Unit 8 THE BUSINESS CYCLE

Vocabulary 1: THE BUSINESS CYCLE

Match up the words and definitions below.

balance of payments (BOP) consumption demand downturn

expectations gross domestic product (GDP) Save Supply upturn
GNP (gross national product)

1. a decline in economic activity = Downturn

2. an increase in economic activity = Upturn

3. beliefs about what will happen in the future = Expectations

4. purchasing and using goods and services = Consumption

5. the difference between the funds a country receives and those it pays for all
international transactions. = Balance of payments (BOP)

6. the total market value of all the goods produced in a country during a given period =
Gross domestic product (GDP)

7. the willingness and ability of consumers to purchase goods and services = Demand

8. the willingness and ability of businesses to offer goods or services for sale = Supply

9. The total value of all the goods and services produced by a country in a particular
year, including income from foreign investments. = GNP (gross national product)

10. to put money aside to spend in the future = Save

READING 1: What causes the business cycle?

Complete each sentence with appropriate words from the previous exercise.

If you have great Expectations, you think something good will come your way, but if
keep your expectations low, you won't risk being disappointed.
The company increased its production of the new sneaker after a recent advertising
campaign made the Demand for the product soar (= rocket/ shoot up/rise sharply).
The finance ministers were under a lot of pressure to improve the country's economic
situation and, for that reason, they focused on their nation’s Gross domestic product
(GDP) and how they could improve it.
When you put out a new product and everyone likes it you must increase your Supply
to handle the demand.
When companies have rivals that offer a better product at the same or better price, they
often experience a Downturn in their stock market profile.
Consumption of electricity is always higher during the summer months because of
air-conditioning.
A stock market is in Upturn when it changes from a bear market to a bull market.
The U.S GNP (gross national product) is the market value of goods and services
produced by U.S. residents, regardless of where they are located.
According to the report, nearly 40 bottles of Scotch are now shipped overseas each
second, contributing nearly £4bn to the UK's Balance of payments (BOP)

WHILE YOU READ

1) Read the text and fill in the gaps with words from the exercise above.

What causes the business cycle? (external + internal theories of the business cycle)

1. The business cycle or trade cycle is a permanent feature of market economies: (1)
Gross domestic product (GDP) alternately grows and contracts (become less or
smaller).

2. During an (2) Upturn, parts of the economy expand to the point where they are
working at full capacity, so that production, employment, business investments, profits,
prices, and interest rates all tend to rise. A long period of expansion is called a boom.
But at some point, there will inevitably be a (3) Downturn. The economy will hit a peak
and start to contract again, the demand for goods and services will decline and the
economy will begin to work at below its potential. Investment, output, employment,
profits, commodity and share prices, and interest rates will generally fall.

3. A downturn that lasts more than six months is called a recession (sự suy thoái); one
that lasts for a year or two is generally called a depression (sự khủng hoảng) or a
slump. Eventually, the economy will bottom out (chạm đáy), and there will be a recovery
or an upturn.
Suy thoái kéo dài hơn sáu tháng được gọi là suy thoá); Tình trạng kéo dài một
hoặc hai năm thường được gọi là trầm cảm (hoảng loạn) hoặc sa sút. Cuối
cùng, nền kinh tế sẽ chạm đáy và sẽ có sự phục hồi hoặc đi lên.

4. The most probable cause of the business cycle is people’s spending or (4)
Consumption decisions, which in turn are based on (5) Expectations. A country’s
output, investment, unemployment, (6) Balance of payments (BOP), and so on, all
depend on millions of decisions by consumers and businesses on whether to spend,
borrow or (7) Save

5. When economic times are good or when people feel confident about the future, they
spend and run up debts (nợ chất chồng). At a certain point, spending has to slow down
and debts have to be paid. If interest rates unexpectedly rise, a lot of people find
themselves paying more than they anticipated (mong đợi) on their mortgage or rent,
and so have to consume less.
Khi thời kỳ kinh tế tốt hoặc khi mọi người cảm thấy tự tin về tương lai, họ
chi tiêu và nợ chồng chất (nợ chất chồng). Đến một thời điểm nào đó, việc chi
tiêu phải chậm lại và các khoản nợ phải trả. Nếu lãi suất bất ngờ tăng, nhiều
người thấy mình phải trả nhiều hơn họ dự đoán (dự kiến) cho khoản thế chấp
hoặc tiền thuê nhà của họ, và do đó, họ phải tiêu dùng ít hơn.
6. Similarly, if people are worried about the possibility of losing their jobs in the near
future they tend to start saving money and consuming less, which leads to a fall in (8)
Demand, and consequently a fall in production and employment. Investment is closely
linked to consumption, and only takes place when demand is growing.
Tương tự, nếu mọi người lo lắng về khả năng mất việc làm trong tương
lai gần, họ có xu hướng bắt đầu tiết kiệm tiền và tiêu dùng ít hơn, dẫn đến (8)
Cầu giảm, và do đó sản xuất và việc làm giảm. Đầu tư gắn liền với tiêu dùng,
và chỉ diễn ra khi nhu cầu ngày càng lớn.
7. As soon as demand stops growing, investment in new factories, machines, etc. falls,
which contributes to the downturn. But if (9) Supply exceeds demand, prices should
fall, and encourage people to start buying again. Eventually, the economy will reach a
trough /trɔːf/ chạm đáy or bottom out, and there will be a recovery or an upturn.
Ngay khi nhu cầu ngừng tăng lên, việc đầu tư vào các nhà máy, máy
móc mới, v.v. giảm, góp phần vào sự suy thoái. Nhưng nếu (9) Cung vượt cầu,
giá sẽ giảm và khuyến khích mọi người bắt đầu mua trở lại. Cuối cùng, nền
kinh tế sẽ chạm đáy / trɔːf / chạm đáy hoặc chạm đáy, và sẽ có một sự phục
hồi hoặc đi lên.
8. This is the internal (or endogenous: nội sinh) theory of the business cycle; there are
also external (or exogenous: ngoại sinh) theories, which look for causes outside
economic activity, such as scientific advances, natural disasters, elections or political
shocks, /ˌdeməˈɡræfɪk/ demographic changes (sự thay đổi về lượng nhân khẩu/ khách
hàng), and so on. The economist Joseph Schumpeter believed that the business cycle
is caused by major technological inventions (e.g. the steam engine, railways,
automobiles, electricity, microchips), which lead to periods of “creative destruction”
during which radical innovations (sự đổi mới toàn diện) destroy established companies
or industries (các lĩnh vực có nền tảng lâu đời).
Ngay khi nhu cầu ngừng tăng lên, việc đầu tư vào các nhà máy, máy
móc mới, v.v. giảm, góp phần vào sự suy thoái. Nhưng nếu (9) Cung vượt cầu,
giá sẽ giảm và khuyến khích mọi người bắt đầu mua trở lại. Cuối cùng, nền
kinh tế sẽ chạm đáy / trɔːf / chạm đáy hoặc chạm đáy, và sẽ có một sự phục
hồi hoặc đi lên.

// Sự hủy diệt mang tính sáng tạo là thuật ngữ để chỉ một cái gì đó mới mẻ ra đời giết
chết một cái cũ. Nhưng nhờ có sự "hủy diệt sáng tạo" này mà các nhà sáng lập doanh
nghiệp đã tạo ra một trong những phát minh quan trọng nhất của thế kỷ này - ví dụ như
laptop ra đời đã hủy diệt nhiều công ty sản xuất máy tính mainframe (máy tính lớn, có
kích thước cỡ chiếc tủ lạnh lớn).

Sự hủy diệt mang tinh sáng tạo được Joseph Schumpeter đặt ra năm 1942 trong công
trình mang tên Chủ nghĩa Tư bản, Chủ nghĩa Xã hội và Dân chủ. Khái niệm dùng để chỉ
"quá trình biến đổi công nghiệp, liên tục cách mạng hóa cơ cấu kinh tế từ bên trong,
liên tục phá hủy cái cũ, liên tục tạo ra cái mới".
2) Complete the following sentences.

1. A downturn begins when the demand for goods and services declines.
Suy thoái bắt đầu khi nhu cầu về hàng hóa và dịch vụ giảm xuống.

2. People spend and borrow money when economic times are good and they feel
confident about the future.
Mọi người chi tiêu và vay tiền khi thời buổi kinh tế tốt và họ cảm thấy tin
tưởng vào tương lai.
3. People tend to spend less when they are afraid of losing their jobs/becoming
unemployed.
Mọi người có xu hướng chi tiêu ít hơn khi họ sợ mất việc làm / thất
nghiệp.
4. When interest rates rise, people have to pay more on their mortgage or rent
(and so consume less).
Khi lãi suất tăng, mọi người phải trả nhiều tiền hơn cho khoản thế chấp
hoặc tiền thuê nhà của họ (và do đó tiêu dùng ít hơn).
5. Companies only invest while consumption is increasing.
5. Các công ty chỉ đầu tư trong khi tiêu dùng ngày càng tăng.
6. Creative destruction means that innovations destroy established companies or
industries.
6. Phá hủy sáng tạo có nghĩa là các đổi mới phá hủy các công ty hoặc ngành
đã được thành lập.
3) Without looking back at the text, choose the correct answers.
1. The business cycle or trade cycle is a (temporary/permanent) feature of market
economies: GDP alternately grows and contracts.

Chu kỳ kinh doanh hay chu kỳ thương mại là một đặc điểm (tạm thời /
vĩnh viễn) của các nền kinh tế thị trường: GDP luân phiên tăng trưởng và co lại.
2. During a(n)(upturn/downturn), parts of the economy expand to the point where
they are working at full capacity.

Trong một tăng trưởng, các bộ phận của nền kinh tế mở rộng đến mức
chúng đang làm việc hết công suất.
3. A long period of ( expansion/contraction) is called a boom.

Một khoảng thời gian dài (giãn nở / co lại) được gọi là thời kỳ bùng nổ.
4. A downturn that lasts more than six months is called (a slump / a recession).

Một cuộc suy thoái kéo dài hơn sáu tháng được gọi là (sự sụt giảm / suy
thoái).
5. A downturn that lasts for a year or two is called ( a slump / a recession).
6. The most probable cause of the business cycle is (consumption
decisions/balance of payments).

7. The fact that people start saving money and consuming less leads to a (rise/fall) in
demand, production, and employment.

8. If supply exceeds demand, prices will (rise/fall), and people will (start buying
again / keep saving more). (cung vượt cầu, giảm nhu cầu mua)

9. When the economy bottoms out, there will be a(n) (upturn/downturn).

10. The theories of business cycle that look for causes outside economic activities,
such as scientific advances, natural disasters, elections or political shocks,
demographic changes, … are known as (endogenous/exogenous) theories.

11. According to Joseph Schumpeter, the business cycle (leads to / results from)
major technological inventions.

4) What does the underlined part refer to?

1. “one that lasts for a year or two is generally called a depression or a slump”
(Para. 1) -> downturn

2. “during which radical innovations destroy established companies or industries”

(Para. 3) -> creative destruction

5) Find prepositions from the text to complete the following phrases.

Paragraph 1

1. a permanent feature of market economies

2. parts of economy expand …………to………. the point where they are working at full
capacity

3. the demand ………for…………. goods and services

4. one that lasts ………for…………. a year or two

Paragraph 2

5. which ………in…………. turn are based ……on……………. expectations

6. all depend on millions of decisions by consumers and businesses ………on………….

whether to spend

7. feel confident ………about…………. the future

8. people are worried about the possibility of losing their jobs in the near future
9. a fall ………in…………. production and employment

10. closely linked ………to…………. consumption

11. which contributes …………to………. the downturn

Paragraph 3

12. lead ………to…………. periods of “creative destruction”

7) Match up the words below into pairs with similar meanings.

boost (v., n.) decrease depression excess expand

expenditure grow output production recovery
reduce slump spending stimulate surplus
upturn

boost - stimulate
decrease - reduce
depression - slump
excess - surplus
expand - grow
expenditure - spending
output - production
recovery - upturn

8) Match up the words below into pairs with opposite meanings.

boom contract demand depression endogenous expand
peak save spend supply trough exogenous

-> boom - depression

contract - expand
demand - supply
endogenos - exogenous
peak - trough
save - spend

Reading 2: Keynesianism /ˈki:nzɪənɪzəm/ and monetarism /ˈmɑːnɪtərɪzəm/

Vocabulary 2: FISCAL AND MONETARY POLICY

I. Before reading about the government and the economy, match up the following
words and definitions.
 1. equilibrium a. an amount of money that is smaller than is
needed (e.g. when spending exceeds
/ˌekwɪˈlɪbriəm/ revenues)

2. deficit b. an excess; a quantity that is larger than is

needed
3. surplus
c. a state of balance, for example when supply
4. fiscal policy is the same as demand

5. monetary policy d. government or central bank actions

concerning the rate of growth of the money in
6 money supply circulation

7. Keynesianism e. government actions concerning taxation

and public expenditure
Answer: 1C 2A 3B 4E 5D 6G 7F
f. the economic theory that government
monetary and fiscal policy should stimulate
business activity and increase employment in
a recession

g. the total amount of money available in an

economy at a particular time

1. Read the text again and decide which paragraphs could be given these
headings:
A. Countercyclical policies don’t work until too late

B. Keynesianism returns

C. The Keynesianism argument

D. The lesson of the 1930s

E. The monetarist argument

1. D The great depression of the 1930s demonstrated that, at least in the short term, the
market system does not automatically lead to full employment. John Maynard Keynes
argued that market forces could produce a durable equilibrium /ˌekwɪˈlɪbriəm/ with high
unemployment, fewer goods being produced, fewer people employed, and reduced
rates of income and investment. Classical economic theory stated that in the long run,
excess /ˈekses/ thái quá/ dư thừa savings would cause interest rates to fall and
investment to increase again; Keynes famously riposted (cãi lại/ đối đáp lại: riposte) that
‘In the long run, we are all dead.
2. C He therefore recommended governmental intervention in the economy, to
counteract (vô hiệu hóa, chống lại, làm mất tác dụng) the business cycle. During an
inflationary boom, governments could decrease their spending or increase taxation.
During a recession, on the contrary, they could increase their expenditure, or decrease
taxation, or increase the money supply and reduce interest rates, so as to boost the
economy and increase output (sản lượng hàng hóa), investment, consumption and
employment.

3. E In the 1950s and 1960s, monetarist economist, most notably Milton Friedman,
began to argue that Keynesian fiscal policy had negative effects in the long term. They
insisted that money is neutral, meaning that in the long run, increasing (or inflating) the
money supply will only change the price level (lead to inflation) and have no effect on
output and employment. They argued governments should abandon the attempt to
manage the level of demand in economy. On the contrary, they should try to make sure
that there is constant and non-inflationary growth in the money supply.

4. A Monetarists and believers in free markets argue that since governments aren’t able
to foresee a coming recession any more quickly than the companies that make up the
economy, their fiscal measures usually only begin to take effect when the economy is
already recovering, and simply make the next swing in the business cycle even greater.

5. B By the beginning of the 21st century, the argument that free markets and
competition are efficient, and should be allowed to operate with a minimum of
governmental intervention, seemed to be dominant. But when the subprime crisis
occurred in 2008, and financial institutions and large automobile companies began to go
bankrupt, Keynesianism suddenly came back into fashion. Governments around the
world poured huge amounts of money into the economy. Monetarists were outnumbered
but continued to argue that this would inevitably lead to massive inflation in the future.

2. Read the text again and match up the following half-sentences.

1. Keynes argued that left to itself, the A. cause interest rates to fall and
free market system investment to increase again.
2. In classical theory, if consumption and B. decrease their spending or increase
investment fall, excess saving should taxation
3. Keynesian argue that during an C. does not guarantee full employment.
inflationary boom governments should
D. in 2008, when major financial institutions
4. Keynesian argue that during an began to go bankrupt
economic downturn governments should
E. increase their spending or the money
5. Monetarists argue that in the long run, supply
6. Monetarists also believe that F. increasing the money supply merely
Keynesian fiscal measures leads to inflation.
7. There was a revival in Keynesian G. only begin to take effect too late, when
policies and government intervention an upturn is already beginning.
Answer: 1C 2A 3B 4E 5F 6G 7D

Sơ đồ speaking Reading 1:
real output = GDP
peak - đỉnh
trough - đáy
E - tăng trưởng
R - suy thoái