The Role of Market

PART A

1. The science of economics …… business, production, trade, inflation, etc.

a. study b. studies c. studed d. studied

2. Economic resources include material and non-material …….

a. things b. thing c. thung d. thinges

3. Economists test theories …… empirical evidence.

a. using b. use c. used d. uses

4. According …… the law of demand as the price for the good rises, the demand for it falls.

a. with b. at c. to d. on

5. To make a higher profit the seller …… raise his price and reduce his production costs.

a. have to b. has to c. has d. have

6. …… economic system has its benefits and drawbacks.

a. some b. several c. any d. all

7. Planned economics have problems …… supply.

a. at b. from c. of d. with

8. It …… difficult to calculate how much to produce.

a. is b. are c. be d.. were

9. If you …… a great deal of money and want to buy something, you always face a budget constraint.

a. has b. have c. having d. had

10. As a rule, monopolies are not good …… consumers as they are price-makers.

a. of b. with c. for d. at

11. Increased output is the utility which employers get from …… purchase of labour.

a. they b. them c. their d. theirs

12. It is impossible …… us to function without the services of banks.

a. at b. for c. of d. with

13. If I …… him yesterday I would have told him about this meeting.

a. have seen b. has seen c. having seen d. had seen

14. He can’t …… the work by now.

a. be completed b. is completed c. have completed d. has completed

15. When economic growth is calculated inflation …… into account.

a. took b. is taken c. taken d. are taken

16. Those changes on the world market …… the companies to raise prices significantly.

a. force b. forces c. forced d. forcing

17. The exchange rate may …… the whole economy: interest rates, balance of payments and economic growth.

a. affect b. affects c. affected d.affecting

18. There …… several ways to measure how the country is developed.

a. is b. was c. are d. were

19. …… economy comprises millions of people and thousands of firms.

a. the b. a c. an d. some

20. Changes …… the state of the economy affect all types of business.

a. of b. at c. of d. in

21. Governments …… part of their revenue on particular goods and services such

as schools and public safety.

a. spend b. spent c. spends d. spending

22. Planned economies are sometimes …… ’command economies’.

a. call b. calls c. called d. calling

23. Everyone in society …… enough goods and services to enjoy a basic

standard of living.

a. receive b. receiving c. received d. receives

24. Economists spend a lot of time …… to develop models of the economy.

a. try b. tries c. tried d. trying

25. Significant rates of inflation …… cause accounting and financial problems.

a. need b. must to c. had to d. can

26. Inflation is often accompanied …… high interest rates.

a. on b. at c. by d. with

27. Money can serve …… a standard of value.

a. as b. with c. at d. on

28. Money is a store of value because it can …… used to make purchases in the future.

a. is b. are c. be d. am

29. …… money you have to invest, the higher the return you can expect.

a. the most b. most c. the more d. more

30. They ……….. yesterday, so they couldn’t have made the decision yet.

a. met b. didn’t meet c. did meet d have met

31. They …… able to come to an agreement.

a. shall be b. been c. will be d. be

32. Analysts write …… the countries will reduce their imports in a few months.

a. that b. than c. what d. then

33. …… they afraid of losing their share of the market?

a. do b. does c. have d. are

34. When …… negotiations start?

a. are b. do c. will d. does

35. If there …… a slump in the world trade, many British industries will be affected by a fall in the demand for exports.

a. was b. were c. be d. is

36. If they …… against the plan it will attract much public attention.

a. votes b. voted c voting d. vote

37. The managing director is making a speech …… the opening ceremony tomorrow.

a. on b. at c. with d. in

38. They are not going to interfere …… the company’s affair.

a. on b. at c. with d. in

39. The company is going …… a big investment in this industry.

a. making b. make c. to make d. makes

40. …… you stopped to work there would be no protection for your family.

a. as b. if c. that d. then

41. The suppliers …… several hours ago.

a. phone b. phones c. phoned d. phoning

42. We have been …… for six months in national newspapers.

a. advertise b. advert c. advertised d. advertising

43. …… many companies invited to participate in tenders?

a. how b. what c. when d. why

44. How quickly is the delivery usually ……?

a. make b. makes c. maked d. made

45. Money …… is the money in circulation.

a. supply b. selection c. store d. demand

46. The situation in which everyone who wants to work has a job is called,,,,,,

a. unemployment b. employment c. full employment d. employ

47. Almost every country in the world has its own national …….

a. money b. currency c. wealth d. price

48. An exchange rate is the …… of currency.

a. money b. currency c. wealth d. price

49. When the economy is enjoying a ……, companies experience high sales and

general prosperity.

a. boom b. a fall c. a decrease d. a drop

50. Monetary …… is one of the main instruments of macroeconomics.

a. role b. policy c. loss d. input

PART B

The Role of Market

Reports in the press tend to say "the market did this" or "the market expected good news on the economic front", as if the market were a single living entity with a single conscious mind. This is not, of course, the case. To understand reports of market behaviour you have to bear in mind the way the market works.

A market is simply a mechanism, which allows individuals or organizations to trade with each other. Markets bring together buyers and sellers of goods and services. In some cases, such as a local fruit stall, buyers and sellers meet physically. In other cases, such as the stock market, business can be transacted over the telephone, almost by remote control. There's no need to go into these details. Instead, we use a general definition of markets.

A market is a shorthand expression for the process by which households' decisions about consumption of alternative goods, firms' decisions about what and how to produce, and workers' decisions about how much and for whom to work are all reconciled by adjustment of prices.

Prices of goods and of resources, such as labour, machinery and land, adjust to ensure that scarce resources are used to produce those goods and services that society demands.

Much of economics is devoted to the study of how markets and prices enable society to solve the problems of what, how and for whom to produce. Suppose you buy a hamburger for your lunch. What does this have to do with markets and prices? You chose the cafe because it was fast, convenient and cheap. Given your desire to eat, and your limited resources, the low hamburger price told you that this was a good way to satisfy your appetite. You probably prefer steak but that is more expensive. The price of steak is high enough to ensure that society answers the "for whom" question about lunchtime steaks in favour of someone else.

Now think about the seller's viewpoint. The cafe owner is in business because, given the price of hamburger meat, the rent and the wages that must be paid, it is still possible to sell hamburgers at a profit. If rents were higher, it might be more profitable to sell hamburgers in a cheaper area or to switch to luxury lunches for rich executives on expense accounts. The student behind the counter is working there because it is a suitable part-time job, which pays a bit of money. If the wage were much lower it would hardly be worth working at all. Conversely, the job is unskilled and there are plenty of students looking for such work, so owners of cafes do not have to offer very high wages.

Prices are guiding your decision to buy a hamburger, the owner's decision to sell hamburgers, and the student's decision to take the job. Society is allocating resources - meat, buildings, and labour - into hamburger production through the price system. If nobody liked hamburgers, the owner could not sell enough at a price that covered the cost of running the cafe and society would devote no resources to hamburger production. People's desire to eat hamburgers guides resources into hamburger production. However, if cattle contracted a disease, thereby reducing the economy's ability to produce meat products, competition to purchase more scarce supplies of beef would bid up the price of beef, hamburger producers would be forced to raise prices, and consumers would buy more cheese sandwiches for lunch. Adjustments in prices would encourage society to reallocate resources to reflect the increased scarcity of cattle.

There were several markets involved in your purchase of a hamburger. You and the cafe owner were part of the market for lunches. The cafe owner was part of the local wholesale meat market. That is why we have adopted a very general definition of markets, which emphasizes that they are arrangements through which prices influence the allocation of scarce resources.

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