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ECONOMICSUNIT 8YOUR KNOWLEDGE
Work with a partner. Discuss the questions.
1 Do you believe it is important for people to be informed about
economics? Why / Why not?
2 What causes some countries to be rich and other countries tobe poor? Why do you think there is such a big gap between the richand the poor in some countries?
3 How has the economy of your country changed in recent years?
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WATCH AND LISTENPREPARING TO WATCH
ACTIVATING YOURKNOWLEDGE

PREDICTINGCONTENT

1 Work with a partner. Discuss the questions.
1 What cities in the world today are centres of money and banking?
2 What happens during an economic depression?
3 How healthy is the economy of your country?
2 You are going to watch a video about a very bad day for the world
economy. Before you watch, work with a partner and use the photos
from the video and your own knowledge to answer the questions.
1 What do you think happened?
2 Where did it happen?
3 Did it happen recently or a long time ago?
GLOSSARY

stock market (n) a system for buying and selling parts of companies; the total value ofall the investments that are traded in this systemcrash (v) to fall or lose value suddenly and completely
investor (n) someone who puts money in a bank, business, etc. in order to make a profit
depression (n) a period in which there is very little business activity and little
employment
replica (n) a copy of an object
ticker tape (n) a long, thin strip of paper, used in the past for printing changing
information on, for example, the prices of stocks

WHILE WATCHING
3170

Watch the video. Check your answers to Exercise 2.

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4Watch again. Match the sentence halves.
1 The stock market
2 On Black Tuesday, investors
3 Millions of people
4 The Great Depression
5 Ticker tape machines

UNDERSTANDING
MAIN IDEAS

a was the worst economic period in modern history.
b were used to print the prices of stocks and shares.
c crashed in 1929.
d lost their jobs.
e lost billions of dollars.
5Watch again. Answer the questions.
1 When exactly did Black Tuesday happen?
2 What happened to stock prices after Black Tuesday?

UNDERSTANDING
DETAIL

3 What happened to many banks and companies?
4 Where is the Museum of Financial History?
5 What does the stock exchange use now to report stock prices?
6 Work with a partner. Discuss the questions and give reasonsfor your answers.

MAKING INFERENCES

1 Were most financial experts surprised by Black Tuesday?
2 Why did people in other countries lose their jobs during
the Depression?
3 How have computers changed stock markets?

DISCUSSION
7 Work in small groups. Discuss the questions.
1 What are the biggest economic problems in the world today?
2 How do changes in the economy affect your daily life?
3 Do you think the economy will be better or worse in ten years? Why?

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READINGREADING 1
PREPARING TO READ
UNDERSTANDING
KEY VOCABULARY

1 You are going to read an article about investments. Before you read thearticle, read the sentences (1–7) and write the words in bold next to thedefinitions (a–g).
1 During the recession of 2007–2009, people all over the world lost theirjobs and were forced to sell their homes.
2 At my bank, the interest rate on a loan to buy a car is about 4.5%.
3 Since Apple Computer company stocks and shares went on sale in1976, their value has increased by more than 28,000%.
4 Real estate, that is land or buildings, is an excellent investment in large
cities like Los Angeles or Tokyo.
5 My father is a careful investor. He buys assets, like buildings and cars,that increase slowly over time.
6 After a natural disaster, such as a tsunami or fire, the homes andbusinesses in an area usually go down in value.
7 If you buy gold, you can probably expect to get a high rate of returnon your investment.
(n) the percentage amount that you pay when you borrowmoney, or receive when you lend money, for a period of timeb(n) profit on money you have investedc(n) parts of a publicly-owned business which can bebought and sold as investments
d(n) someone who puts money in a bank, business, etc.
to make a profit
e(n) how much money something could be sold forf(n) a period when the economy of a country is not doing
well, but not as bad as a depression
g(n) something such as stocks or property which you buy inorder to make a profit
aUSING YOURKNOWLEDGE

1722 Work with a partner. Discuss the questions.
1 Can you think of some usual and unusual ways to invest money?
What are they?
2 Can you give an example of a safe investment? What investments
are risky?
3 Two possible investments are gold and classic cars. Do you think they
are safe, risky or somewhere in-between? Which do you think has
been more profitable recently?

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as the graph below
shows. Between
2009 and 2012, forexample, the pricerose from $1,087 anounce to a peak of$1,664 an ounce.
Then, by the end of
2015, it had fallen
to $1,161. In 2016, itrose slightly again to$1,249. Forecasters
expect it to stay in this range until
2025. If you are thinking about
investing in gold, you may wantto consider one famous investor’sadvice. Warren Buffet, one of therichest men in the world, dislikesgold as an investment. He points
out that historically, the stock
market has brought in significantly
higher returns than gold. He alsosays it is better for society if you
use your money for something
productive, rather than have itsitting in a bank.

How should
you invest yourmoney?
1 In a recession, interest rates arelow. This means that keeping yourmoney in a bank may not be thebest way of making money. Stocks
and shares are also risky whenthe economy takes a dive1. So
where should you invest to makethe most of your money? For thebrave investor, there is a rangeof alternative investments. Goldand classic cars are two popularinvestments because their market
value tends to go up with time.

3 While gold and stocks are both
excellent investment options in
the long term, some people preferinvestments that they can use andenjoy. For these people, classic cars
are one way to have fun and makelots of money. In fact, over the last
30 or 40 years, the value of some

2 Over time, gold has been a very
good investment, though the pricehas fluctuated2 in recent years,

classic cars has risen far more thanthat of gold or other investments
like houses. As an example, a 1972
Ferrari Dino 246 GT cost around$13,000 in 1980 but was worth asmuch as $450,000 in 2016. A 1955
Mercedes-Benz 300SL cost about$36,000 in 1980 but is worth about$1 million now. But neither of thesecars compares to what is perhaps
the best investment ever: a man
in Tennessee bought the Aston
Martin DB5 which was used in twoof the James Bond films. This car
cost just $7,000 in 1980 but sold in2010 for an incredible $4.1 million!
That is an incredible 20,000%
increase!
4 In sum, the prospect of making lotsof money through investing is very
exciting, but one must never forgetthat investing is a risky business.
Gold prices rise, but they also
fall. Classic cars need to be kept inexcellent condition to increase invalue and, because fashions change,investors have to guess which car toinvest in. If you are clever and lucky,
you may make a big profit – butremember, there are no guarantees.

1
take a dive (v) If a value
or price takes a dive, it
suddenly becomes less.
2
fluctuate (v) to keepchanging, especially inlevel or amountPrice history: Gold (USD)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
40020002000

20032006

2009

2012

2015

Car values (USD)

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WHILE READINGSKILLS

Skimming for general ideas
Skimming is the opposite of reading in depth. To skim a text, read it quickly
to get a general idea of what it is about. Don’t read every word. It is enoughto read the title, the introductory paragraph, the concluding paragraph andperhaps the first sentence of each main body paragraph. It is also useful tolook at any photos or diagrams in the text. Skimming is a particularly usefulskill in academic reading.

SKIMMINGREADING FOR
MAIN IDEASREADING FOR DETAIL

3 Skim the article and the graphs on page 173. Tick the topics that thearticle discusses.
causes of a recession
the stock market in 2016
two popular investments
classic cars as an investment
the price of gold over time
the risks of investing
4 Look at your answers to Exercise 3. Find the main ideas and write themin the order that they appear in the reading.
Paragraph 1
Paragraph 2
Paragraph 3
Paragraph 4
5 Read the article. Answer the questions using information from the article.
Remember that you can annotate the text as you read.
1 Approximately how much did gold cost per ounce in 2009?
2 In which year was the price of gold the highest? How much did itcost per ounce?
3 According to forecasters, what will happen to the price of gold
between now and 2025?
4 How much did a Ferrari Dino 246 GT cost in 1980?
5 What is a 1955 Mercedes-Benz 300SL worth now?
6 How much did the Aston Martin used in the James Bond films sell
for in 2010?

READING BETWEEN THE LINES
MAKING INFERENCES

174

6 Work with a partner. Discuss the questions.
1 If you followed Warren Buffett’s advice, would you invest in thestock market or in gold? Why?
2 Are classic cars a risky investment? Why / Why not?
3 As far as you know, what is the safest investment in general? Whichinvestments do you think are the safest during a recession?

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DISCUSSION
7 Work with a partner. Discuss the questions.
1 Imagine that you and your partner have one million pounds to invest.
How would you invest the money? Why?
2 Are there any investments that you definitely would not make? Whywould you choose not to invest your money in this way?
3 If you could afford it, would you buy an Aston Martin DB5? Why /Why not?

READING 2
PREPARING TO READ
1 You are going to read an article about income and expenditure. Before
you read the article, read the sentences (1–6) below and write the words
in bold next to the definitions (a–f).

UNDERSTANDING
KEY VOCABULARY

1 My family has a comfortable standard of living. We have enoughmoney to pay for everything we need, and we are able to save a little
bit of money every month.
2 People who go to university usually have a higher income than people
with only a secondary-school education.
3 Housing is the biggest expenditure for most people. For instance, many
Europeans pay 40% or more of their income in rent or house payments.
4 The weather is one factor which influences the price of food. For
example, if there is not enough rain, crops are smaller and the price offood goes up.
5 Families with many children must spend a large percentage of theirincome on food and clothing.
6 It is a good idea for workers to put some money into savings every
month. Even putting a little aside each month can result in a large
amount over time.
(n pl) money that you put away, usually in aabank, for a later date(n) how much money and comfort someone has(n) one of the things that has an effect on aparticular situation, decision, event, etc.
d(n) the total amount of money that agovernment or person spends on somethinge(n) money that you earn by working, investingor producing goods
f(n) an amount of something, expressed as anumber out of 100bc

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USING YOURKNOWLEDGE

2 Work with a partner. Answer the questions.
1 Do you think the standard of living in most developed countries
has improved, got worse or stayed the same in the last 20 years?
2 What factor or factors play an important role in people’s standardof living?
3 Scan the article and check your answers.

WHILE READING
ANNOTATINGREADING FOR
MAIN IDEASREADING FOR DETAIL

176

4 Read and annotate the article opposite. Look at page 85 for whatto annotate.
5 Choose the sentence which best summarizes the article.
a The article compares income and expenditure in the United States withthe same factors in other developed countries.
b The article explains how falling incomes and rising expenditure has
affected people’s standard of living in recent years.
c The article describes five categories of expenditure which play a keyrole in determining people’s standard of living.
d The article discusses how the so-called ‘economic miracle’ becamea reality for Japanese people in the years during and following theSecond World War.
6 Read the article again and choose the correct statement from each pair.
1 a Incomes in the United States rose quickly in the 1970s, and have been
increasing slowly since then.
b Incomes in the United States fell from the 1980s to the 2000s andhave been increasing slowly since then.
2 a Between 1999 and 2016, median income in the US stayed aboutthe same.
b Between 1999 and 2016, median income fell by about 7%.
3 a Between 2000 and 2016, Americans spent more on transport thanthey did on food.
b Between 2000 and 2016, Americans’ biggest expenditure was housing.
4 a Healthcare costs have stayed approximately the same in spite ofrising hospital costs.
b Because of higher prices for prescription drugs and hospital stays,
healthcare costs have increased.
5 a Over the past two decades, people in developed countries have hadless money to spend on entertainment and small luxuries like eatingin restaurants.
b Over the past two decades, people in developed countries havebeen able to spend more money on entertainment and small luxuries
like eating in restaurants.

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FALLING INCOME, RISING EXPENDITURE
1 In almost every country and every culture,parents work hard to try to give theirchildren a richer, more successful and more
comfortable life than they had. For decades
following the Second World War, this dream
became a reality in many countries aroundthe world. Possibly the best example is theJapanese ‘economic miracle’, when Japan,
thanks to an extremely high rate of economic
growth from the 1960s to the 1980s, developed
into one of the world’s strongest economies.
Yet in Japan, as in other developed nations,many people today are not able to enjoy thesame standard of living as their parents
before them. This is because in recent years,
incomes have declined while expenditure
has risen. In effect, this means many people
are actually poorer than they were 10 or 20years ago.
2 Falling incomes are the first cause of adeclining standard of living. In the UnitedStates, for instance, incomes rose during the1970s, began falling in the 1980s, and reachedtheir low point during the Great Recessionof 2007–2009. The years since then haveseen a slow recovery; yet according to the US
Census Bureau, the median1 income in 2016
was $59,039 – nearly the same as in 1999.
Similarly, in the United Kingdom, the average
household income of £25,700 in 2016 wasnearly the same as that in 2007.
3 The other key factor which influences
people’s standard of living is expenditure.
Worldwide, prices for necessities such as rent
and food have been rising. As an example,

Figure 1 shows the percentage of theirincome that Americans spent on five key
categories between 2000 and 2016: housing,food, transport, entertainment and health.
Until 2015, the costs in these five categories
remained more or less stable. That is,
Americans spent approximately 20% of theirincomes on housing, about 10% on food,about 8% on transport, and around 3% eachon entertainment and health. As the graphshows, most of these costs jumped in 2015 andhave continued to rise.
4 In the United States and in many othercountries, the most important cause ofrising expenditure over time is the highcost of housing. In many cities worldwide
there is a critical shortage of houses andapartments to buy and rent. This has driven
up costs. Also, healthcare costs continue torise as prescription drugs and hospital costs
have become more and more expensive.
Transport and food prices have also increased
significantly in recent years.
5 In conclusion, the combination of rising prices
and falling incomes has left many people
with less spending power than they had inprevious decades. Because consumers must
pay more for essentials like food, healthcare
and especially housing, they have less moneyfor education, investment, savings and small
luxuries like eating in restaurants. For many
people, the dream of living in greater comfort
and security than their parents must seemvery distant indeed.

1
median (adj) having a valuethat is exactly in the middle ofa set of values arranged fromlargest to smallest

30%
25%
20%
15%
10%
5%
0%

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Housing and related

Food

Entertainment

HealthTransport

Figure 1
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READING BETWEEN THE LINES
MAKING INFERENCES

7 Work with a partner. Answer the questions.
1 What are some examples of countries that became richer in thedecades following the Second World War?
2 What are some causes of the shortage of housing in cities worldwide?
3 If the average American earned around $59,000 in 2016, about how
much did that person spend on housing?

DISCUSSION
8 Work with a partner. Use ideas from Reading 1 and Reading 2 to answer
the following questions.
1 Do people in most developed countries probably have more, less orabout the same amount of money to invest as they did before theGreat Recession of 2007–2009? Why?
2 If someone’s income is falling and expenditure is rising, is it a good idea
to try to make more money by investing in the stock market, gold, etc.?
Why / Why not?
3 What has happened to income and expenditure in your country since
1996? Why?

SYNTHESIZINGLANGUAGE DEVELOPMENTNOUNS AND ADJECTIVES FOR ECONOMICS
1 Use a dictionary to find the meanings of the words in the table and write
the definitions.
noun178

adjective1 economy

economic

2 finance

financial

3 wealth

wealthy

4 povertypoor

5 valuevaluable

6 employment

employed

7 profession

professional

8 expense

expensive

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