The economy
Whai drives the a orld economy?The simplestans{pr to
ilrjs questjor is'cons!mer spending'.And what drnes
consumerspendnlg?Sohe cohbination of the faciorsbeldr
is generallyconsideredio p(\,ide a reasonablean${cr
GDPgrowth for different countries
Grossdomesticprcdu.t (CDP) measuresthe sizc ol a
.ountry's economy It reFresentsthe iotallaluc ofall goods
ind se^,icesproducedoler a specifictime period. Cro$ th in
GDP is one ofthe primarr-indicato.susedto gautc
(= neasure) the he!1thof a couniry s e.onom\: Usunll),GDP
is expressedas n comparisonto the prelious quartcr or \,ear
Governmenttrade policy
Thc hro polcs of govc.rucnt policl'arc liberalizationand
'Lib€ralization'isassoci.lcdwiih frcc markets,open
bor.lers,dcr.Bulationand ihc frcc morc,nent of capiinl
around the world.
'Protcctionisnr'is associatcds'ith golcrntrent
inlcNcnlion, sulrsidics,quoiasand t iffs, and resiriciions
o ! l h c m o v c m c n oi i c i p i i a l .
Nation.l govci,nnentsdo hi!c som0gcnrin. choic.s herr,
cv.n if ihoy .ft'consh.nlcrl by thc p.licy of th.ir rc8ional
tridiig bkJc(og the EU, NA1TA, ASE,\N). ln ih. cod host
countrieshNc . mixc.l ccdnotuywhich is lonre('herc
briwccn ihc two crh'omos.
(l.n...lly sp..knrg, froo n.rkots pronartcgrowih ii thc
wodd d.onon\', and ptutcct.d markcisdos doer thc
pr1,c.ss(.lihough thcy nray ha!. a b.neficialeffecton
p . r t i c l l a r i n d u s l r i o si ' r s i d ci c o u D l r v ) .
Eflects of globalization
C oser
externallrnancinq
Arguments in favour of globalization
Generaprosperity: lowerprices,
moreemployment.
hiqherstandard of living.
lncreased
opportunjty andsoclal/pelsonalmobility.
lmprovements for poorcountrles: intant
lifeexpectan{y,
mortalty,llteraq,padicipation
of wonrenin society.
consumer confidence
lf.onsumcrs are confideniaboui tomorrow,they will spend
more The main factorsaffechngconsumerconfidencearc
the lerel of memplovment ifpeople's jobs a.e at risk, or
the\.don t have a job, they sill spend less ind housepices
if people'shousesare worth more than ihev paid for ihcm,
the\.feel.ich and rvjllspend nrore rrcely.
lnterest rates
Inierestratesire setbv CeniralBanks When int€resirates
are lo$r.onsumers and b!sinessesc.n boirow mon.y
cheaplyand ihere is a sfimuhs to the economy.8ut thc
cheap(edit alsocausesinflation an.t too much Liquidjiyin
the system.This liqli.lity leadsto bubblesin siock markets,
housingma.kets,eic. When ihe CeniralBank sccsthe need
b control inflafion dnd cool groivth a liiile, ii .aiscsintcrest
Exchangerates
Cur€ncies fllciLutc againstcich othcr thc c!rc itg.inst th.
d o l l a r i h e t e n . g a i n s tt h c y u a n .T h i s i s d u c k ) m a n yc o m p l c x
factoE such as the undc.lying st..ngth of thc economy,
inicrcst ratc diffcrcntinlsand spcculitnr. Ha!ing a sirong
curcncv makcs impo.ts chcip f(r dotucsticconsrmcrs.irut
huris cxpo.te.s(rvhoscPrcducit bccotuchotu orpdlsivc
The business cycle
Economicsgo throughcycl.s ofg(trt,th.nd coniri.ti()n
(= sldvdor!n). This is co\ dc.t in unii 2.
Cultural Ecological
Rapidflow of Cross-cult!ral Global
acrossthe qlobe cnaeng€s
rmmrgraton; n€eding
Arg ufi ents againtt g IobaIization
lnequalityof w€althwithinnations not rnuch'tricke
down effect' (whenfinanclalbenefitsarc p.sseddown
frombig business to consumeB andordinarypeople)
Humancosts:injustice dueto powerof local
increased
cultures.
elites,erosionof traditional
Environmental darnaqe.
 1 THE ECONOMY

Exercises
1.1 Find a word in th€ text opposite thal matches €ach 1.4 Readthe articleabout the USeconomy,then answ€r
definition below' The words appear in orcler. the questionsbelow.Checkany unknownwords in a
1 makessomethinqwork; p.ovidesthe power for somethng dictionary

the ru€sandlawsthatcontrobusin€ts
2 removing dctivty it aiulacturng in the US slowedmorethan lorecast
lUl ln Ocloberas factores recevedjewerordercafd
3 moneythattheqov€rnrnent pdysto supporlndunresor producuonconiracted,an induslryreportshowedtoday.
' p d L , F r p r o . p. oo d u . r Manufacluring Lson lhe vergeof stallngas the deepenng
4 officallrnitson the amountol somethng housing slLimpweakens demandlorconstruction equrpmenl,
furnilureand appliancesBul on a moreposiUve nole the
5 " . p . o . g o o do. - 9 . n l o d . o - n t a / weakerdollaris boostingexportsand he p ng companes
6 limited,r€strded thatdo mlch of ther busin
- Theseilguresmake it ciear why the Fed clt nterest
r e d r o L o ln o n e y n c i c - l c t o .
8 periodsof t mewh-"npeoplepaymorclhanthe realvaue ratesby a quarterpoint ast week. n theirstatement,Fed
o . o 1 e l 'n q .b . 5 o ' a r r - a o L d porcy md.€rssard rl-dl rl-eouloo o ho p, or o n) (
9 wth dn important efiect,but onethat iln t easyto notce unce ain,evenafterso d growlhast qua.ler.Theyadded
lhal upsideriskslo lnialionroughlybalancethedownsrde
10 (forma,the degreeoi difference th ngs
between riskslo grcwlh.

Finda word in the text that means:

Now do the samefor the words in 'Efiectrof
1 (ftvewotds)rcat1yslopping n its progress
globalization'opposite.
11 wh€npeop€ h.ve..oneyandeverylhng theyneedlor a 2 perodwhensometh beiore
ng is muchesssuccessiulthan
good f€
12 theab ityto readandwlte : hepi.gsorel' nq ro n.'pd"
1.2 [4akephrasesby matchjngan item from eachcolumn. 4 (shortfam)Cefita Bankol the UsA
I consumer movement oJcapital 5 approximately
\
2 fre€ \ and convacton seepage146lorsomediscu55ion
topi.s.
3 growih \ ...- borders
4 Ie rpendinq
5 open oi livnq
5 standard expectancy

8 goods srengrn
9 rnt€ren
l0 cheap
1I socia oamaqe
12 L r n d e rnl yg

1.3 Usephrasesfrom 1.2to completethe sentenceg

below.The phrasesare not in order.
1 Theeconomy w qrcw { q]]:njlql l|ert'rfg rsnsrnq
2 conslmersandbusnesseg cantakeon too muchdebtif
re e 5 easJaccessto
3 Econom c qrowthbr ngsmateriacomforts, bul alsohrgher
prcesfor the bascnecesstiesof ife n oiherwords,your
qoesuP,bui sodoesYolr
costot vinq
4 Econom esqo throlghcycl,"s
of

5 The nraintool avail.bleto a centra Bank s ts abilityto s€t

O \ e ' - h e o , r gr p r e , . r d n q A, d r F .d p p p d
' or lr€ ' fAi ;;t
tr d? ;t \lir tht !,nan|
or rne economy.
T h eb u s i n e sw
s orld 7