Fundamentals of Economics. Доловова Н.Н - 36 стр.

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36
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1. Not surprisingly, this large variation in average income is reflected in various
measures of the _____ of life.
2. Changes in _____ over time are also large.
3. At this rate, average income _____ every 35 years.
4. Similarly, the growth rate of a nation's _____ determines the growth rate of its
average income.
5. For example, it might be tempting to credit labor unions or _____ laws for the
rise in living standards of American workers over the past century.
6. To _____ living standards, policymakers need to raise productivity by ensuring
that workers are well educated, have the tools needed to produce goods and services,
and have access to the best available technology.
7. Foreign _____ has helped build up the country's infrastructure, improve health
and education and create a growing tourist industry.
8. In 1998 the king of Bhutan _____ power and appointed a central cabinet.
LESSON 9
Principle #9: Prices Rise When the Government Prints Too
Much Money
In Germany in January 1921, a daily newspaper cost 0.30 marks. Less than two
years later, in November 1922, the same newspaper cost 70,000,000 marks. All other
prices in the economy rose by similar amounts. This episode is one of history's most
spectacular examples of inflation, an inc rease in the overall level of pric es in the
economy.
Although the United States has never experienced inflation even close to that in
Germany in the 1920s, inflation has at times been an economic problem. During the
1970s, for instance, the overall level of prices more than doubled, and President
Gerald Ford called inflation "public enemy number one.'' By contrast, in the 1990s,
inflation has been about 3 percent per year; at this rate it would take over 20 years for
prices to double. Because high inflation imposes various costs on society, keeping
inflation at a low level is a goal of economic policymakers around the world.
What causes inflation? In most cases of large or persistent inflation, the culprit
turns out to be the same—growth in the quantity of money. When a government
creates large quantities of the nation's money, the value of the money falls. In
Germany in the early 1920s, when prices were on average tripling every month, the
quantity of money was also tripling every month. Although less dramatic, the
economic history of the United States points to a similar conclusion: The high
inflation of the 1970s was associated with rapid growth in the quantity of money, and

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