IN ECONOMICS, WHAT IS THE PHILLIPS CURVE?

The Phillips curve is a macroeconomic theory introduced by William Phillips, an economist from New Zealand. Phillips studied British wage data from the late 19th and early 20th century to analyze the relationship between inflation and employment rates. According to the Phillips curve, there is an inverse relationship between unemployment rates and the rate of inflation. As unemployment rates fall, the rate of inflation increases, and as unemployment levels rise, inflation rates begin to decrease.

To understand how this inflation-unemployment relationship works, it's helpful to understand some basic macroeconomic principles. As unemployment rates decline, skilled workers may be more difficult to find. Those that are available will have more available options in terms of where to work. To attract workers in this type of economy, firms will have to pay higher wages, which ultimately raises the price of the products they sell. Because workers are earning more on average, they have more money to spend, which means that many firms will be tempted to raise prices even further.

The inverse is also true. As unemployment rates increase, workers are willing to accept lower wages because competition for jobs is so intense. There is no need for companies to raise prices on products because they are paying so little for labor. Consumers, who are earning lower wages overall, have less money to spend on products. This means that many companies will reduce prices on products in order to increase sales.

By the end of the 1970s, several notable economists had begun to publicly criticize the Phillips curve. They argued that the inverse relationship between unemployment and inflation only exists in the short-term, and that policies aimed at reducing unemployment would only worsen future inflation. For example, workers who learn to expect increased inflation rates will continuously demand higher and higher wages to maintain their purchasing power. This sets off a cycle of inflation and wage increases that is not sustainable, and eventually leads to increased unemployment.

Today, most economists believe that the Phillips curve is only useful over very short periods of time. In the long-run, the Phillips curve is a straight, vertical line rather than a curve. The long-term Phillips curve illustrates the relationship between a steady rate of inflation and a natural rate of unemployment. This means that any policies aimed at reducing unemployment by manipulating inflation rates in the short-term will be ineffective in the long-term. Under the modern Phillips curve, only improvements in productivity or technology can lower unemployment rates without effecting long-term inflation rates.

2. Answer the following questions:

1. What is the Phillips Curve?

2. How do you interpret the notion of “inverse relationship”?

3. According to the Phillips Curve criticism, in what way would policies aimed at reducing unemployment influence the inflation?

4. What is the modern Phillips curve interpretation?

TEXT 10

1. Read the text and decide whether the statements are ‘true’ or ‘false’.

1. EFT stands for electronic funds technique.

2. EFT has made the money transferring processmore complicated

3. EFT is often used by people who work at home in different countries.

4. A credit card, debit card, online account or payments in cash are all examples of using EFT.

5. Encryption, verification, and passwords are meant to ensure money transfer safety.

6. PayPal is one of the biggest EFT tools available on the Internet.

7. EFT is impossible to use for exchange transactions.

WHAT IS AN EFT?

An electronic funds transfer (EFT) is a process whereby money is transferred from one place to another electronically. Computers are used to process payments in a variety of ways. The EFT procedure is a quick and efficient way to transfer money from one account to another.

EFT is used millions of times a day the world over. If you are earning a salary, your cash may be placed into your bank account by EFT. You can then withdraw money from an automated teller or use your debit card to pay for goods and services. Using your debit card in a store to pay for goods is another example of EFT.

EFT has simplified the money transferring process. Once money has been paid into an account using this procedure, it should be available immediately. Some banks and processes may hold up the transfer of funds in order to verify and process the transfer.

EFT has made buying and selling on the Internet a much simpler way to conduct business. Many Internet sites allow you to pay for goods by electronic fund transfer. This speeds up the transaction process, as money can be passed between accounts in real time. You can see when money has been deposited into your account within seconds of the other person sending it.

The Internet has also enabled workers to telecommute and be paid by EFT. Many people who work from home now work in different countries from their place of employment. With EFT, paying salaries into bank accounts is quick, safe, and efficient.

If you are using a credit card, debit card, or online account, you are using EFT. Because these transactions deal with the transfer of money, safety procedures must be put into place. Encryption, verification, and passwords are typically necessary for an EFT procedure to take place.

One of the biggest EFT tools available on the Internet is Paypal. Using the Paypal site, people can shop, move money to bank accounts, buy, sell, and request money directly from their bank accounts. The advent of Paypal has been responsible in creating thousands of small and large online businesses.

Another advantage of EFT is that currency is automatically calculated when funds are being transferred around the world. The currency and exchange rate from one country to another can be automatically worked out, and the money can be deposited into an account. EFT is both time saving and, in most cases, reliable.

Match the English words and word combinations with the Ukrainian equivalents.

3. Answer the following questions:

1. Define the notion of an electronic funds transfer in your own words.

2. What EFT tools are used by you on a regular basis?

3. What are the advantages and disadvantages of using EFT?

TEXT 11

1. Read the article and answer the questions:

1. What is a speculative bubble?

2. What are possible reasons for its development?

3. Is it always unprofitable?Are there any ways to benefit fromaspeculative bubble?