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INJECTIONS (ВЛИВАНИЕ ДЕНЕГ В ЭКОНОМИКУ)
An injection is simply an addition to the circular flow of income, which does not arise from the spending of households. It was unrealistic to assume earlier that there would be no such additions. These additions or injections will, of course, increase the size of the circular flow and thus the level of activity in the economy. There are three recognized ways in which funds can flow into an economy. They can be generated through:
Investment
Government spending
Export sales
Figure 4. Additions to the Circular Flow of Income
Investments. Инвестиции
Investment is expenditure on productive capital goods. That is, goods which can be used to produce other goods and services. Thus, investment is usually held to be expenditure on factories, machinery and other physical assets. It is important to realize that economists use the word investment in a different context to the layman. An economist referring to investment does not mean the purchase of paper financial assets such as stocks or shares. Clearly, if the ownership of a company's shares is transferred from one UK citizen to another there is no overall impact on the economy.
Investment can be categorized into net investment and gross investment. Net investment is investment, which actually increases the nation's stock of capital goods. It is such investment that enables the economy to grow. However, some investment is necessary to replace capital stock that is worn out or obsolete. This loss of value of assets is called depreciation. When this replacement is added to the net investment the total achieved is termed gross investment.
You should note that investment increases the circular flow since it comprises extra spending that has not originated in. the circular flow. The main influences on the amount of investment that takes place are:
* the rate of interest since firms often have to borrow to undertake the investment
* the firm's expectation about the future behaviour of the economy. If they believe the economy will boom and the level of economic activity will increase, then they are more likely to enjoy increased sales. They may well decide to invest in new machinery or in a new factory. On the other hand, if the level of investment declines then there will be less injections than previously into the economy and the rate of growth of economic activity (or the national income) will fall. Economic statistics show us that over the last few decades the level of gross investment in the UK economy has fluctuated. This will have been one of the factors affecting the level of national income and the environment in which businesses operate.
Government Expenditure. Расходы государства
Government' expenditure takes many forms and, particularly over the last 50 years or so, has been a very substantial total. This heading covers spendings by both central government and local authorities. Government spending results in an injection of funds into the circular flow.
Let us take as an example a decision by the Department of Transport to build a new motorway. This will lead to a variety of spending, which would not have taken place otherwise. The authorities will have to employ surveyors, lawyers, accountants and construction workers and will have to purchase large quantities of construction materials. All of the spending generated in this way will be an addition or an injection to the circular flow.
Government spending can, of course, take many other forms. Major financial items are the provision of health and social security benefits. The latter tends to put money directly into the hands of people who need it badly and who are, therefore, likely to spend all or most of it in the near future. If it so wishes the government can use its own expenditure to rapidly affect the level of injections and thus the circular flow. Pursuing such policies, however, can have undesirable side-effects.
Exports. Экспорт
Exports are an injection because they result in income entering the UK's circular flow as a result of the spending decisions of foreign households, firms and governments. Notice that this spending by foreign households is a loss (or withdrawal from) their domestic circular flows.
Britain is a major trading nation and, as such, can be described as an open economy. It exports approximately one-third of all the goods and services it produces. The amount of the UK imports varies but over time will be roughly the same proportion. The UK's trade is recorded in the balance of payments figures, which are published monthly and then collected into annual accounts. If you look at the UK's trade figures you will see that rarely, if ever, does the value of exports equal the value of imports.
The balance of payments accounts are split into two broad sections: the current account, which records imports and exports of goods and services; and the capital account, which records international monetary flows in and out of the UK, such as foreign loans and investment in the UK.
Exports have always been important to the UK economy and are indisputably an engine of economic growth. They provide domestic employment not only in the exporting industry but also in the industries, which supply components and raw materials to that industry. Exports bolster the circular flow and promote employment in a range of industries. They also stimulate innovation and competition and generate a satisfying standard of living. Most of the world's most prosperous economies are successful exporters, notably Japan and Germany. Few isolated economies have been economically successful.
VOCABULARY NOTES
injection – инъекция, вливание (напр., денег в экономику)
to arise from – проистекать, являться результатом
to assume – предполагать, считать
thus – таким образом
they can be generated through – это может происходить посредством...
assets – имущество, активы
layman – непрофессионал, неспециалист
an economist referring to investment – говоря о вложениях, экономист...
paper financial assets – имущество, вложенное в ценные бумаги
stock – акция, ценная бумага; запас, ассортимент
there is no overall impact on the economy – большого влияния на эконо мику это не окажет
net investment – чистые инвестиции
gross investment – валовые капиталовложения
worn out – изношенный
depreciation – обесценение (денег), снашивание (в результате износа и морального устаревания)
total – целое, сумма, итог
to term (syn. to call) – называть
rate of interest – процентная ставка
rate of growth – скорость роста
decade – десятилетие
the level... has fluctuated – уровень колебался
has been a very substantial total – составило очень значительную сумму
this heading covers – под этим заголовком рассказывается
to result in (syn. to lead to, to cause, to entail) – приводить к чему-либо;
иметь своим результатом
this will lead to a variety of spending – это повлечет за собой самые раз нообразные затраты
surveyor – землемер, топограф
major financial items – основные статьи расходов
social security benefits – льготы социального обеспечения
to tend to – иметь тенденцию
rapidly – быстро, скоро
pursuing such policies – проведение такой политики
undesirable side-effects – нежелательные побочные явления
as a result of the spending decisions – как результат решения покупать или нет
withdrawal – утечка, изъятие
the amount ... varies — количество ... бывает различным
over time – иногда, время от времени
roughly – приблизительно
the UK's trade is recorded in the balance of payments figures – торговля Великобритании отображена в данных платежного баланса
annual accounts – ежегодные отчеты
rarely, if ever – редко или почти никогда
the balance of payments accounts are split into – статьи (разделы) пла тежного баланса разделяются на
current account – счет текущих операций
capital account – счет движения капиталов
indisputably – бесспорно
to bolster – поддерживать, укреплять
promote employment in a range of industries – обеспечивают занятость в ряде отраслей
innovation – новшество, нововведение
notably – особенно
WITHDRAWALS (ИЗЪЯТИЯ ДЕНЕГ ИЗ КРУГООБОРОТА)
Withdrawals (or leakages) are that part of the circular How, which are not passed on as spending with UK firms. This is income, which individuals, firms or governments take out of the circular flow with the likely result that the level of economic activity in the economy declines. The three forms that withdrawals can take arc:
Savings
Imports
Taxation
Savings. Сбережения
Both businesses and individual citizens can take the decision not to spend all of the income that they receive. A number of factors are thought to determine the level of savings at any one time. Interest rates obviously influence the saver's decision since they represent the return on his or her savings. Many economists believe that decisions to save arc taken in response to periods of economic uncertainty: the more worried people arc about interest rates, job security and so on, the more they arc likely to save. Alternatively, there is evidence that when money is losing value quickly, as in a period of inflation, people tend to purchase consumer durable goods such as televisions and washing machines.
Another factor is social change. Previous generations placed great store by saving in order to carry out major purchases; this is less common today perhaps due to the ready availability of credit.
Imports. Импорт
You will know that expenditure by UK inhabitants on goods and services imported from abroad -will remove those funds from the domestic circular flow and will cause a decrease in the level of economic activity. Periodically, the UK has spent too freely on imports and earnings from exports have been insufficient to cover this. Many factors encourage us to purchase imports: some are favourable to the economy in the long term, whilst others are harmful. If imports of raw materials increase due to the growth of a domestic industry, then this indicates an expanding economy, which should sell more exports in the future in order to pay for the increased expenditure. However, if the imports are the consequence of UK citizens preferring foreign goods on grounds of, for example, price or quality, then the impact may be harmful as jobs are lost in domestic industries.
Taxation. Налогообложение
Funds are withdrawn from the circular flow in the form of taxation by the government. It levies two types of tax:
Direct taxes, such as income tax, corporation tax (on profits) and other taxes on income or wealth;
Indirect taxes, such as VAT and customs and excise duties, which are levied on spending by all of us;
If the authorities withdraw funds through taxation and then fail to spend this tax revenue, the circular flow will reduce the level of activity in the economy.
Taxation policy has been substantially altered by the Conservative government in the 1980s and early 1990s. It has reduced direct taxes because of the belief that taxation of this kind reduces the incentive to work and so dampens the spirit of enterprise in the economy. Indirect taxes, such as VAT, have been increased to make up for some of the revenue lost from direct taxes. The government has thus transferred the tax burden from direct to indirect taxes. The total burden of taxation has hardly altered.
VOCABULARY NOTES
leakage – утечка
which are not passed on as – которые рассматриваются не как...
with the likely result that – в результате чего может; результатом чего может
savings – сбережения, накопления
a number of factors are thought to determine – считается, что ряд факто ров определяет
the return on his or her savings – отдача, процент, доход от... сбережений
there is evidence that – очевидно, что
to place great store by – придавать большое значение
due to – благодаря, из-за
to remove from – удалить, изъять
insufficient to cover – недостаточный для покрытия (расходов)
to encourage smb to do smth – побуждать кого-то сделать что-то
in the long term (ant. in the short term) – в (отдаленном) будущем
domestic industry – национальная промышленность
to withdraw – изымать, выводить, удалять
to levy – взимать, облагать (о налогах)
direct (indirect) taxes- прямые (косвенные) налоги
income tax – подоходный налог
corporation tax (on profits) – налог с прибыли (доходов) корпораций
VAT (value added tax) – НДС (налог на добавленную стоимость)
customs duty – таможенная пошлина
excise duty – акцизный сбор
and then fail to spend this tax revenue – а затем не могут распорядиться (потратить) этими налоговыми поступлениями
has been substantially altered – была значительно изменена
and so dampens the spirit of enterprise – и таким образом подавляет дух предпринимательства
to make up for – компенсировать, восполнять tax burden – бремя налогов
INFLATION (ИНФЛЯЦИЯ)
Inflation is generally defined as a persistent rise in the general price level with no corresponding rise in output, which leads to a corresponding fall in the purchasing power of money.
In this section we shall look briefly at the problems that inflation causes for business and consider whether there are any potential benefits for an enterprise from an inflationary period.
Inflation varies considerably in its extent and severity. Hence, the consequences for the business community differ according to circumstances. Mild inflation of a few per cent each year may pose few difficulties for business. However, hyperinflation, which entails enormously high rates of inflation, can create almost insurmountable problems for the government, business, consumers and workers. In post-war Hungary, the cost of living was published each day and workers were paid daily so as to avoid the value of their earnings falling. Businesses would have experienced great difficulty in costing and pricing their production while the incentive for people to save would have been removed.
Economists argue at length about the causes of, and "cures" for, inflation. They would, however, recognize that two general types of inflation exist:
* Demand-pull inflation
* Cost-push inflation
Demand-pull Inflation. Инфляция спроса
Demand-pull inflation occurs when demand for a nation's goods and services outstrips that nation's ability to supply these goods and services. This causes prices to rise generally as a means of limiting demand to the available supply.
An alternative way that we can look at this type of inflation is to say that it occurs when injections exceed withdrawals and the economy is already stretched (i.e. little available labour or factory space) and there is little scope to increase further its level of activity.
Cost-push Inflation. Инфляция издержек
Alternatively, inflation can be of the cost-push variety. Tills takes place when firms face increasing costs. This could be caused by an increase in wages owing to trade union militancy, the rising costs of imported raw materials and components or companies pushing up prices in order to improve their profit margins.
VOCABULARY NOTES
a persistent rise – неуклонный, постоянный подъем
with no corresponding rise in output – не сопровождающийся подъемом производства
briefly – коротко, кратко
potential benefits – потенциальные выгоды
varies considerably in its extent and severity – бывает разной по длитель ности и остроте
hence – следовательно
mild inflation – мягкая, низкая инфляция
may pose few difficulties – особых проблем нс представляет
entails enormously high rates of inflation – означает (ведет к) громадный рост инфляции
insurmountable – неисчислимые, колоссальные
at length – и сейчас
to pull – тянуть
demand-pull inflation – инфляция, вызванная превышением спроса над предложением, инфляция спроса
to push – толкать
cost-push inflation – инфляция, вызванная ростом издержек производ ства, инфляция издержек
to occur – происходить
to outstrip – обгонять, опережать, превосходить
to stretch – натягивать, напрягать
little available labour – мало рабочей силы
there is little scope – мало возможностей
owing to trade union militancy – благодаря воинственности профсоюзов
in order to improve their profit margins – чтобы увеличить прибыль (раз меры прибыли)
THE IMPACT OF INFLATION ON BUSINESS (ВЛИЯНИЕ ИНФЛЯЦИИ НА БИЗНЕС)
Inflation can adversely affect business in a number of ways:
1. Accounting and financial problems. Трудности бухгалтерского учета и финансирования
Significant rates of inflation can cause accounting and financial problems for businesses. They may experience difficulty in valuing assets and stocks, for example. Such problems can waste valuable management time and make forecasting, comparisons and financial control more onerous.
2. Falling sales. Снижение объема продаж
Many businesses may experience falling sales during inflationary periods for two broad reasons. Firstly, it may be that saving rises in a time of inflation. We would expect people to spend more of their money when prices are rising to avoid holding an asset (cash), which is falling in value. However, during the mid-1970s, when industrialized nations were experiencing high inflation rates, savings as a proportion of income rose! It is not easy to identify the reason for this, but some economists suggest that people like to hold a relatively high proportion of their assets in a form which can be quickly converted into cash when the future is uncertain. Whatever the reason, if people save more they spend less and businesses suffer falling sales. The economic model predicts that if savings rose the level of activity in the economy would fall. Clearly, if this happened we would expect businesses to experience difficulty in maintaining their levels of sales.
I Businesses may be hit by a reduction in sales during a time of inflation for a second reason. As inflation progresses, it is likely that workers' money wages (that is, wages unadjusted/or inflation) will be increased broadly in line with inflation. This may well take a worker into a higher tax bracket and result in a higher percentage of his or her wages being taken as tax. This process, known as fiscal drag, will cause workers to have less money available to spend on firms' goods and services. The poverty trap has a similar impact. As money wages rise, the poor may find that they no longer qualify for state benefits to supplement their incomes and at the same time they begin to pay income tax on their earnings. Again, this leaves less disposable income to spend on the output of firms. Finally, it may be that the wages of many groups are not index-linked and so they rise less quickly than the rate of inflation, causing a reduction in spending power and demand for goods and services.
Once again, the economic model can be used to predict that increases in the level of taxation will increase withdrawals, lowering the level of economic activity and depressing firms' sales
Not all businesses will suffer equally from declining demand in an inflationary period. Those selling essential items, such as food, may be little affected whilst others supplying less essential goods and services, such as foreign holidays, may be hard hit.
3. High interest rates. Высокие процентные ставки
Inflation is often accompanied by high interest rates. High interest rates tend to discourage investment by businesses as they increase the cost of borrowing funds. Thus, investment may fall. Businesses may also be dissuaded from undertaking investment programmes because of a lack of confidence in the future stability and prosperity of the economy. This fall in investment may be worsened by foreign investment being reduced as they also lose some confidence in the economy's future.
Such a decline in the level of investment can lead to businesses having to retain obsolete, inefficient and expensive means of production and cause a loss of international competitiveness. Finally, a fall in investment can lower the level of economic activity, causing lower sales, output and so on. Thus, to some extent, businesses can influence the economic environment in which they operate.
4. Higher costs. Рост издержек производства
During a bout of inflation firms will face higher costs for the resources they need to carry on their business. They will have to pay higher wages to their employees to compensate them for rising prices. Supplies of raw materials and fuel will become more expensive as will rents and rates. The inevitable reaction to this is that the firm has to raise its own prices. This will lead to further demands for higher wages as is called the wage-price spiral. Such cost-push inflation may make the goods and services produced by that enterprise internationally less competitive in terms of price. An economy whose relative or comparative rate of inflation is high may find that it is unable to compete in home or foreign markets because its products are expensive. The economic model tells us that a situation of declining exports and increasing imports will lower the level of activity in the economy with all the consequent side-effects.
VOCABULARY NOTES
impact – удар, влияние, воздействие
waste valuable management time – может уходить много драгоценного времени
make more onerous – сделать более затруднительным
to avoid holding an asset – чтобы избавиться от наличности
whatever the reason – какова бы ни была причина
businesses may be hit by – фирмы (предприятия) могут пострадать от...
wages unadjusted for inflation – заработная плата без учета уровня ин фляции
a higher tax bracket – следующая группа, категория (напр., при группи ровке налогоплательщиков по доходу)
fiscal drag – финансовый тормоз экономического роста с помощью налоговых изъятий
they no longer qualify for – они больше не подпадают под…
to supplement their incomes – что является дополнением к их доходу this leaves less disposable income – из-за этого остается меньше средств index-linked – индексированный
a reduction in spending (syn. buying, purchasing) power – снижение поку пательной способности
declining demand – падение спроса
tend to discourage investment – не способствуют инвестированию
may also be dissuaded from – могут также отказаться от...
a lack of confidence – недостаток (отсутствие) уверенности
this fall in investment may be worsened by foreign investment being reduced – это падение уровня инвестирования может стать еще сильнее, если сократятся иностранные инвестиции
can lead to businesses having to retain – может привести к тому, что фирмам (предприятиям) придется сохранить
a bout (syn. period, spell) of inflation – период инфляции
less competitive in terms of price – менее конкурентоспособный в смыс ле цены
CAN INFLATION BE BENEFICIAL (МОЖЕТ ЛИ ИНФЛЯЦИЯ БЫТЬ БЛАГОТВОРНОЙ)?
We would be simplifying the impact of inflation on business if we suggested that all effects were unfavourable. There is a school of thought, which argues that a low and stable rate of increase in the price level can be beneficial. It believes that a steady rise in money profits produces favourable expectations and 'induces investment as firms seek to expand. This action expands the economy as a whole. Paradoxically, inflation can also reduce the costs of businesses in the short run. Many enterprises incur costs, which are fixed for some period of time – for example, the rent of a factory may be fixed at a particular figure for a few years. At a time when the selling price of the firm's product, and hence its sales income, is rising this cost will be falling in real terms and thus stimulating the business.
There is a. further argument that firms may be persuaded to borrow heavily in a period of inflation since the burden of repaying loans is reduced by inflation. If inflation is running annually at 10 per cent, for example, then the real value of the repayments of the loan will fall by approximately that amount each year. This may serve to encourage investment which, since it is an injection into the circular flow, will promote the level of activity. However, in these circumstances interest rates are likely to be high.
Government will accept that low rates of inflation are likely to exist in many economies. Inflation rates of 5 per cent or below arc not considered to be too great a problem, especially if competitor nations are suffering similar rates.
In spite of the above, the conclusion must be drawn that inflation is, in general, harmful to business and its environment. Indeed, many economists would contend that inflation is the fundamental evil as its presence leads to lack of competitiveness and therefore relatively high unemployment and low rates of growth. This viewpoint has gained in credence in government circles over the last few years. It is for this reason that its control has been a major objective of government economic policy throughout the 1980s and early 1990s.
VOCABULARY NOTES
beneficial – выгодный, приносящий доход
unfavourable (ant. favourable) – неблагоприятный
there is a school of thought, which argues that – существует мнение, что...
and induces investment as firms seek to expand – и способствует росту капиталовложений, так как фирмы (предприятия) расширяются
in the short run – очень быстро
incur costs, which are fixed for some period of time – несут расходы, ко торые в течение какого-то периода являются неизменными
a further argument – еще один аргумент
to borrow heavily – брать взаймы большие суммы
repaying loans – выплата займов
to contend – настаивать, утверждать
this viewpoint has gained in credence – эта точка зрения получила боль шое распространение
a major objective – главная цель