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1. Word Pretest

For each italicized word or phrase , choose the best meaning below.

1.He augments his income by teaching in the evenings.
　A. receives
　B. decreases
　C. increases
2. Inflation rates began to accelerate.
　A. slow down
　B. speed up
　C. move on
3.Is cost or reliability the main determinant in choosing a new car?
　A. financial factor
　B. determining factor
　C. single factor
4. The recession was in its trough.
　A. period of little activity
　B. period of great activity
　C. period of recovery
5. Marriage is seen as the culmination of a successful relationship.
　A. beginning
　B. middle
　C. climax
6. Our local bus and rail complement each other very well.
　A. cooperate with
　B. compete with
　C. supply what is lacking in
7. His insensitive speech provoked angry reaction.
　A. caused
　B. prevented
　C. predicted
8. The school is open to all irrespective of race, color or creed.
　A. with regard to
　B. regardless of
　C. as regards

2 Text
2.1Cultural Background

美国经济学家埃德蒙菲尔普斯（Edmund S.Phelps）：传统经济学对通货膨胀的著名解释，莫过于“菲利普斯曲线”(Phillips curve)。根据该理论，失业与通胀之间存在着一种稳定的关系——就业水平越高，价格上涨越快。或者说通胀及失业率成反比关系，政策制定者没有可能同时解决这两个经济问题。菲尔普斯提出：通胀不仅取决于失业水平，而且取决于企业和家庭对价格与工资上涨速度的预期。

什麼是菲利浦斯曲線？

　　菲利浦斯曲線是用來表示失業與通貨膨脹之間交替關係的曲線，由英國經濟學家W·菲利浦斯於1958年在《1861－1957年英國失業和貨幣工資變動率之間的關係》一文中最先提出。此後,經濟學家對此進行了大量的理論解釋,尤其是薩繆爾森和索洛將原來表示失業率與貨幣工資率之間交替關係的菲利浦斯曲線發展成為用來表示失業率與通貨膨脹率之間交替關係的曲線。

　　1958年，菲利浦斯根據英國1867－1957年間失業率和貨幣工資變動率的經驗統計資料，提出了一條用以表示失業率和貨幣工資變動率之間交替關係的曲線。這條曲線表明：當失業率較低時，貨幣工資增長率較高；反之，當失業率較高時，貨幣工資增長率較低，甚至是負數。根據成本推動的通貨膨脹理論，貨幣工資可以表示通貨膨脹率。因此，這條曲線就可以表示失業率與通貨膨脹率之間的交替關係。即失業率高表明經濟處於蕭條階段，這時工資與物價水都較低，從而通貨膨脹率也就低；反之失業率低，表明經濟處於繁榮階段，這時工資與物價水平都較高，從而通貨膨脹率也就高。失業率和通貨膨脹率之間存在著反方向變動的關係。

　　上圖中，橫軸U代表失業率，縱軸G代表通貨膨脹率，向右下方傾斜的PC即為菲利浦斯曲線。這條曲線表明，當失業率高（d）時通貨膨脹率就低（b），當失業率低（c）時通貨膨脹率就高（a）。

Monetarism：货币主义，以控制国家货币供应量为理论基础的一种经济政策。可概括为：经济中的货币数量决定它的经济活动，特别是它的通货膨胀率。如果允许货币供应量上升太快，物价就会上涨，结果造成通货膨胀。为了清除通货膨胀的压力，政府必须减少货币供应量和提高利率。这一观点在20世纪80年代对英 美两国的经济政策发生过很大影响。

Keynesian: 指凯恩斯学派，英国经济学家凯恩斯于1930年提出的经济学说的信徒和拥护者，他们号称实行“凯恩斯革命”，这是因为凯氏的经济理论彻底地改变了对于应该怎样管理经济的看法，特别是有关充分就业的看法。在凯恩斯之前古典经济学派认为经济会趋向充分就业平衡，凯恩斯向这种观点提出挑战，他认为经济并非达到充分就业就能够处于平衡状态，除非刺激经济中的需求，经济就不可能成长，从而不可能达到充分就业，1960年和1970年，凯恩斯的学说受到货币学的批判，许多人认为凯恩斯的基本理论虽然有用，但不能解决目前的各种经济问题(如通货膨胀)。

Milton Friedman：弗里德曼(1912--)。美国经济学家，生于纽约市。曾就读于拉特格斯大学和哥伦比亚大学。1948—1983年任芝加哥大学经济学教授之前曾在政府机关服务。他是货币学派的大师，曾提出消费的恒久性收入理论，特别是对美国大萧条时期，强调重视货币的功能，他的理论对某些右翼政府颇有影响。1976年获得诺贝尔经济学奖。

Monetarism

　　What is Monetarism? It would be hard to find a question to which modern economics has given a more diverse and self-contradictory set of answers. One definition is “revolt against the real and imagined consequences of the Keynesian revolution.” This would capture the more important motivation underlying it, including its fondness for free market and its antipathy to all forms of state intervention. But it does not help us to understand the issues involved in the long debates about economic theory and policy. A recent, fairly comprehensive summary of the positions taken up by Monetarism has been made by D. Laidler. He describes the key characteristics of Monetarism as:

(1) a quantity theory of money approach to macroeconomic analysis both in the sense of a theory of the 　demand for money and in the sense that changes in the money stock are the most important cause of 　changes in money income;
(2) the expectations-augmented Phillips curve;*
(3) the monetary approach to the balance of payments;
(4) antipathy to stabilization policy and support for long-run money supply rules or targets.

__   ____
* Phillips curve: a curve that show the relationship between unemployment and inflation based on the theory that as inflation falls unemployment rises and vice versa.

　　The central idea that emerges from this is the notion that money matters, and indeed that it matters more than anything else in macroeconomics. The second important component is the rejection of the prevailing ideas of the immediate post-war period, in particular the twin ideas that governments should intervene actively to manipulate the level of effective demand in the economy, and that a certain amount of inflation is an acceptable price to pay for a high level of employment.  According to the expectations-augmented Phillips curve, if the inflation rate remains above what had been generally anticipated for a prolonged period, then expectations will be adjusted upwards and the inflation is likely to accelerate. There policy issues have been the meat and drink of the Monetarist argument; they have been less concerned to attack Keynesian ideas at a purely theoretical level.
　　For a long time, the overriding concern of Monetarism was to reinstate the supply of money as a central determinant of effective demand. It was reacting against a view which had been prevalent in the 1940s that monetary policy was an almost totally useless instrument of demand management. The first criticism was the publication, in 1956, of Studies in the Quantity Theory of Money, edited by Milton Friedman. In the introduction, Friedman presented a theoretical restatement of the quantity theory of money. He defined it as a theory of the demand for money rather than a mechanical relationship between money and income. In 1959 Friedman published an article which argued that turning points in the money supply series led turning points in economic activity by reasonably regular period. The point was that if the former preceded the latter, this suggested that the fluctuations in the stock of money were causing the fluctuations in activity. Comparing timings of peaks and troughs of the rate of growth of the money supply with peaks and troughs in the level of money income he found an average leg of 16months for peaks and 12months for troughs. From this Friedman concluded that fluctuations in the money stock had been a major causative factor in US business cycles.
　　The culmination of this intensive examination of historical statistics on money was the publication by Milton Friedman and Anna Schwartz of an article on “Money and Business Cycles”, together with a weighty book on the Monetary History of the United States 1867-1960. They once again compared the timing of movements in the rate of growth of the money stock with movements in the level of money income, and argued that the former series leads the latter.
　　The Monetary History was a verbal account intended to complement the statistical studies of the trade cycle. It laid great emphasis on the money supply as a causal influence in economic fluctuations. The most striking and controversial single point was the assertion that the Great Depression only became great because of a fall of one-third in the money stock as a result of bank failures. The authors argued that the Federal Reserve System might have prevented the banking collapse if it had pursued its role as lender of last resort with much greater vigor. If this had happened, the money supply would not have collapsed and therefore, according to this line of reasoning, neither money income nor real output would have done so. The underlying assumption was that the money stock was the major determinant of money income, and that if money income had not collapsed, there would not have been the disastrous rise in unemployment. This essentially monetary explanation of such a major historical episode provoked a considerable stir. It implied that timely action by the monetary authorities was sufficient to prevent abnormal economic fluctuations, a position which was to become an increasingly prominent feature of Monetary doctrine.
　　In 1968 Friedman delivered a lecture “The Role of Monetary Policy.” The thrust of the lecture was to back up the cast for pursuing a simple, known target rate of growth of the stock of money as the leading principle of monetary policy, irrespective of the current state of the economy. Previously he had argued that stabilization policy had often been counter-productive because the authorities had underestimated the time-lags required for their measures to take effect, now he added to that a much more powerful and more obviously anti-Keynesian proposition: that the economy contained strong self-stabilizing tendencies of its own.
　　Friedman was a gifted propagandist who was never frightened to argue the vices of state intervention and the virtues of the free market. Meanwhile the political right saw Monetarist ideas as a way of attacking state expenditure and intervention. Money supply control seemed to promise a new era of financial stringency (紧缩银根) in the public sector and an altogether more discrimination attitude towards its activities. Whereas the experience of depression and war, together with the intellectual impact of the Keynesian revolution, had long sustained a marked growth of state spending and intervention and the development of an extensive welfare state, by the end of the 160s the rising burden of taxation was beginning to eat a hole in people’s pockets and a reaction set in against the cost and the dubious justifiability of carious state expenditures. For the political right, Monetarism was to become the way to link popular dissatisfaction about taxation and public generosity with the other great source of anxiety, inflation. Thus Monetarism became a key component of the right-wing critique of the Keynesian/social-democratic consensus of the post-war period, a consensus which had been characterized by great optimism about how the states could be used to improve the lives of the community.

Total Words: 1146
Total Reading Time: __ ___

The text is based on The Rise and Fall of Keynesian Economics by Michael Bleaney. Macmillan , 1985.

◆Reading Comprehension
Circle the letter of the best answer.

1. Which of the following statements is not true of Monetarism?
　A. Monetarism favors free market.
　B. Monetarism rejects state intervention
　C. Monetarism is mainly concerned with attacking Keynesian ideas at a purely theoretical level.
2. According to Phillips curve, _____.
　A. when inflation falls unemployment rises
　B. when inflation rises unemployment falls
　C. when inflation rises unemployment rises
3. The author uses the term “effective demand” to mean ______.
　A. expected demand
　B. actual demand
　C. imagined demand
4. With which of the following statements would Friedman most likely agree?
　A. Fluctuations in the supply of money result in fluctuations in economic activity.
　B. Fluctuation in the supply of money result from fluctuations in economic activity.
　C. Fluctuations in the supply of money result from changes in money income.
5. Friedman and Anna Schwartz in Monetary History of the United States 1867-1960 argued that the Great 　Depression was caused by ______.
　A. the state intervention
　B. the Federal Reserve System’s failure to supply enough money
　C. the rise in unemployment
6. Friedman supported the idea that the basic principle of monetary policy is _____.
　A. to pursue the target rate of growth of the stock of money
　B. to change the rate of growth of the stock of money according to the current state of the economy
　C. to cut down the rate of growth of the stock of money
7. It may be inferred from the text that the Keynesian revolution brought about the following except _____
　A. the rising burden of taxation
　B. marked growth of state spending
　C. a high level of unemployment
8. Monetarism takes up the following positions except _____.
　A. the money supply is a causal influence in economic fluctuations
　B. government should play an important role in improving the lives of community.
　C. the economy contains strong self-stabilizing tendencies of its own.

Key

◆Vocabulary Building
ŒDefinition
Define the following terms in your own words.
Monetarism
macroeconomics
microeconomics
the business cycle
welfare state

Idiom
Complete the following sentences with the appropriate idiomatic expressions which are related to the idea of PROBLEM-SOLVING ABILITY. Make sure it fits the blanks.
　　　　be off base                　　　　be right on target
　　　　get to the heart of           　　beat around the bush
　　　　hit the nail on the head       　miss the mark

1. Someone who _   ___ is absolutely correct
2. Someone who _   ___avoids giving a clear answer.
3. Someone who _   ___is not able to understand the most important thing.
4. Someone who _   ___is not close to the answer.
5. Someone who _   ___something understands the most important thing about it.
6. Someone who _   ___gets an answer exactly right.

ŽGeneral Vocabulary Exercise
Use the appropriate form of the word given in the brackets to fill in the corresponding blank.

1. Many people eat foods that are _____ to others. (repugnance)
2. Many critics are _____　frank in their criticism. (repugnance)
3. There are too many _____ in this plan. (intangibility)
4. The bomb was _____ from several miles away. (detonate)
5. A careful _____ of the substance was made in the laboratory. (analytic)
6. The _____ lake reflected the image of the old castle. (placidness)
7. The father was _____ proud of his children’s accomplishments. (enormity)
8. The child shouted with _____ when the box was opened. (gleefully)
9. The lateness of the train _____ all the commuters. (vexation)
10. _____ exercise can damage health instead of improving it.(rigor)

Analogies
Select the lettered pair that best expresses a relationship similar to that expressed in the original pair.

1. IGLOO: ESKIMO:
　A. ham: eggs      B. palm: Florida
　C. war: Vietnam    D. cannon: noise
2. INOCULATION: IMMUNITY:
　A. talisman: charm   B. serum: antidote
　C. exposure: toughening   D. doctor: scientist
3. HOLOCAUST: FIRE:
　A. inundation: water    B. catastrophe: accident
　C. deluge: emergency    D. disaster: earthquake
4. SEDATIVE: PAIN:
　A. narcotic: oblivion   B. hypnotic: sleep
　C. solace: grief   D. irritant: eye
5. EXPUGATE: PASSAGE:
　A. burn: book    B. filter: water
　C. abridge: text   D. cancel: plan
6. CONVENTION: MORES:
　A. antics: capers   B. corruption: maggots
　C. honesty: falsity    D. books: library
7. CONVENTION: MORES:
　A. zebra: zoo   B. hawk: prey
　C. parrot: jungle   D. chameleon: lizard
8. SOLDIER: CARBIND:
　A. author: book    B. chemist: test tube
　C. knight: spear    D. sailor: marine

Key

◆Cloze
Read through the following passage and then decide which of the choices given below would correctly complete the passage if inserted in the corresponding blanks.
　　Most people have a good idea of what is meant by inflation. They know that it  1    a sack full of groceries to cost more money. They know that buying Christmas presents costs more. They know that it is more expensive to eat   2  , to go to a movie, to take a vacation, or to buy a car. They know they will be generally   3   off in the future unless their pay can keep up with inflation.
　　Inflation means that the general level of prices is rising.  4   is, enough commodity prices are rising so that,   5   the average, prices in general are rising. During inflating some commodities may be falling in price and some may be rising, but the commodities rising in price are   6 , and they exert an upward force on the general price level.
　　Inflation has dynamic and self-   7   properties. Increases in the price level induce economic groups to react   8   rising prices, causing further increases in prices. For example, consumers   9   increases current consumer spending, causing current market prices to   10  . During periods of rising prices, producers are not inclined to resist increases in wages and other costs, since higher production costs may be shifted forward to consumers in the   11   of higher prices. These increases in prices,  12  , become the basis of further increases in production costs and still higher prices.

1. A. brings       B. causes       C. takes      D. gives
2. A. out          B. in          C. within     D. off
3. A. better        B. worse       C. best       D. worst
4. A. This         B. That        C. It         D. What
5. A. for          B. in          C. on         D. with
6. A. small        B. large        C. trivial      D. dominant
7. A. contained     B. controlling   C. sustaining   D. imposed
8. A. with         B. to           C. in         D. on
9. A. expected      B. expect       C. expecting   D. expectative
10. A. fall         B. increase      C. lower      D. rise
11. A. shape       B. group        C. form       D. means
12. A. moreover   B. besides       C. likewise   D. however

key