Диссертация (1168413), страница 30

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You can see that there are eight areas altogether. The biggestslice of the pie – about 28 per cent of the total – goes on social security. This is almosttwice the amount spent on health care, which accounts for around 16 per cent of allgovernment spending. After health care comes education.

Schools, colleges anduniversities take about 13 per cent of all the money that the government spends. Six percent of the government's money is spent on public order and safety, which includes thepolice force. The same amount of money is spent on defense – in other words, the army,navy and the air force.

Transport services such as public buses and trains cost thegovernment about 3 per cent of their total spending. The smallest slice of the pie, just 2per cent, goes on protecting the environment. What about the large 'other' slice of 26 per160cent? This is a wide range of things, including arts and culture, agriculture and science.Altogether, these account for over a quarter of all government spending.Text 5What is welfare economics and why is it important?Welfare economics studies how economic policies affect society, families andindividuals.

Welfare economists believe economics is not just numbers, but somethingwhich affects people's everyday lives. We could say that welfare economics iseconomics with a heart. It looks at how government policies affect society and theequity, or fairness, of the system.Economic relationships affect the welfare of a society. Firstly, the cost of livingaffects people's lives. If prices are high, then poorer people cannot afford many things.Secondly, wages and working conditions affect society. Highly-paid employees who aresatisfied with their job, perform better and increase production. They are able to buymore, which also benefits the economy. In addition, economic choices often affectpeople who are not directly involved in the transaction.

These results are calledexternalities. If many people run cars, everybody will be affected by the pollution theycause.When welfare economists look at the equity of a system, they study how fair it is.They look at how income and wealth are distributed and how government policy affectsequity. Governments try to fight unfairness through taxation.

The ideal tax system hasboth vertical and horizontal equity. Vertical equity means people with more income paymore tax than those with less income. Horizontal equity means people with the sameincome pay the same amount of tax.In my view, welfare economics is important. It aims to understand the impact ofeconomics on our lives which, as a result, should help us improve our lives.Text 6Interest rates are a tool governments use to control borrowing and investment.They are important because they help governments control the growth of the economy.161The money supply includes the notes and coins people have. As some of this isborrowed money, loans are also part of the supply. Also included are the bank accountspeople have and the reserve accounts that commercial banks have in the centralgovernment bank.

Demand and supply in the money market is how much people 'pay'for money and how much they 'buy' If money is a 'commodity', the 'price' of money isthe interest rate. The interest rate is set by the levels of supply and demand. The lessmoney there is, the more banks will charge. So the interest rate goes up. Demand comesfrom people who want to spend or invest money.

But as interest rates rise, demand falls.The interest rate is set at the equilibrium point. The government tries to influence theequilibrium point Commercial banks lend the money that customers deposit. Whencustomers withdraw money, banks take cash from their reserve account with the centralgovernment bank. If the bank has a shortage of cash in this account, it borrows at thegovernment's rate of interest. Governments ensure that commercial banks have ashortage of cash and therefore influence interest rates. To sum up, interest rates are setby supply and demand. Governments, however, influence these rates in order to controlthe growth of the economy.Text 7When the gross national product of a country increases every year, then it enjoyseconomic growth. When economists calculate economic growth they also look atinflation.

Inflation must be lower than the rate of growth in order for economic growthto occur.Today many people in industrialized countries have a lifestyle that previousgenerations could not have imagined. This is because economic growth brings with it anumber of benefits for the population of a country Standards of living improve, and sodoes health care and education. Better education and training mean that the workforce ismore productive.

In add it ion, when there is more employment, people can afford morethings, like houses and cars for example.On the other hand, economic growth can cause a number of negative externalities.Heavy industry creates a lot of pollution which seriously affects the health of the162population. Furthermore, the traditional way of life often disappears. This is becausepeople often relocate to find work, far way from their relatives. They also work longhours and suffer from stress. This has a negative impact on workers and their families.Another problem is that wealth is not fairly distributed among the population and equityis impossible.

This inequality makes people depressed and causes problems betweenthem.To sum up, economic growth has both benefits and drawbacks for a society. Inmy opinion, if the alternative is poverty, poor health care and no education, the benefitsoutweigh the drawbacks.Text 8Nearly every country has its own currency. For example the UK has sterling andRussia has the ruble. If a country wants to trade with another country and buy itsproducts, it must buy them in the currency of that country. To do this it must exchangeits currency for the currency of the other country.The exchange rate is the price at which currencies are bought and sold.

First ofall, the price of a currency is decided by supply and demand in the market. In addition,the exchange rate is set at the equilibrium point. Demand comes from people who wantto pay for exports in a particular currency. Supply comes from people on theinternational money market who want to sell them the currency. As a result, exchangerates do not stay the same because supply and demand change.A change in the exchange rate can make a currency stronger or weaker againstother currencies. Consequently, when a currency gets stronger, imports become cheaper.But this leads to exports becoming more expensive for overseas customers.

This willprobably mean that more money flows out of the economy than in. Due to this, acountry's balance of payments is affected because when the flow of money out is greaterthan the flow of money in, there is a trade deficit.This is not the only effect the exchange rate can have on the economy. It can alsoaffect the rate of inflation and consequently the growth of the economy.163Text 9For decades, the world's least developed countries have received billions ofdollars in aid. However, these countries are still desperately poor.

Why is aid notworking?One reason is debt. A lot of money given to these countries is simply used to payoff the interest on the countries' huge debts.A second problem is corruption. A lot of direct aid never reaches the people whoneed it because corrupt officials keep it for themselves or save it in foreign bankaccounts. A third problem is that when poor countries borrow money from richcountries, they must agree to certain rules. These rules are set by the donor countries –that is, the countries which lend money – or by the World Bank.

The rules try toencourage governments to create free markets and reduce government spending. In theend, however, this usually means that governments spend less money on education andhealth care – the very things that are needed for economic growth. Finally, money givenby donor countries is often tied aid. If aid is tied, this means that the countries receivingcannot spend it in any way they wish. Often, the donor countries expect receivingcountries to buy manufactured goods from them. What poorer countries really need is tospend money on capital equipment so that they can produce goods themselves.However, this is not what donors want them to do.With these problems, aid often fails to help the people who need it most, and caneven make things worse.Text 10Industrialization in the 19th century helped Russia's economy grow, but, as inother European countries, there was a terrible human cost.

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