two hundred and seventy.
Turning to middle-income countries again, they have twenty-five point one per cent of world population, with fourteen point two per cent of world income. The major oil countries have point four per cent of population, the industrial countries fifteen point six. The oil countries have one point five per cent of world income, the industrial countries sixty-four point eight.
The first economic question is for whom does the world economy produce? As the table shows, it produces essentially for the people living in the rich industrial countries. They get sixty per cent of the world's income, although they only have sixteen per cent of its population. This suggests an answer to the
second question, that is of what is produced. The answer is that most of world production will be directed towards the goods and services that these same rich industrialised countries want.
The third question is how goods arc produced. In poor countries, with little machinery, not very much technical training and so on, workers produce much less than workers in rich countries. And poverty is very difficult to escape. It continues on and on. And this goes some way towards accounting for the differences in national incomes. It accounts for an unequal distribution of income, not just between countries but also between members of the same country, although there individual governments can help through taxation. In other words, governments can act to help distribute income throughout their population.
VOCABULARY NOTES
income distribution
an annual income
a certain standard of living
to cover the necessities of life
recreation ,
national income
share of income ,
income per head
percentage of world population
percentage of world income
essentially ,
world production
rich industrialised countries
not very much technical training
to escape .
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to account for (syn. to explain)
the differences in national incomes
unequal distribution of income
throughout population
Assignments
I. Suggest the Russian equivalents
income is shared around; income doesn't just cover the necessities of life; to suggest an answer to the question; to direct the production towards the goods and services; individual governments
II. Fill in the table with the data from the text Table 1. The distribution of world income
| Poor countries | Middle-income countries | Major oil countries | Industrial countries | Soviet bloc | |
| Income per head | |||||
| % of world | |||||
| population % of world income |
III. Fill in the gaps with the words and expressions from the text
1. You have __, that is what you earn in a year.
2. Your income doesn't just __ the necessities of life.
3. It includes __, whether that's sport or TV or a holiday.
4. __ is the sum total of the incomes of all the people living in that country.
5. __ is the total of all the incomes earned by all the people in the world.
6. In poor countries __ is only one hundred and fifty-five pounds per year.
7. In __ countries the income per head is eight hundred and forty pounds.
8. Most of world production __ towards the goods and services that these same rich industrialised countries want.
9. In poor countries, with __, not very much technical training workers produce much less than workers in rich countries.
10. This goes some way towards __ the differences in national incomes.
IV. Find English equivalents
; ; ;
; ; ; ; ; ; ; ; ; ; ;
V. Give the definition of income distribution
VI. Give the definition of national Income
VII. Answer the questions
1. What countries are called poor?
2. For whom and what does economy produce?
3. What is the role of governments in distributing incomes?
VII. Translate into English using all the active possible
1. , , , , .
2. , . , 2 : , ; , . , , . , , . .
THE ROLE OF GOVERNMENT ( )
Having mentioned the effect of government tax policy on the income distribution, it's necessary to examine in greater detail the role of the government in society In every society governments provide such services as national defence, police, public education, firefighting services, and the administration of justice. In addition, governments through budget make transfer payments to some members of society.
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Transfer payments are payments made to individuals without requiring the provision of any service in return. Examples are social security, retirement pensions, unemployment benefits, and, in some countries, food stamps. Government expenditure, whether on the provision of goods and services (defence, police) or on transfer payments, is chiefly financed by imposing taxes, although some (small) residual component may be financed by government borrowing. Tabl. 2 compares the role of the government in four countries.
