B. The passive use of –able

EXAMPLE The difficulty can be avoided.

ð The difficulty is avoidable.

1. The commodity can be marketed.

2. The plan can be tested.

3. The flow of work can be measured.

4. The relationship can be defined.

5. The product can be obtained.

Exercise 4. Give suitable opposites for these words

EXAMPLE capitalism: communism

minority	maximum	theoretical
positive	public	collective
solid	simplify	longterm

Exercise 5. Translate.

1. Военные ведомства оказывают мощное влияние на Президента.

2. Повышение государственных расходов на выплату пенсий и пособий по безработице несомненно приведет к увеличению темпов инфляции.

3. Решение о строительстве нового шоссе между провинцией Квебек (Канада) и штатом Техас (США) послужит интересам нации в целом.

4. Благосостояние народа зависит от количества денежной массы в обращении.

5. После того, как был запрещен выброс вредных веществ в реку, компания была вынуждена установить новые очистные сооружения, что привело к повышению цен на продукцию.

6. Антимонопольное законодательство не разрешает производителям-монополистам бесконтрольно повышать цены на товары первой необходимости.

7. Введение новых тарифов на ввоз подержанных машин призвано уменьшить количество аварийных ситуаций на дорогах страны.

8. Экономический спад привел к резкому обнищанию населения.

9. Забастовочный комитет потребовал увеличения заработной платы и выполнения программ по социальному страхованию.

10.Пособия малообеспеченным семьям предоставлялись в ограниченном объёме.

6 FLUCTUATIONS IN ECONOMIC ACTIVITY

THE BUSINESS CYCLE

Economic activity has been subject to considerable variation ever since records have been available. Periods of rapid expansion have been followed by stagnation and depression; rising prices, which have many times produced inflation, have been succeeded by falling prices; full employment by unemployment; rising wages by falling wages; and expanding output by declining output. These fluctuations have come to be associated in the public mind as the “business cycle”. What precisely is meant by this phrase? For a long time all succeeding business fluctuations were treated by observers as if they actually represented the same sequence of events as all their predecessors. It was noted that some were stronger than others, and that some depressions were more disastrous than others. In the nineteenth century cycles were characterized by widespread monetary and banking instability and crises were accompanied by mass sales of securities in short periods of market “panics” or by run of depositors on banks in “banking crises”.

Nowadays economists refer to a business cycle as a type of fluctuations found in the aggregate economic activity of a nation that organized its work mainly in business enterprises. A business cycle is identified as a sequence of five phases:

· Contraction (a slowdown in the pace of economic activity);

· Trough (when the economy hits bottom, usually in a recession, the lower turning point of a business cycle);

· Expansion (a speedup in the pace of economic activity);

· Peak (the upper turning of a business cycle);

· Revival (economic recovery) (See picture 1).

Picture 1 – Phases of the Business Cycle

A recession occurs if a contraction is severe enough. A deep trough is called a slump or a depression.

This sequence of changes is recurrent but not periodic. The peaks and troughs of business cycles are referred to as “turning points”.

In other words, the business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables such as employment, real personal income, industrial production and retail sales.

The business cycle is affected by all the forces of supply and demand. However, it is most dependent on the availability of capital, which is dependent upon interest rates. Too much capital will turn a healthy expansion into a peak, at which point greed will bid up the price of assets, often causing inflation. At this point, a stock market correction may indicate that assets are overvalued, creating fear and a contraction. The Federal Reserve lowers interest rates to spur the economy into expansion during a trough. It raises rates during an expansion to avoid too much of a peak.

A trough usually is accompanied by a recession and a bear market, while an expansion is usually signaled by a bull market and inflation.

Recessions and business cycles are thought to be a normal part of living in a world of inexact balances between supply and demand. What turns a normal recession or 'ordinary' business cycle into an actual depression is a subject of debate and concern. The even larger question is whether it is largely a failure on the part of free markets or largely a failure on the part of government efforts to regulate interest rates, curtail widespread bank failures, and control the money supply.

THE GREAT DEPRESSION

The Great Depression was a severe worldwide economic depression in the decade preceding World War II. In most countries it started in about 1929 and lasted until the late 1930s or early 1940s. It was the longest, most widespread, and deepest depression of the 20th century, and is used in the 21st century as an example of how far the world's economy can decline. The depression originated in the United States, starting with the stock market crash of October 29, 1929 (known as Black Tuesday), but quickly spread to almost every country in the world.

The Great Depression had devastating effects in virtually every country, rich and poor. Personal income, tax revenue, profits and prices dropped, and international trade plunged by a half to two-thirds. Unemployment in the United States rose to 25%. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by approximately 60 percent. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as cash cropping, mining and logging suffered the most.

Historians most often attribute the start of the Great Depression to the sudden and total collapse of US stock market prices on October 29, 1929. However, some see the stock crash as a symptom, rather than a cause of the Great Depression. Even after the Wall Street Crash of 1929, optimism persisted for some time; John D. Rockefeller said that "These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again." The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30% below the peak of September 1929. Together, government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the previous year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.

By mid-1930, interest rates had dropped to low levels, but expected deflation and the reluctance of people to add new debt by borrowing, meant that consumer spending and investment were depressed. Prices in general began to decline, but wages held steady in 1930; but then a deflationary spiral started in 1931. Conditions were worse in farming areas, where commodity prices plunged, and in mining and logging areas, where unemployment was high and there were few other jobs.

The common view among economic historians is that the Great Depression ended with the advent of World War II. Many economists believe that government spending on the war caused or at least accelerated recovery from the Great Depression. However, some consider that it did not play a very large role in the recovery, although it did help in reducing unemployment.

VOCABULARY

A

1. stagnation – застой, отсутствие или медленное развитие

2. succeeding fluctuations – следующие друг за другом колебания, изменения

3. a sequence of events – последовательность, цикл событий

4. predecessor – предшествующий элемент

5. to be accompanied by – сопровождаться чем-либо

6. securities – ценные бумаги

7. a depositor – вкладчик, депонент

8. aggregate economic activity – совокупная, общая экономическая деятельность

9. contraction – падение/сокращение деловой активности

10. trough – низшая точка цикла, дно экономического цикла

11. revival – оздоровлении, оживление экономики

12. to occur – происходить, случаться

13. a slump – резкий экономический спад

14. recurrent – периодически повторяющийся

15. retail sales – розничные продажи

16. greed will bid up the price of assets – страсть к наживе приведет к повышению цены на активы, фонды

17. to spur the economy into expansion – стимулировать рост, развитие экономики

18. to avoid – избегать, остерегаться

19. a bear market/ a bull market – рынок, характеризующийся тенденцией падения цен/ рынок, характеризующийся тенденцией роста цен

20. to curtail widespread bank failures – сокращать, уменьшать широко распространённые банкротства банков

B

1. preceding - предшествующий

2. to decline – убывать, снижаться, сокращаться

3. to originate in – брать начало, возникать, происходить

4. stock market crash - резкий обвал курсов ценных бумаг на (Нью-Йоркской) фондовой бирже

5. to spread to other countries – распространился на другие страны

6. to have a devastating effect – оказать разрушительный эффект, воздействие

7. tax revenue – государственный доход от налогов, налоговые поступления

8. international trade plunged by a half – международная торговля сократилась на половину

9. construction was virtually halted – строительство фактически было остановлено

10. a rural area – сельский район

11. approximately – приблизительно, примерно

12. plummeting demand – стремительно падающий спрос

13. cash cropping – выращивание товарных культур (cash crop - сельскохозяйственная культура, производимая для продажи на рынке, например, кофе, табак)

14. to attribute to smth – относить за счет чего-либо, объяснять чем-либо

15. prosperity – период экономического процветания

16. to suffer severe losses – нести серьезные убытки

17. to cut back expenditures – сокращать, урезать расходы, траты

18. a drought – засуха

19. reluctance – нежелание

20. with the advent of World War II – с началом второй мировой войны

21. to accelerate recovery – ускорить выздоровление, экономическое оживление

EXERCISES

Exercise 1. Make each pair of sentences into a new conditional sentence, changing may to might, and changing the tense.

EXAMPLE Citizens are completely free. Factory-owners may make their employees too long each day. ð If citizens were completely free, factory-owners might make their employees work too long each day.

1. There is no system of control. Landowners may build factories in unsuitable places.

2. They are completely free. Workers may work only when they need money badly.

3. They have all the money they need. They may not work.

4. The government want to improve the general conditions of work. They may make new laws.

5. Employees anticipate new and better working conditions. They may increase their productivity.

6. You regularly provide essential services. You may get more business.

7. They undertake to replace the old school with a new one. We may provide some of the money.

Exercise 2. Make these sentences passive, omitting the agent phrase.

EXAMPLE The government reduced private property to a minimum. ð Private property was reduced to a minimum.

1. The government limited private enterprise to a small area in the economy.

2. They permit the citizens to have personal property.

3. The workers will produce only essential commodities.

4. That factory produced a large quantity of shoes last year.

5. You will charge more money for these services.

6. The central authority must plan the economy over a number of years.

7. The authorities provided large numbers of workers for the ten new factories.

8. The government reduced the quantity of shoes produced in that factory.

9. The state organized the whole economic effort of the nation.

10.The central authority has planned the whole economic programme for the next five years.

Exercise 3. Study this diagram about kinds of production and then answer the questions.

PRODUCTION

Primary industries Secondary industries Tertiary industries

Hunting Fishing Farming Mining etc.

Engineering Building Gas, electricity Weaving etc.

Intermediate Banking Trading Insurance Transport etc.

Final Teaching Medicine Defence Acting etc.

1. Which of these categories describes secondary industries? (a) selling things; (b) growing things; (c) making things.

2. Which of these categories relates to both primary and secondary industries? (a) providing goods; (b) providing services.

Exercise 4. Word-formation.

a) Form adjectives from these nouns:

money

benefit

responsibility

majority

addition

commerce

nature

minority

base

capital

locality

relation

b) Form verbs from these adjectives:

regular

relative

satisfactory

special

complex

realistic

selective

influential

simply

national

specific

indicative

c) Form nouns from these verb-adjective pairs:

imagine: imaginative

collect: collective

inform: informative

investigate: investigative

invent: inventive

originate: original

prescribe; prescriptive

describe: descriptive

possess; possessive

prevail: prevalent

prevent: preventive

vary: various

Exercise 5. Translate.

1. Прошлогодняя засуха произвела разрушительный эффект в сельских районах страны.

2. Детективы восстановили последовательность событий в день, когда была совершена кража и таким образом арестовали настоящего преступника.

3. Нежелание наследников сократить расходы привело предприятие их деда к банкротству.

4. Компания отнесла серьезные убытки, которые она понесла на зарубежных рынках за счет несвоевременной и непродуманной рекламной кампании.

5. Многие транснациональные корпорации берут свое начало в США.

6. Оживление экономики сопровождается увеличением числа розничных продаж.

7. Вы не сильно преуспеете в бизнесе, если будете избегать просчитанных рисков.

8. Во время экономического спада государственные налоговые поступления сократились примерно на 30%.

9. Период экономического процветания начался в промышленности и постепенно распространился на все сферы экономики.

6 FROM SMALL BUSINESS TO

THE CORPORATION

THE SOLE PROPRIETOR

Many businesses are sole proprietorships, firms owned and operated by a single person. When a person decides to open an independent business, that person is then entirely responsible for its success or failure. Any profits go to the owner; any losses are his or her responsibility as well. If the losses prove to be greater than the investment, the individual is responsible for paying them, even if this depletes all per­sonal assets.

One of the advantages of a sole proprietorship is that an owner can make decisions quickly and decisively without having to consult others. And an individual proprietor, by law, pays fewer taxes and at a lower rate than does a corporation.

There are disadvantages to this form of business organization, however. A sole proprietorship ends with the incapac­ity or death of the owner. The assets can be inherited by a person who may then become the operator, but legally the business dies with its owner. Also, since it is dependent upon the amount of money the owner has saved or can borrow, usually it does not develop into a large-scale enterprise.

In spite of its limitations, the sole proprietorship is well adapted to many kinds of small businesses and suits the temperament of many persons who like to exercise initiative and be their own bosses. Some economic contributions of small business are:

· A small business is often the starting point for developing a new product or service. One person tries out an idea. If it is successful, the business grows, or the product may be bought by a larger firm.

· The small business can give an individual a chance to gain experience, which the person may use later on a larger scale.

· Small businesses are particularly well suited for meeting specialized local needs.

· Artisans can provide individualized products for customers who have grown weary of mass-produced goods.

· Small businesses provide a service where knowing one's customers is important.

· Sole proprietors are reassuring to customers who believe an individual who is accountable will do a good job.

THE BUSINESS PARTNERSHIP

When a proprietor wants to expand a business, one way to do so is to form a partnership, a business formed for profit by two or more co-owners. The rights and duties of a partner­ship are regulated by laws of the state where it is formed and by a legal agreement entered into by the co-owners. Usually an agreement specifies the amount of money each is invest­ing and the duties each partner assumes. A partnership agreement also may provide for a "silent partner" who does not take part in the management, but who invests money in the business.

The partnership has the advantage of pooling manageri­al talent. One partner may be qualified in production, another in marketing. The partnership, like individual ownership, is exempt from most of the reporting that the government re­quires of corporations. Furthermore, it has a favorable tax position when compared with the corporation. Federal taxes are paid by individual partners on their share of earnings; beyond that the business is not taxed.

A major disadvantage of the partnership is that each member is liable for all the debts of the partnership; the act of any partner is legally binding upon all the others. If one partner takes a large amount of money from the business and squanders it, the others must pay the debt. Partnerships suffer another major disadvantage: decision-making is shared. If partners have serious and constant disagreements, the business is bound to suffer.

Nonetheless, the partnership remains a vital part of the overall business economy.

FRANCHISING AND CHAIN STORES

Franchising, a practice adaptable to small business, has increased greatly in recent years. A common practice in the restaurant business, franchising combines the economic effi­ciencies of the large corporation with the benefits of local ownership. In this transaction, a large company allows an individual or small group of entrepreneurs to use its name (often a distinct advertising advantage) and sometimes its products in exchange for a percentage of the profits. The entrepreneur, who is usually not an employee of the parent company, is responsible for the management and operation of one or several units of the larger chain. The individual owner or owners must also assume most of the risks connect­ed with the enterprise.

Franchising has costs as well as benefits for the econo­my. The rise of the chain store has inhibited the development of single proprietorships and partnerships. Chain stores use mass methods buying in large quantities, selling a high volume and stressing self-service that make it possible to sell goods at lower prices than small-owner stores. Chain supermarkets, for example, using lower prices to attract customers, have driven out many independent small grocers.

Nonetheless, many independents do survive. Some indi­vidual proprietors join forces with others to form chains of independents or cooperatives. They pool their buying power or become independent franchises, and they often serve spe­cialized or "niche" markets.

LARGE CORPORATIONS: ADVANTAGES AND DISADVANTAGES

A corporation is a voluntary association of owners, known as stockholders, who form a business enterprise that is marked by limited liability. Although there are many small- and medium-size corporations, bigger business units are needed to perform certain services in the vast American economy. Large corporations can supply goods and services to a greater number of people across a wider geographic area than small businesses. They serve consumers across the nation and across the world. Corporate products tend to cost less because of the large volume and small overhead costs per unit sold. Moreover, consumers benefit from the availability of corporate "brand names," which they recognize as guaranteeing a certain level of quality wherever purchased.

Large corporations also have the financial strength to research, develop and produce new goods. Their scientific know-how, innovation and technical capability are critical to maintaining the nation's competitiveness and productivity.

In the United States, a corporation is a specific legal form of organization of persons and resources chartered by one of the 50 states for the purpose of conducting business. When people and resources are brought together to form a corporation, the result—in the eyes of the law—is a person. (Indeed, the Latin word corpus means "body" or "person.") A U.S. corporation, distinct from any individual human being, may own property, sue or be sued in court and make con­tracts. For this reason, a corporation is an ideal vehicle for the conduct of business by many smaller enterprises as well as larger ones.

The corporate form of business is a more flexible instrument for large-scale economic activity than the sole proprietorship or partnership.

First, because the corporation itself has legal standing, it safeguards its owners, relieving them of individual legal responsibility when they act as agents of the business.

Second, the owners of shares of stock have limited liability; they are not responsible for corporate debts. If a shareholder paid $100 for 10 shares of stock and the corpora­tion goes bankrupt, he or she can only lose the $100 invested.

Third, corporate stock is transferable. Thus, the corpo­ration is not damaged by the death or disinterest of a particu­lar person. An owner of stock can sell his or her holdings at any time or pass the stock along to heirs.

Yet the corporate business organization has drawbacks as well as benefits.

One disadvantage relates to taxation. As a separate legal entity, the corporation must pay taxes. Unlike the treat­ment of interest on bonds, dividends paid to shareholders are not a tax deductible business expense for the corporation.

When the corporation passes along profits to individuals in the form of dividends, the individuals are taxed again on these dividends. This is known as "double taxation".

Another cost results from the fact that ownership be­comes separated from management. While this makes man­agement easier, some managers are tempted to act more in their own interests than those of the stockholders.

Perhaps the most striking feature of the large corporation is its great number of shareholders (in effect, owners). A major company may be owned by a million or more people, many of whom own fewer than 100 shares. Typically, corporations directors and managers own less than 5 percent of the common stock. Blocks of stock often are owned or controlled by individuals, banks or retirement funds, but these holdings usually account for only a fraction of the total.

With shareholders living in all parts of the country, it is impossible for them to know all details about their business and to manage it wisely. In this situation, effective direct control is in the hands of the corporation’s board of directors.

Beyond making policy, the board places operational control in the hands of a chief executive officer (CEO). This person, who may be the chairman or president, usually supervises a number of vice presidents who manage various aspects of the corporation and report to the CEO. The chairman of the board is often an experienced executive who, together with the executive committee of the board, gives advice and approval to the president and many vice presidents. As long as the CEO has the confidence of the board of directors, he or she is permitted a great deal of freedom in the operation of the company.

The makeup and role of the board of directors varies from one company to another. Increasingly, only a minority of board members are internal officers of the corporation. Some directors are selected to give prestige to the board, others to provide certain skills or to present lending institutions.

HOW CORPORATIONS RAISE CAPITAL

The large corporation has grown to its present size in part because it has found innovative ways to raise new capital for further expansion. Five primary methods used by corpora­tions to raise new capital are:

Issuing Bonds. A bond is a written promise to pay a specific amount of money at a certain date in the future or periodical­ly over the course of a loan, during which time interest is paid at a fixed rate on specified dates. Should the holder of the bond wish to get back his money before the note is due, the bond may be sold to someone else. When the bond reaches "maturity" the company promises to pay back the principal at its face value.

Bonds are desirable for the company because the inter­est rate is lower than in most other types of borrowing. Also, interest paid on bonds is a tax deductible business expense for the corporation. The disadvantage is that interest pay­ments ordinarily are made on bonds even when no profits are earned. For this reason, a smaller corporation can seldom raise much capital by issuing bonds.

Sales of Common Stock. Holders of bonds have lent money to the company, but they have no voice in its affairs, nor do they share in profits or losses. Quite the reverse is true for what are known as "equity" investors who buy common stock. They own shares in the corporation and have certain legal rights including, in most cases, the right to vote for the board of directors who actually manage the company. But they re­ceive no dividends until interest payments are made on outstanding bonds.

If a company's financial health is good and its assets sufficient, it can create capital by voting to issue additional shares of common stock. For a large company, an investment banker agrees to guarantee the purchase of a new stock issue at a set price. If the market refuses to buy the issue at a minimum price, the banker will take them and absorb the loss. Like printing paper money, issuing too much stock di­minishes the basic value of each share.

Issuing Preferred Stock. This stock pays a "preferred" divi­dend. That is if profits are limited, the owners of preferred stock will be paid dividends before those with common stock. Legally, the owners of this stock stand next in line to the bondholders in getting paid. A company may choose to issue new preferred stock when additional capital is desired.

Borrowing. Companies can also raise short-term capital — (usually working capital to finance inventories) — in a variety of ways, such as by borrowing from lending institutions, primar­ily banks, insurance companies and savings-and-loan estab­lishments. The borrower must pay the lender interest on the loan at a rate determined by competitive market forces. The rate of interest charged by a lender can be influenced by the amount of funds in the overall money supply available for loans. If money is scarce, interest rates will tend to rise because those seeking loans will be competing for funds. If plenty of money is available for loans, the rate will tend to move downward.

Using Profits. Some corporations pay out most of their prof­its in the form of dividends to their stockholders. Investors buy into these companies because they want a high income on a regular basis. But some other corporations, usually called "growth companies," prefer to take most of their prof­its and reinvest them in research and expansion. Persons who own such stocks are content to accept a smaller dividend or none at all, if by rapid growth the shares increase in price. These persons prefer to take the risk of obtaining a "capital gain," or rise in value of the stock, rather than be assured a steady dividend.

The typical corporation likes to keep a balance among these methods of raising money for expansion, frequently plowing back about half of the earnings into the business and paying out the other half as dividends. Unless some dividends are paid, investors may lose interest in the company.

THE THREAT OF MONOPOLY

In the late 19th century, the corporation was viewed by many as the chief instrument of monopoly. It was commonly argued that, by raising vast amounts of capital, corporations could combine or collude with competitors to control prices and inhibit genuine competition.

A monopoly exists in theory when one firm controls production and sale of total output of a commodity. In prac­tice, however, a definition based on control of a specified percentage (often 33 percent) of total sales is often used.

In both theory and practice, large companies can become monopolies by absorbing smaller ones through stock purchases on the open market. The giants then raise prices, causing people who need their products to pay a larger amount than before.

Although in a perfect market competition is unrestricted and sellers are numerous, free competition and large number of sellers are not always available in the real world. In some markets there may only be one seller or a very limited number of sellers. Such a situation is called a “monopoly”, and may arise from a variety of different causes. It is possible to distinguish in practice four kinds of monopoly.

State planning and central control of the economy often mean that a state government has the monopoly of important goods and services. Some countries have state monopolies in basic commodities like steel and transport, while other countries have monopolies in such comparatively unimportant commodities as matches. Most national authorities monopolize the postal services within their borders.

A different kind of monopoly arises when a country, through geographical and geological circumstances, has control over major natural resources or important services, as for example with Canadian nickel and the Egyptian ownership of the Suez Canal. Such monopolies can be called natural monopolies.

They are different from legal monopolies, where the law of a country permits certain producers, authors and inventors a full monopoly over the sale of their own products.

These three types of monopolies are distinct from the sole trading opportunities which take place because certain companies have obtained complete control over particular commodities. This action is often called ‘cornering the market’ and is illegal in many countries. In the USA anti-trust laws operate to restrict such activities, while in Britain the Monopolies Commission examines all special arrangements and mergers which might lead to undesirable monopolies.

VOCABULARY

A

1. sole proprietor – частный предприниматель

2. to be responsible for – отвечать за, быть ответственным

3. failure – провал, крах

4. a loss – убыток

5. assets – активы, собственность, которая может быть обращена в наличность

6. an advantage – преимущество

7. a disadvantage – недостаток

8. to gain experience – приобрести опыт

9. a partnership – товарищество

10. to enter into an agreement – заключить соглашение, контракт

11. to be qualified in smth/doing smth – быть квалифицированным в чем-либо

12. to be exempt from – освобождаться от чего-либо

13. a favorable tax position – льготное налогообложение

14. to be liable for – быть в ответе за что-либо

15. a debt - долг

16. to squander money – растратить, промотать деньги

17. efficiency – эффективность

18. a transaction - сделка

19. in exchange for a percentage of the profits – в обмен на процент от прибыли

20. costs – издержки

21. volume – объем

B

1. overhead costs per unit – накладные расходы на единицу товара

2. a brand name – торговая марка

3. to research – проводить исследование

4. innovation – нововведение

5. to be critical to maintaining competitiveness and productivity – важный, решающий для поддержания конкурентоспособности и продуктивности

6. to conduct business – заниматься бизнесом

7. distinct (from smb/smth) – отличный (от чего-либо/кого-либо)

8. property – собственность

9. to sue in court – преследовать в суде

10. flexible – гибкий

11. legal standing – правовое положение

12. to relieve smb of individual responsibility – освобождать кого-либо от персональной ответственности

13. to go bankrupt – обанкротиться

14. stock – акции

15. a legal entity – юридическое лицо

16. a tax deductible business expense – расходы на ведение бизнеса, подлежащие льготному налогообложению

17. a retirement fund – пенсионный фонд

18. a fraction of the total – часть целого

19. board of directors – совет директоров, правление

20. to supervise –наблюдать, контролировать, курировать

21. chairman – председатель

С

1. to raise capital – добывать деньги

2. a loan – заём

3. to be due – подлежать к осуществлению

4. to reach maturity – достигать срока погашения облигаций

5. to pay back the principal at its face value – выплатить первоначальный вклад по номинальной стоимости

6. equity – акционерный капитал (обыкновенные акции)

7. affair - дело

8. sufficient - достаточный

9. the basic value – начальная стоимость

10. lending institutions – кредитные организации

11. an insurance company – страховая компания

12. savings-and-loan establishments - сбербанк

13. to be content to do smth – соглашаться на что-либо

14. to accept smth – принимать, допускать

15. capital gain – прирост капитала

16. a threat - угроза

17. to collude with – сговориться, войти в сговор

18. to inhibit genuine competition – препятствовать подлинной конкуренции

19. percentage of total sales – процент от общей суммы продаж

20. to cause smb to do smth – причинять, заставлять, послужить причиной

21. unrestricted - неограниченный

22. numerous - многочисленный

23. to distinguish – выделять, различать, отличать

24. authorities - власти

25. geographical circumstances – географическое положение

26. to obtain smth – приобретать, достигать

27. anti-trust laws – антимонопольное законодательство

28. a merger – слияние

EXERCISES

Exercise 1. Study the table. It shows how words can be formed by adding first the suffix –ify, and then the suffix –cation (with suitable changes in spelling).

EXAMPLE simple ð simplify ð simplification

Use the table and the example to help you fill in the blanks in the sentences.

simple	ify
note
pure
class	ification
clear (=clar-)

NOTE: Remember to remove the ‘e’ in simple, note and pure.

1. This plan is not simple enough. We must therefore _______ it. The _______ of the plan is essential.

2. The economy of that country belongs in the Marxist group or class. We must therefore _______ it as communistic. The _______of the economy of that country is not difficult.

3. That water is not pure enough. It is necessary therefore to _______ it. The _______ of the water is a matter of public health.

4. Please send a note to the members of the Council. You should ______ them of the date of the next Council meeting. The _______ should reach them this week.

5. The economics teacher tried to make the situation clear. He tried to _______ his description by making it simpler. When he had made this _______, his students understood the whole matter much better.

Exercise 2. Form verbs from these adjectives:

regular	complex	simple
relative	realistic	national
satisfactory	selective	specific
special	influential	indicative

Exercise 3. Make the words negative by using the prefix dis -

EXAMPLE satisfaction ð dis + satisfaction ðdissatisfaction

Note The prefix dis - usually possesses a more specialized meaning of ‘oppositeness’ or ‘opposite action’ than the negative prefixes un-, in- and non -. Use your dictionary if necessary.

ability	pleasure	agree
obey	engaged	connect
qualify	continue	possess
comfort

Exercise 4. Arrange these sentences in their proper sequence in order to obtain a paragraph on durable goods.

1. Finally, it is interesting to note that many buyers and sellers on important markets never see the commodities which they buy and sell.

2. Commodities like these can be bought and sold and stored without difficulty by people who live at great distances from each other and from the sources of supply.

3. Certain commodities have a wider market than others.

4. In addition, commodities which are easy to transport, safe to handle and simple to grade are generally in universal demand.

5. Durable goods, for example, have a far wider market than perishable goods.

6. For this reason such goods are a good commercial proposition simply because the risk of investing in them is relatively low.

Exercise 5. Translate.

1. Товарищество «Грант» обанкротилось, так как их издержки превысили доходы, а активы оказались недостаточными, чтобы возместить убытки.

2. При увеличении объёмов производства эффективность от установки конвейера возрастет.

3. В результате сделки между компанией «Проктер&Гэмбл» и нашей фирмой мы получаем право использовать их торговую арку в обмен на процент прибыли.

4. Директор пенсионного фонда растратил деньги вкладчиков и был привлечен к суду.

5. Частный предприниматель согласился заключить контракт с поставщиком только после того, как убедился, что последний лично отвечает за качество поставляемой продукции.

6. Мы допускаем, что это нововведение приведет к увеличению накладных расходов на единицу товара.

7. Географическое положение и климат Великобритании дают ей ряд важных преимуществ перед соседними государствами.

8. Для проведения исследования рынка необходимо найти средства. Совет директоров решил обратиться в кредитные организации для получения краткосрочного займа.

9. Слияние двух сильнейших компании на рынке может привести к их неограниченной монополии, что послужит причиной разорения многих мелких и средних предприятий.

10. Мы должны быть более гибкими в этом вопросе. Многочисленные жалобы наших клиентов могут сказаться на нашей репутации.

7 STOCKS, COMMODITIES AND MARKETS

The efficiency of the U.S. capital market is legendary. His­torically, virtually every major city once had a stock market, but by the 1990s there were only three major markets: New York, New York, Chicago, Illinois and San Francisco, Califor­nia. Local markets persisted in such cities as Boston. Massa­chusetts, and Philadelphia, Pennsylvania, but trading was limited.

Capital markets in the United States have provided much of the money—the lifeblood of capitalism—to finance the building of thousands of factories and plants, research laboratories and office buildings, airplanes and ships. It is fair to say that if capital markets did not exist in the United States, they would have had to be invented. Although in recent years much capital has been raised through bond markets and in other ways, stock markets have often proved to be useful money-raising tools for new struggling companies.

Capital markets are said to be efficient when they can match quickly vast numbers of stocks put forth by sellers with vast demands for stocks put forth by buyers. In part, it is a matter of technology. The modern markets, particularly those in New York and Chicago, rely heavily on computerization each day to process millions of transactions. But also, in part it is a matter of tradition and experience. The stock market works largely on one broker's trust in another broker's word. The brokers, in turn depend on the faith of the customers they represent. Occasionally this trust is abused. But during the last half century, the federal government has played an increasingly important role in insisting on clean dealing and unambiguous language.

This chapter is an attempt to explain how the stock market works.

The principles of this market are similar to all others. For every buyer there has to be a seller. When more people wish to buy than to sell the price tends to rise; when fewer people wish to buy and many wish to sell, the price tends to fall.

Once a company has sold its original stock to the public and it is traded freely in the market, the price will be deter­mined continuously during the trading day by what buyers will pay and what sellers will take. It is simply a matter of supply and demand. Thus, the price is the composite opinion of all the people who buy and sell that stock. Factors that influence how much people will pay include:

· The general business climate or trend, depending on the state of the overall national economy, and the amount of confidence the public has in it;

· The amount of profit the company that issued the stock has been making, or is predicted to make, and its financial condition;

· The rate at which the company is growing or declining;

· The ability of a company to compete successfully with its rivals over a period of time;

· Whether the product or service is one that is popular, and whether the market for that product or service is growing or decreasing;

· The general interest rate, or the market price for bonds;

· The rate of return the company offers compared to the rate of return on alternative investments.

THE IMPORTANCE OF DIVIDENDS

As previously noted in a different context, when a company makes money it usually pays a part of its earnings to its shareholders in the form of dividends. A typical payout is about 50 percent of the earning. Thus, if a company made $20 million in a year and if there were 5 million shares of stock, this company might declare dividends in the amount of $10 million, retaining the other half for immediate operations and/or expansion. So if there were 5 million shares of stock in the company, each shareowner would receive $2 per share. If one owned 100 shares, the dividend would be $200. To carry the arithmetic a step further, if a stock sold at $40 per share and yielded a $2 dividend, the rate of return per share would be 5 percent.

THE STOCK EXCHANGES

While there are literally thousands of stocks, the ones bought and sold most actively are usually listed on the New York Stock Exchange (NYSE). The exchange dates back to 1792 when a group of stockholders gathered in New York City to make some rules about how buying and selling was to be done. The NYSE has become the leading exchange in the United States.

The NYSE, housed in a large building on Wall Street, does the bulk of trading in listed securities. On the trading floor more than 2,200 common and preferred stocks are traded. The NYSE has some 1,600 members, most of whom represent brokerage houses involved in buying and selling for the public. They buy ‘seats’ on the exchange at considerable expense. They are paid commissions by the buyers and sellers.

Direct stockholders in America business number approximately 42 million. In addition, there are over 133 million indirect stockholders who share in the ownership of American corporations through their contributions and participation in pension funds (public and private), insurance companies, mutual funds, banks, foundations, colleges and universities.

How are stocks bought and sold? Suppose a school-teacher in California wants to go on an ocean cruise. To finance the trip she decides to sell 100 shares of her General Motors stock. The schoolteacher calls her stockbroker and directs him or her to sell the shares at once at the best price. The same day an engineer in Florida decides to use the savings he has accumulated to buy 100 shares of General Motors stock. The engineer calls his broker and puts in a buy order for 100 shares at the market price.

Both brokers wire their orders to the floor of the New York Stock Exchange. The two brokers, one representing the widow and the other the engineer, negotiate the transaction. One asks, "How much do I have to pay for a hundred shares of General Motors?" The highest bid is $50.00 and the least amount for which anyone has offered to sell is $52.00. Both want to get the best price, so they compromise and agree on a buy/sell at $51.00.

The NYSE itself neither buys nor sells stocks; it simply serves as a mechanism by which brokers buy and sell for their clients. Each transaction is carried out in public and the information is sent electronically to every brokerage office in the nation.

OVER-THE-COUNTER STOCKS

The largest securities market in the world in terms of the number of different stocks and bonds traded is the over-the-counter (OTC) market. OTC is not located in any one place, but is primarily an electronic communications network of stock and bond dealers. These stocks are supervised by the National Association of Securities Dealers, Inc., which has the power to expel companies or dealers determined to be dishonest or insolvent. The over-the-counter market tends to get stocks of smaller companies, and by the 1990s had come to be known as a market where many of the fastest growing "high-technology" stocks could be bought and sold. Again, information about trading activity can be acquired through newspapers, magazines, or electronically. A brokerage house usually handles purchases and sales of these stocks along with those on the major exchanges.

Many persons who do not feel qualified to decide which stocks to purchase, but who nevertheless want to participate in the stock market in hopes of making a profit by doing so, turn to mutual funds. A mutual fund combines funds of its shareholders, which may be in small amounts, and invests large blocks of money in a varied portfolio of stocks, thus reducing the risk, which is another reason why many people prefer this method of investing in stocks.

Another advantage of mutual funds to the customer is that the fund's managers get professional advice from staff analysts. It is possible for a fund to employ such persons because the operation is on a large scale. There are dozens of kinds of mutual funds. Some are designed for income, some for capital appreciation, and others are speculative with the chance for large gains or severe losses. Some deal only with stocks of specific industries, or stocks of foreign companies, or companies whose activities benefit the environment.

BUYING STOCK ON MARGIN

Americans buy many things on credit, and stocks are no exception. Investors who qualify can make a stock purchase by paying 50 percent down and getting a loan for the remain­der. This is called buying on a "margin" of 50 percent. The balance is borrowed at interest from the brokerage house and the stock certificates are deposited with the broker as securi­ty. The Federal Reserve Board regulates the minimum margins, the amount that must be paid in cash as a percentage of a purchase. The minimum margins vary, depending on whether there is need to stimulate the market or curb its speculative enthusiasm.

If an investor sells stock held on margin that has appre­ciated, the investor may pocket the profit and pay the broker the amount that was borrowed plus interest and commission. If the stock goes down, the investor is required to pay an additional amount into the account. If the owner cannot produce cash, some of the stock is sold at the investor's loss.

Buying stock on margin gives speculators (traders will­ing to gamble on high-risk situations) the opportunity to extend the scope of their operations. Their available cash will buy many more shares, giving them the opportunity of mak­ing more profit and also the risk of suffering greater losses.

At times the Federal Reserve Board requires a 100-percent margin, meaning that all stock must be paid for in cash. During the 1950s, for example, the margin rate varied from a low of 50 percent to a high of 90 percent. A low rate, of course, stimulates stock buying, while a high rate dis­courages it.

The first concern of most investors is the safety of their purchases. If necessary they will often take lower dividends to avoid great risk. In contrast, speculators hope to see the price of their stocks go up, usually within months, or even days. They are more interested in the future of the stock than in its earning power at the time of purchase. People who believe they can outguess the market try to buy before prices rise and sell before they fall.

COMMODITIES FUTURES

The prices of commodities—such as crops, livestock and such metals as copper, gold, lead and tin—tend to fluctuate from one period of time to the next. Commodity traders fall into two broad categories: hedgers and speculators. Hedgers are business firms (or individuals) that enter into a commod­ity contract to be assured access to the commodity at a guaranteed price. A firm secures a needed commodity and is protected against price fluctuation. Thousands of individuals, in contrast, trade in commodity futures as speculators.

The major reason for the rising volume of commodity speculation is the lure of huge profits which can be made on small or thin margins. Uncontrolled forces such as weather or wars can affect supply and demand and send commodity prices up or down very rapidly, thereby creating great profits or losses.

Speculating in commodities is done primarily at a com­modities exchange, and there are a dozen such exchanges in the United States. These exchanges are voluntary trade asso­ciations, but they are called organized markets because members are required to follow set trading rules.

How does the commodity-trading system operate? Sup­pose a person bought a standard contract for 30,000 kilo­grams of cocoa. This buyer could pay the money and take possession of the cocoa. Or the buyer could make the pur­chase and then sell the contract to someone else. Most people have no need for that much cocoa, nor do they have a place to store it. Their purchase is purely a paper transac­tion; they hold the contract with the intention of selling it to someone else.

Commodity futures contracts, like stocks, are traded on margin. The difference typically is that a commodities margin is only about 10 to 20 percent of the value of the contract, which increases the opportunity for speculation, and large gains or losses.

Those who make money are often professional traders, well versed in the way the market is likely to react. It has been estimated that of all the small buyers who enter this market, 85 percent lose money. In practice this statistic suggests a few very large winners and a great many losers. The risks are high because a small price change raises profits or losses dramatically.

MARKET DYNAMICS

Markets in stocks and commodities form a vital part of the American economic system. Millions of individuals buy and sell small lots of stocks and commodities while mutual funds and trusts trade in large lots. In good times, when it appears that prices will rise, money from savings or from other types of investment flows into the market. When this happens, prices are driven higher. Often a period of speculation follows in which the "bulls," those who make money on a rising market, dominate the market. When the market can no longer sustain the speculative fever, a reaction sets in, selling devel­ops and prices begin to fall. At this point the "bears," or those who make money in a falling market, are the gainers.

During this process the Federal Reserve Board may be trying to curb excesses and stimulate or dampen the market by raising or lowering the margin.

A new significant factor in the market is the volume of funds from abroad that is being invested. Not only has Middle Eastern oil money made its way into American securi­ties, but many people in Europe, Japan and other parts of the world feel that their best opportunity for securing their wealth is to invest in American stocks. This preference for investment in the U.S. economy partially explains the ex­traordinary strength of the American dollar in the early 1980s. It also, of course, is partly responsible for the gradual upward climb of stock prices in the decades toward the end of the century.

VOCABULARY

A

1. a stock market – рынок ценных бумаг

2. trading – торги

3. a capital market – рынок капитала, заемных средств

4. a tool – инструмент

5. to match smth – подбирать пару

6. to rely on (smth, smb) – полагаться на кого-либо / что-либо

7. a broker – торговый (финансовый) агент по купле, продаже ценных бумаг

8. fortune – состояние, богатство; (шанс)

9. a rival – конкурент

10. the rate of return – норма прибыли

11. the Stock Exchange – фондовая биржа

12. the bulk of smth – основная масса чего-либо

13. listed securities – зарегистрированные ценные бумаги

14. a brokerage house – брокерская компания

15. mutual funds – взаимные фонды

16. to negotiate smth – вести переговоры о чем-либо

17. a bid – предложение цены

B

1. over-the-counter stock – акции покупаемые / продаваемые через брокера на внебиржевом рынке

2. in terms of smth – с точки зрения, в переводе на язык

3. insolvent – несостоятельный

4. to participate in smth – участвовать в чем-либо

5. portfolio – пакет акций

6. capital appreciation – повышение стоимости капитала

7. to buy on margin – покупать акции с маржей (гарантийный взнос)

8. remainder – остаток

9. to deposit – отдавать на хранение\вверять, вносить залог

10. to pay in cash – платить наличными

11. to curb smth – обуздать что-либо

12. to gamble on smth – делать ставка на что-либо

13. futures (contracts) – (срочные) фьючерсные (контракты на продажу и доставку товарно-сырьевой продукции на какую-либо дату в будущем)

14. to fluctuate/fluctuation – колебаться\колебание

15. to hedge – страховаться от возможного падения цены

16. a commodities exchange – сырьевая биржа

17. a trust – трест, концерн

18. to dominate the market – быть лидером на рынке

19. wealth – богатство

20. access to smth – доступ к чему-либо

21. to affect smth – оказывать эффект

22. to estimate – оценивать

23. decade - десятилетие

EXERCISES

Exercise 1. Seven words can be formed from the basic word nation. This table shows how to do it. Make a list of the words, and put each word in its suitable place in the sentences. You will also need the word nation itself.

stem	suffix
nation	al	ize	d
ation
ism
ist	ic

1. The USA is the homeland of the American_______.

2. Most countries have _______ banks, such as the Bank of England.

3. The Socialist Party has plans to _______ various privately owned industries.

4. British Rail is already a _______ industry, because it is publicaly owned.

5. The name given to the change from private to public ownership is _______.

6. In the last twenty years _______ has been a strong political force leading to the formation of many new nations.

7. A person who is interested in the progress and history of his own country may be called a _______.

8. Many governments have certain policies which are not international but simply _______.

Exercise 2. Below are pairs of sentences. In the first sentence there is a verb in italics. In the second sentence there is a blank. Make the italicized verb into a noun in order to fill the blank.

EXAMPLE manage ð manage + ment ð management

1. It is sometimes necessary to adjust the quantity of goods flowing on to the market. This _______ is made according to market conditions.

2. He arranged the committee meeting. His _______ were very efficient.

3. The government encourages private enterprise. Their _______ sometimes takes the form of financial help.

4. Some economists are interested in measuring changes in the price of essential commodities. This _______ extends over a period of years.

5. The management tried to assess the amount of money needed for the plan. The _______ was to be made by a special committee.

6. He decided to invest his capital in the new enterprise. His _______ might be very profitable.

Exercise 3. Form nouns from these verb-adjective pairs.

1. imagine: imaginative 2. collect: collective 3. inform: informative 4. investigate: investigative 5. invent: inventive 6. originate: original

7. prescribe: prescriptive 8. describe: descriptive 9. possess: possessive 10. prevail: prevalent 11. prevent: preventive 12. vary: various

Exercise 4. Put prepositions in the blanks of these sentences.

EXAMPLE The central authority is concerned _______ methods of production.

ð The central authority is concerned with methods of production.

1. His capital was finally reduced _______ nothing.

2. They charged quite a lot of money _______ that commodity.

3. The government is usually responsible _______ the people _______ the condition of the national economy.

4. Citizens are required to conform _______ the law.

5. He agreed _______ the other economists that the system was unusual.

6. He was paid well _______ the government _______ the work he did.

7. The people hoped _______ a reduction in the price ________essential goods.

8. That man subscribed _______ a number of important newspapers and magazines containing information _______ economics.

9. The consumption _______ coal and steel has increased greatly _______ recent years.

10.They have provided many services _______ the citizens _______ that town and do not charge very much _______ the services.