That income. Too much money chasing too few goods inevitably caused inflation. Controlling inflation

By restricting demand (either through tight control of the money supply through high rates

Of interest, or through cuts in government borrowing) has costs, however. If wages are growing

Rapidly, and the government squeezes demand in the economy, unemployment may result because

Employers will not be able to afford to pay their staff if they cannot raise their sales prices because

Of low demand. In other words, if wages are high, but aggregate demand is restricted, firms will

Have high costs but will not be able to pass these on in higher prices because sales will be too low.

And many will go out of business or sack some of their employees. In the short term, it appears than

By allowing higher demand, inflation occurs, but unemployment can be lower than otherwise.

Commentary and Notes to Text 16.7.1.5

In the wake of the quadrupling of oil price... — из-за учетверения цен на нефть

A crucial feature — критическая, важнейшая черта (признак)

Value-added tax (VAT) — налог на добавленную стоимость (НДС)

To put up prices — повышать цены

Repercussions — последствия

Net costs — конечная, общая стоимость

To live beyond its means — жить не по средствам (о стране)

To merit — заслуживать, быть достойным

Match the following terms with the correct definition