5) Why does the price of cakes rise according to the baker?
6) Why is inflation presented as a monster?
7) Translate: les riches; les pauvres
8) Quote three reasons why the old woman complains about inflation.
Part 3:
9) Explain the expression “be of service”
10) How does the economist explain inflation?
Part 4:
11) What means “borrow”? What is the contrary of this word?
12) Can you give an example of the reimbursement of a borrow with an interest rate?
Part 5:
13) What is the eurosystem?
14) What is the contrary of inflation? Why can it be worse than inflation
Exercise 1
1) Translate into English :
Each word is a one mark question; each sentence is a two mark question.
- Augmenter
- Un billet de banque
- Un chèque
- Un code barre
- Depuis 1983, les prix ont augmenté de 150%
- Il y a dix ans, le pain ne coûtait que cinquante centimes.
- En 20 ans, le prix du vin a augmenté de 30%.
- As-tu déjà vu les prix diminuer ?
- Selon la banque centrale européenne, le taux d’inflation doit être inférieur à 2%.
ANNEX: VIDEO TRANSCRIPT
PRICE STABILITY: WHY is THAT IMPORTANT FOR YOU?
Part 1: Beginning -1’16
-Teacher: Today we’re going to talk about price stability. Price stability as defined by the governing counsel of the European Central Bank is the year-on-year increase for the Euro area in the harmonized index of consumer prices for the Euro Area of below 2 per cent.
-Boy: Excuse me; can you explain that in simple terms, please?
-T: Well, imagine a shopping basket of goods with a broad range of products such as bread, tomatoes, milk, or things like shoes, or computers. The price of this basket of goods is checked regularly and the annual prices increase.
And in some rare cases a decrease is calculated.
Broadly speaking, if the increase is lower than 2 per cent, we have price stability.
Is that clearer? Well, let’s start from the beginning (…)
Part 2: 1’20-3’27
Boy: What happened?
Girl: Where are we?
B: I don’t know, but I am hungry.
G: Look at those!
G: What can we get for four coins?
S: What would you like?
G: Two please
S: that’s not enough!
B: He increased the price! Why that?
S: Because people have more to spend than there is goods to buy. The demand for my cakes has risen. And the price of flour has gone up. I have to pay the miller. The price of wood for my heaven has gone up too. It is more expensive to pay now. Next!
Monster (M): Do not worry. You just need more money!
B: Cool! Thanks a lot!
I do not believe it!
He keeps putting his prices up!
Girl: we’ll never be able to buy anything here
Monster: Well then…You’d better have more money!
Girl: Wait a second, I know you, you’re inflation!
Monster: Well done! Because you’re so clever, I’m going to give everyone here a cash price
Girl: No! Don’t!
Boy: Waoh! This is great!
Girl: No it is not! It is too much money around for the same number of products, it pushes up prices and money loses its value.
Old woman: Look, what he is asking for that! It is more expensive that it was last month. I use to be able to afford it but now I can’t. Prices are going up all the time, but my pension is not!
And my savings are losing value every day!
It is always the less well off who suffer in times like these
B: When it has started, it is difficult to stop. Here it is again! Let’s get out of here!
Part 3: 3’27-5’16
Girl: glad we are away from that! I wonder who keeps an eye on inflation nowadays.
Boy: Did not the teacher say something about the European union central bank and price stability?
Girl: Yeah, let’s try to find out some more
Look where we are!
Boy: Excuse me: is it true that your job is to keep prices stable?
How do you do that?
Economist : maybe I can be of service… Right, how can I help you?
Girl: Well, we’ve just see the inflation monster and the damage he causes. Are you the one taking care of that?
Economist: Inflation monster?
Boy: Yes…
Economist: You must mean this!
Girl: That is the inflation monster? But that is tiny!
Economist: Sure it is, and that is because our job is to keep prices stable. We aim to keep inflation below but close to two percent, over the medium term.
Girl: But how do you do that?
Economist: We figure out if they are risks to price stability. We carry out two kinds of analyses. First, we monitor a number of factors, such as economic growth and oil prices: factors that could push up prices in the short run. And second, we keep an eye on how much money is circulating in the economy, because that could push up prices in the middle to long run.
-Girl: But, why?
-Economist: We know that all high inflation in the past was accompanied by too much money being in circulation
If too more money was chasing too few goods, then we would risk having more inflation
Boy: like if everybody wants to buy the same cake in the market place?
Economist: Yes, but inflation only occurs general increase in prices. Not only for cakes but for all goods in services.
Part 4: 5’16-6’36
Boy: But what could you do about this? For example, can you prevent the baker from raising his prices?
Economist: No we can’t, but we decide what the interest rate should be. Let me explain to you. If you take out a credit to buy a car or a new fridge for instance, you’ll pay an interest, calculated on the basis of the interest rate. In other terms, the interest rate is the price of money. The higher the price of money or the interest rate, the lower the demand for money will be.
Girl: it is less likely to borrow money when it is too expensive.
Economist: Exactly. That is why our job is to set the level of the interest rates
Girl: Making sure that prices remain stable of the time
Economist: That is right!
And having stable prices create confidence: it makes easier and to save and invest. If you go shopping in a few months’ time, things would cost roughly the same all they do know.
Also, companies invest more, helping the economy to grow and creating jobs
Girl: and that could make a country more prosperous
Economist: You see, an increase of this little fallow can be a problem for the economy. It can even people losing trust in their money, which is why the ECB and the eurosystem take their mission so seriously.
Part 5 6’36-8’17
Girl: Eurosystem?
Economist: That is the ECB and the national central banks of the countries in the euro area
But you know, that is not all we keep on about.
Girl: Really?
Economist: Yes, this is this: deflation
Boy: What is that then?
Economist: Deflation is a general decrease in prices
Girl: it sounds great!
Economist: No, it’s not. You see, just like inflation, they can also damage the economy.
For example, if all prices are declining, you delay buying something, expecting it to cost less a week later, and even less a month later . For the same reason, a company might decide to postpone investment, and the economy would suffer.
Boy: These little guys are destructive!
Teacher: And what is the primary objective of the ECB and the European system?