ENGLISH LANGUAGE 2

      My Best Pal

Close friendships are hard to come by these days. In an ever-changing world with people striving to achieve their interpretation of preordained success, it is hard to know who your true friends are. Fortunately, I found my best pal early at the tender age of seven. We were both enrolled at the same school and were at wits’ ends as we searched tirelessly for our designated classes.

Samantha and I got acquainted as both of us were in the same class and sat next to each other. Samantha was a happy-go-lucky girl who always managed to breathe fresh air into the sometimes arid classroom. She always knew what to say and would voice them at the best possible moments. Both pupils and teachers alike enjoyed her company and liveliness. There was hardly ever a dull moment when she was around with her funny quips and expressions.

Samantha was born with a silver spoon. Her father was a businessman and her mother owned and ran a boutique. Both her parents were very caring towards her as she, just like I, was the only child of the family. Samantha came to school each day with a perpetual smile. She was a very nice person to be around with. She and I used to go everywhere together and both of us were rarely seen apart. We used to talk about so many things as we walked, thoroughly enjoying our time together.

One day, I went to school and forgot to ask my parents for lunch money. At first, I was not hungry and thought I could bear going without a meal but soon, my stomach began to growl. Without asking, Samantha generously paid for my meal and drinks during recess. The incident revealed to me how lucky I was to have such a caring and compassionate friend.

As time went on, people started teasing us as we were spending more and more time together. We seemed to know what each other thought and we cared for each other deeply. Was I in love with her? I did not know then and we both knew we were too young for all that emotional roller coaster.

Currently, Samantha and I are studying at different schools. It was hard to be apart at first, but technology in the form of instant messaging and e-mails have helped to bridge the gap in our friendship. I sincerely wish our friendship will never end as it would be equivalent to waking up from a beautiful dream.

The Night Market

One of the most interesting places in Zimbabwe is the night market. You may visit and experience the night market yourselves. Both locals and foreigners agree that the night market is the most common feature in the local society.

The night market begins when the vendors arrive in the late afternoon. More and more goods laden vans arrive to begin a brisk day of business. Most of the vendors busily set out to set up their stalls respectively in order to get ready for a brisk day of business.

The sun gradually sets and the night market picks up momentum. More cars and vans are arriving. By now, the stalls are neatly and strategically arranged to entice their customers. There is an assortment of goods sold ranging from food, toys and clothes, to name a few. A variety of goods is sold at low prices.

Large rainbow-coloured parasols are used to shade the people from rain and shine. A concoction of blaring music can be heard in the night market background amidst the constant shouting. It is an amazing kaleidoscope of sights, sounds, smells and colours.

The night market is known as a haven by local ‘gourmets’ who can enjoy various kinds of mouth-watering local cuisine. Still more people arrive, they come from all walks of life, mingling freely and harmoniously. Crowds are walking up and down in an endless stream. Some of them are stopping by the stalls and haggling before making purchases. Little children tag along, amused and excited. Sprinklings of tourists join in to experience the lifestyle of typical Zimbabwean folks.

When night falls, lighted lamps brighten up the place, they add gaiety to this atmosphere, and it is like a funfair. The night wears on and the traffic of people recedes. Vendors get a chance to rest their weary legs besides bantering with each other.

By 10.00 pm, all the stalls call it a day. The vendors pack up and close the van doors. One by one, they leave, leaving behind pieces of papers, plastic bags and discarded boxes. It us an eyesore! Finally, the night market disappears. The place becomes quite and still once more.

Race

“Not so fast Meli!” My immature ten-year-old voice yelled out at the fast disappearing figure before me. I knew the additional two wheels of my glittering silver-tinted bicycle had given me a disadvantage rather the advantage I thought I would have. I pedaled with all the force my undeveloped leg muscles could generate, but it only proved to be futile. I could not win this race.

I had never beaten my brother, Meli, in any bicycle race after that. He always seemed to be one step ahead of me, no matter how hard I tried. Meli was a caring and understanding brother, but equally so was he competitive and determined. He was my role model and the person I respected most, but he was also my main rival. Our parents too supported our healthy competition. Races with Meli were never short of passion and excitement, and soon I found myself getting more into cycling, determined to beat Meli at our favourite sport.

The years had gradually passed, and the both of us had found a new love, motorcycle racing. We had worked hard to make our mark in the sport, and both of us had succeeded thus far, winning respective races in different parts of the world. Yet, he had won many more titles than me. I could never surpass him, it seemed. Our rivalry was a race.

Now, it was time for us to compete once more. Both of us had entered the widely-acclaimed “MotoGP” competition, and a showdown would be inevitable. We had not raced together for many years, leaving this race down to the tremendous amounts of hard work we had put in. The press had written countless articles about our coming race, and it was finally time for the big clash.

I turned my head towards him, and I could see his eyes through the visors of our helmets. Eyes filled with a colourful mixture of nostalgia, happiness and determination. Then, the horn blared. We raced, neck to neck from the start. It stayed that way for the next seventeen laps, before the final lap. He sped in front of me, stretching his engine to the limit. It would be extremely difficult to attempt to rival his pace, and I tried my very best to reduce the gap as much as I could. As I saw him riding in front of me, I was gripped by a sense of déjà vu.

“Not so fast Meli!” I mouthed, for the sake of reliving our very first race. Only this time, I would not let history repeat itself. I flicked my wrist back, accelerating my vehicle. I concentrated on the figure in front of me. I could feel the effect of pushing my engine to its limits. My gloved hands were feeling the heat from the overheating engine.

We approached the last hundred metres. I was only half a motorcycle’s length behind him. With a final flick, we crossed the finish line.

We looked up at the giant screen. A camera replay was being shown. It was too close to call a winner.

“And the winner is Will!” the commentator boomed through the sound system.

I felt immense relief and a massive sense of achievement. I had finally done it. I had won the cup. I had won a race against my brother. I had won the race to surpass my brother.

Money

It is truly undeniable that in this science and technology millennium, we can hardly live without money. Even buying something small such as sweet will cost you some money. However, this does not mean that money can buy happiness, unlike the misconception of most people in the world. In fact, wealth is a far cry from happiness. If you disagree with me, let's look at the reasons for my stand.

Firstly, one of the main gates to happiness is to stay healthy. Maybe some people think that when one is rich, he can be healthy or it does not matter even if they have diseases because these rich men have lots of money to pay their medication. This is totally wrong. Good health is acquired from a healthy lifestyle progressively and not in a day. With lots of money we are tend to temp ourselves to exotic, luxurious food. If this food is taken excessively, it will let to obesity, heart diseases, diabetes, hypertension and other serious illness. Moreover, rich people are probably lack of exercise as they hardly walk outdoor due to 24 hours-service debar fetching them about causing them to be at a higher risk of getting these unnecessarily health problems. How a person can enjoys his life and feels happy when he is confined to a wheelchair or bed-ridden. He would not even be glad spending his money and time curing his sickness. Therefore, wealth cannot bring happiness.

Professionals like doctor, nurse, lawyer, engineer, food technologist and accountant earn a lot of money per month. They are considered the high class citizens who can afford large, expensive house with huge beautiful gardens. But do they really enjoy the pleasures of life? Most probably not because they are simply too busy with their work. They frequently burnt the midnight oil in their work place. It is even more miserable if they have to turn their home into a working place. Most specialists have to stand-by 24 hours in case of emergency calls from the hospitals. Hence, they can hardly spend any relax, restful night at their home even if they posse a huge two and a half storey bungalow with a beautiful garden and artificial waterfall. Successful businessmen may always have a chance of flying to all parts of the world when they go out station to make business. However, very few of them can really take it as a holiday as a treat for themselves for their schedules are always full and they are so stressful with their works. Even fewer businessmen can ignore urgent, pursuing calls from their clients or office when they are going for holidays or resting. In other words, one can make lots of money but he may not enjoy even the beauty of nature around them or the branded, expensive things with them. So what is the use of money when we do not even enjoy a meal properly and discontented with lives. One with a moderate income can feels happier if he leads a simple life and be grateful with what he has.

Finally, a children or a teenage brought in moderate family is better than in a rich family. As the sons or daughters of billionaires, their parents will give them whatever that they want in material. These children or teenagers get a lot of pocket money from their parents and can afford to buy many expensive things like branded, latest handset, expensive clothes and branded sport shoes. But the question is, are they happy if their parents are always working with only an Indonesian maid to accompany them. If they are asked to choose between wealth and love from their parents, I believe that they were undoubtedly choose love. A healthy family is not created for the children. These children mentally are not as healthy as those being cared and loved by their parents. Children need parents who can listen to their problems and give them words of wisdom, teaching then day by day. Parents who are not rich may not be able to buy branded things to satisfy their children but with more communication and understanding, these teenagers will understand the difficulty of their parents in earning money, learning to be thrifty. In short, money does not promise a happy, caring family.

Money may be able to buy a lot of things but not love, friendship, health and others. These are the main ‘ingredients’ for a happy life. Thus, it is a controversy if money can bring happiness. Even, if we can afford many things we desired with lots of money, we may not be happy and enjoy our lives if we are always dissatisfied with what we had, yearning for more. Thus, I stand firm that money cannot bring happiness.

Police Report on Accident

DIRECTED: REPORT – Police Report
You witnessed an accident. The police officer has asked you to make a report. Use the points given below:
- when the event happened
- where the event took place
- how it happened
- description of the vehicles
- steps takenTo: Sergeant Victor Mabika
From: Zibanani Moyo
Date: 7th September 2011
Report of the accident on Fazak 2/14
On 7th September 2011 at 10.30 a.m., I was walking along Fazak 2/14 which is next to the children’s playground. As I was about to cross the road to enter the park, I saw a car driving swiftly down Fazak 4/14. It was a Honda Civic with the number plate ASD 0098. Another car, a Toyota Vios 1.5 with plate number ZAB 1234 came out of Fazak 4/14 as well. The Honda Civic was driving too fast that make it did not have time to avoid collision.

The accident caused a loud crash. The Honda Civic hit the Toyota Vios on the driver’s door. The door could not be opened and the driver had to get out from the passenger’s door. The driver of the Toyota Vios was lucky as he survived with no physical injuries. Both air bags popped up when they collided to each other. They both were fortunate as their car was not badly damaged and dented.
The Toyota Vios’s windscreen was shattered to pieces. The Honda Civic’s headlight and signal light were smashed. There was plenty of glass on the road. The two drivers startled to argue. The driver of the Honda City was a woman. They blamed each other and the argument stopped when her mobile phone rang. Most of the passerby slowed down their vehicle to watch the accident. Some pedestrian came by and offered help.

As it happened, I ran into my house which is close by. I called the nearest police station and in ten minutes, a police car drove up. I told the police officer I had witnessed the accident and offered to come out to the station to give a statement. The cars were towed to the side of the road first, and then were brought to the police station before to workshop. Pictures were taken for insurance claim.
In my opinion, the driver of the Honda City is to blame for the accident. She was driving too fast and did not pay any attention to vehicles coming out from the side road. The driver of the Toyota Vios should have stopped at the junction.

Zibanani Moyo

355 words

Anti-Smoking Campaign Speech

DIRECTED: SPEECH
Your school is having a month-long ‘A Healthy Body Campaign’. As President of the Health Club of your school, you decide to give a speech on the ‘Angisafuni Campaign’ recently launched by the government.

Angisafuni Campaign

A very good morning to our dear Principal, Mr. Ngwenya, teachers and students.

Recently, our former Prime Minister, Winston Hama launched an anti-smoking campaign called “Angisafuni”. You can now see this short and rhyming catch phrase “Angisafuni” everywhere – on billboards, posters, TV ads, and sometimes I even hear it on the radio. Though some people have criticised our government for setting aside a staggering sum of Bonds 100 million over 6 years for the campaign, it is nothing compared to the huge amounts that tobacco companies spend to promote smoking.

But in this war against smoking, money definitely talks; it is necessary for the Angisafuni Campaign to constanly remind us of the hazard of smoking because about 50 Zimbawean teenagers light up for the first time every day. In fact, some of these youth progress steadily from this to regular use, with addiction raking hold within a few years. And this is despite the warning on every pack of cigarettes that states unequivocally “Smoking is dangerous to your health”.

What can the Angisafuni Campaign do to combat this? Their aggressive advertising creates media awareness among the public, especially among the fashionable young crowd, that smokers have yellowed teeth and suffer from shortness of breath and tells them that it is not cool to smoke. It is also not responsible of them to affect non-smokers with second-hand smoke.

Also, there is a succession of infomercials on TV and in the papers showing the debilitating effects of tobacco addiction on the body and gruesome statistics of smoke-related deaths. We are now familiar with the graphic pictures of damaged lungs on billboards which should scare people into not smoking. This works, as I know some of my friends are quitting now, or trying to reduce the number of cigarettes they smoke per week.

However, I feel any anti-smoking campaign is more effective if other people and organisations are actively involved too. Yes, the first step has been taken by the top, but sad to say, many of our politicians smoke themselves. Nearer to home, so do some of our parents and teachers.

These adults have to be good role models by not smoking themselves. If they do smoke, they should tell their children and students that they regret that they ever started, and then take steps to quit smoking as soon as possible. They must practise what they preach.

On a more positive note, I commend the Zimbabwe Amateur Athletic Union for its zero-tolerance of smoking because they know that smoking and health just do not mix. How can our sportsmen excel if they cannot stop smoking.

Dear teachers and students, thank you for your attention. Let me end my speech by reiterating that smoking is a bad habit, so make Angisafuni your mantra. If you have started smoking, say Angisafuni and quit! And if you haven’t started smoking, say know that smoking not only damages your health but you are also literally burning your money.

502 words

ENGLISH LANGUAGE

The English Examination

Paper One
The paper has two writing sections:

1. Free composition/imaginative writing
2. Guided /situational composition

• Tips for Paper One

Mistakes in spelling, grammar and punctuation may be penalized in any part of the paper. Be conscious at all times of the need to write legibly and avoid making common mistakes in spelling and grammar. Try to leave time to check through your work before the end of the exam.

The paper is marked on an impression based standard meaning there is no correct or wrong answer.

Know yourself
• By the time you sit for the final exam, you should know your strengths so you can pick the best composition type that you can write be it narrative, descriptive, dialogue and so on.
• Some topics may entice you during the exam but stay focused and stick to what you know. For example, there are several rules that apply to writing dialogue and if you do not know them and try to write one you will lose a lot of marks.
• Create a draft of your composition or essay, write down ideas and important points that you may wish to include.
• Do not get carried away when writing, be sure to stick to the recommended word limit. You may lose marks for work that is too short or too long.

Tips for Paper Two
This paper is marked on the assessment of comprehension skills, testing your understanding of the given comprehension passage. Each question has a set of specific and acceptable answers, no marks will be given for answers mis-matched; For example, giving the answer for question one in question two and vice-versa. Your answers should be clear and straight to the point.

Comprehension
• Read widely as much as you can, about whatever you can, whenever you can. Having a strong reading culture improves your understanding, analysis, grammar and other critical skills.
• During the examination be sure to read the comprehension passage a number of times until you get a general direction of the events in the passage. Read the passage a first time, then go through the questions. Once done, you should go back to the passage and try to identify the answers but do not write anything on the answer sheet as yet.
• After the second read through, you can then attempt the questions. Write clear, short answers and stick to the passage as a source. Unless otherwise asked for, do not state your own opinion on any of the answers.

Summary
Summary questions are marked based on your ability to extract and summarize relevant information from the passage. The last section of the paper examines your ability to give or identify the most appropriate response to a given situation as you may meet in real life. The response you choose may be correct in a real life situation but may also be seen as inappropriate for the given situation hence marked as wrong.

• Make sure you clearly understand the summary instruction.
• A summary question addresses a particular aspect of the entire passage and this renders several parts of the passage irrelevant. • Write down points from the comprehension passage that are relevant to the question as this will help you to lay out a guide of the number of words to add or remove to meet the word limits set in the question.
• You should familiarize yourself with the use of discourse markers as they enable you to link summary points without changing their meaning. • Your summary should state at the end the actual number of words used in brackets.

Appropriate register
• Read and understand each given situation.
• Choose the most appropriate response to that situation.
• Situations usually require contradicting responses.
• Avoid repetition of responses for instance if you have used rude in question one, you will not be accorded marks if you repeat the same term in question two.
• Avoid the use of double negatives, for example, saying unhappy instead of not happy. Constant practice will help you to improve analysis of register situations.

• Your answers should be clear and straight to the point.

The Eight Parts of Speech

There are eight parts of speech in the English language: noun, pronoun, verb, adjective, adverb, preposition, conjunction, and interjection. The part of speech indicates how the word functions in meaning as well as grammatically within the sentence. An individual word can function as more than one part of speech when used in different circumstances. Understanding parts of speech is essential for determining the correct definition of a word when using the dictionary.

1. NOUN A noun is the name of a person, place, thing, or idea.
woman... Bulawayo College... tree... sadness

A noun is a word for a person, place, thing, or idea. Nouns are often used with an article (the, a, an), but not always. Proper nouns always start with a capital letter; common nouns do not. Nouns can be singular or plural, concrete or abstract. Nouns show possession by adding 's. Nouns can function in different roles within a sentence; for example, a noun can be a subject, direct object, indirect object, subject complement, or object of a preposition.

2. PRONOUN A pronoun is a word used in place of a noun.
She... we... they... it

The young girl can run very fast. She is the fastest runner in our school.

A pronoun is a word used in place of a noun. A pronoun is usually substituted for a specific noun, which is called its antecedent. In the sentence above, the antecedent for the pronoun she is the girl. Pronouns are further defined by type: personal pronouns refer to specific persons or things; possessive pronouns indicate ownership; reflexive pronouns are used to emphasize another noun or pronoun; relative pronouns introduce a subordinate clause; and demonstrative pronouns identify, point to, or refer to nouns.

3. VERB
A verb expresses action or being.
jump... is... write... become

The verb in a sentence expresses action or being. There is a main verb and sometimes one or more helping verbs. ("She can sing." Sing is the main verb; can is the helping verb.) A verb must agree with its subject in number (both are singular or both are plural). Verbs also take different forms to express tense.

4. ADJECTIVE
An adjective modifies or describes a noun or pronoun.
pretty... old... blue... smart

An adjective is a word used to modify or describe a noun or a pronoun. It usually answers the question of which one, what kind, or how many. (Articles [a, an, the] are usually classified as adjectives.)

5. ADVERB
An adverb modifies or describes a verb, an adjective, or another adverb.
gently... extremely... carefully... well

An adverb describes or modifies a verb, an adjective, or another adverb, but never a noun. It usually answers the questions of when, where, how, why, under what conditions, or to what degree. Adverbs often end in -ly.

6. PREPOSITION
A preposition is a word placed before a noun or pronoun to form a phrase modifying another word in the sentence.
by... with.... about... until

(by the tree, with our friends, about the book, until tomorrow)

A preposition is a word placed before a noun or pronoun to form a phrase modifying another word in the sentence. Therefore a preposition is always part of a prepositional phrase. The prepositional phrase almost always functions as an adjective or as an adverb. The following list includes the most common prepositions:

7. CONJUNCTION
A conjunction joins words, phrases, or clauses.
and... but... or... while... because

A conjunction joins words, phrases, or clauses, and indicates the relationship between the elements joined. Coordinating conjunctions connect grammatically equal elements: and, but, or, nor, for, so, yet. Subordinating conjunctions connect clauses that are not equal: because, although, while, since, etc. There are other types of conjunctions as well.

8. INTERJECTION
An interjection is a word used to express emotion.
Oh!... Wow!... Oops!

An interjection is a word used to express emotion. It is often followed by an exclamation point.

Comprehension Skills

The following skills are essential for a student who sits for an exam and wishes to excel in the comprehension section:

• Skimming
When you skim, you are getting a quick overview of the passage. This helps you get a general idea of what the passage is about and this helps you get a better understanding of the passage and subsequent questions.

• Scanning
Scanning is concentrated reading of a given passage looking for particular information. Once you are able to scan a given text quickly you are on a better footing to appropriately respond to given questions and instructions.

• Inference and deduction
Here you are giving a contextual interpretation of words and phrases used in a given passage. You need to master both scanning and skimming before you can apply inference and deduction on a given passage.

• Answering Questions
To obtain maximum marks on comprehension work you must be able to respond to given questions using only the information available in the passage. Question interpretation and analysis skills are essential as it places you in a better position to correctly respond to an instruction. There has been a general observation of the fact that in an exam set-up, candidates fail to answer but instead, copy whole sections of text from the passage which they feel contain information required by the question.

Question types

Questions can be generally categorised into seven types:

1. The Factual Question
2. The Inferential Question
3. The Use Your Own Words Question
4. The Language Use Question
5. Writing down/Quoting a Word/Phrase/Sentence/Expression
6. The Vocabulary Question
7. The Summary Question

Sometimes, however, you may find that some questions straddle two categories. For example, you may find a question that can be categorised either as a Use Your Own Words Question or a Language Use Question.

The Factual Question

The word factual’ comes from the word “FACT’, and as the word suggests, this type of question requires you to retrieve facts given in the passage.

Examples of factual questions:

who, what, where,when,why and how questions
For this type of question, DO NOT INCLUDE FACTS WHICH ARE NOT GIVEN IN THE PASSAGE.

Question Type	Examples
Who: You are asked to identify the person or person.	Who won the high jump competition?
Where: You are aksed to identify a place.	Where did he meet the woman who helped him find his daughter?
When: You are asked to give the time an event occured.	When did the Challenger space craft leave the solar system?
Why: You are aksed to give a reason for your answer.	Why did the children suddenly run from the school car park?
How: You are asked to give a method or a process to your answer.	How did the young boy persuade his mother that he was responsible enough to go to the fair alone?
What: What can be broad. A what question must be answered depending on how it is phrased. It is best to analyze the requirements of the question then answer it.	What were the reasons of the king's downfall? What symbol did the book have on its cover?

Use your own word questions

STEP 1 : Check the context of the expression.
STEP 2 : Identify key words/key ideas (which may be expressed in two or more words} used by the author.
STEP 3 : Replace each key word/key idea with:

(i} a synonym (a word with similar meaning)
(ii} a phrase with similar meaning
(iii} associated word
(iv} an antonym* (a word with opposite meaning}
*[Please note that antonyms can only be used in special cases.)

STEP 4 : String your substitute words into a complete sentence that answers the question.

Example:

Type 1:
Obtain the points for your answer for the passage, and then re-phrase the points using your own words. It is a factual question that asks you to use your own words in an answer.

First, locate the answer in the passage, in the writer's own words.
Identify the key words or key ideas which you will have to rephrase. As a general guide, one mark requireds one key idea that you rephrase.
Replace these key words with synonyms or phrases with similar meaning. You can also use antonyms in certain cases. Your final answer must be part of a complete sentence.

Type 2:
This type of question asks you to explain what the author means by a word or phrase, sentence or expression. You do not have to look for particular points but rather analyze the author's use of language.

The Vocabulary Question

1. A word or phrase is chosen from the passage and you are required to explain its meaning.
2. You will be required to give another phrase or word with the same meaning as that word.

Examples:
Pick an alternative word for the words or phrases in bold for each question that best keep the meaning of the original sentence.

1. It is difficult to get young people to plan for their old age, which seems very distantto them.
a) obervable
b) far away

The correct answer is b
2. Receptors for the sense of smell are located at the top of the nasal cavity.
a) upper end
b) inner edge

The correct answer is a

The Rephrasing Question

The rephrasing question requires you to express certain phrases or sentences in your own words, .i.e. you have to explain their meaning. In answering this type if question, you have to read the given phrase or sentence in its context, i.e. you have to read the given phrase or sentence in its context, i.e. you have to read what comes before or after, in order to understand its meaning fully.

“I waited for Zibanani to appear. The minutes ticked by. It seemed like an age before he finally appeared.”

To understand the meaning of the phrase “an age” you have to read the two sentences before it. Then you understand “an age” to mean a very long time.

Now read the following:
“Once you have tracked down the wild animal, you must shoot it cleanly.”

Cleanly here means killing it immediately. Notice how that meaning of clean here is related to the context of hunting, and has nothing to do with the usual meaning of clean (i.e. free of dirt.)

Sometimes sentences given to you contain idioms and figures of speech, such as metaphors.
For instance:
1.) The ghosts of his past misdeeds keep returning to haunt him. (He kept remembering, with guilt and fear, his past wrongdoings.)
2.) He was convinced that his enemies, one fine day, would do him in. (He knew his enemies would find and kill him.)

The Inferential Question

These types of quesions need you to read between the lines to find a hidden meaning.
You will not be able to find an answer directly in the passage, but you need to use deduction skills to infer the answer through the given words phrases.

Examples:
- Explain clearly / explain the contrast ....
- Suggest how ....
- What do you think ....
- Why does the author suggest ....
- What impression ....

Example Question:
"Winnie! Winnie! Where are you?"
The old lady called out again and again as she walked along the wide road. A bad road for dogs. She prayed he had not wandered this far. It had been nearly seven days since she had seen him.

Answer these questions:
1. Who was Winnie?
2. Describe the woman's relationship with Winnie.

As you answer the questions, you will realise that the information given in the story does not directly state the answer. You need to look at clues/facts that will help you pick an answer.

1. Who is Winnie?
Clues:
- A bad road for dogs.
- She prayed he had not wandered this far.

The two details above allow a conlcusion to be made that the old lady was looking for Winnie along a road that was dangerous for dogs. Hence, it is most likely she was looking for her dog.

Winnie was the old lady's dog.

2. Describe the woman's relationship with Winnie
You need to give a reason why you have chosen this answer.
Clues:
- The old lady called out again and again.
- She prayed he had not wandered this far.
- It had been nearly seven days...

The woman is looking for the dog anxiously, praying that he had not wandered off too far onto the bad road for dogs and after seven days she was still looking. This shows us that she loved and cared for the dog deeply and was close to him.

The Summary Question

Being able to answer summary questions well will give you a huge advantage in your Comprehension paper.
Here are the 4 Steps to answering any summary question.

Step 0: Reading the Question
There are 2 very important things you MUST take note of before you begin writing your summary.
- Identify EXACTLY what the question wants,
- Take note of the paragraphs from which you are tasked to identify your points from.

The first requires you to take note of key terms and understand question words.
The second requires no more than a couple of seconds to check but is often the most common careless mistake that exam takers make. It may seem implausible for one to miss such an obvious instruction but it has happened too often for you to brush it off. So double check the paragraphs you are allowed to get your points from.

Step 1: Identify the relevant answers from the passage
When identifying answers from comprehension passages there are a few rules we normally follow:
- Only select key ideas - Leave out examples - Leave out adjectives and adverbs

That is true for most questions unless they specifically ask you for examples.

Underline the points from the relevant paragraphs and write a quick word or two (noting) in the margin about each point so that you will take less time sorting them out later.
Sort your answers in the sequence you would present them (or as required by the question).

Group any answers that are similar or belong to the same category in order to reduce the number of words used. For example:
He returned home to shower and had a sandwich after that. But it wasn’t until he finished his homework that he realised he left his basketball in school.

The three bolded points all have one thing in common: they are all things he did before he realised he left his basketball in school. You can group them into one sentence when summarising them: He bathed, ate, and completed his assignments before realising he left his basketball in school.

Quick Tip: If you are required to identify 8 points, identify 10 points instead. This leaves room for errors and there will be a higher probability of getting the right answers. Scoring the goal 8 out of 10 times is easier than 8 out of 8 times.

Step 2: Identify the key words in the answer
While your language grade in the summary is determined by your choice of vocabulary and grammar, the content grade is determined by the number of key words you managed to identify.
On top of that, the key words are the words that you cannot lift directly from the passage (unless it is a technical jargon like photosynthesis or nulcear fusion).

It is therefore crucial that you identify the key words before you start writing your summary. Once you’ve had enough practice, you can actually complete this step together with Step 1. However, it is not recommended that you attempt to do so right from the start without practice.

Step 3: Change the key words
When answering the summary question it is recommended that you use your own words as much as possible. But it is impossible to change everything. The key words and phrases, however, have to be changed. For example:

Q: What did Sibahle do at night?
Passage: Sinahle ate a muffin before she went to bed.”

The word muffin and SInahle are almost impossible to change. In most cases, proper nouns (Sibahle) do not have to be changed. Common nouns (muffin) may be changed but most of the time this isn’t necessary.

Important Note: DO NOT force yourself to change common nouns. Unless there happens to be another alternative name, attempts to change common nouns usually end up fairly ridiculous. (Someone once changed ‘bird’ to ‘flying mammal’. You DO NOT want to do that.)

The question asks for what Sibahke did at night, therefore the key words we are looking for are most likely verbs (action words). In this case, they are ‘ate’ and ‘went to bed’. You should try your best to change these words.
Sibahle retired to bed/went to sleep/slept after consuming a muffin.

Tip: Try to rephrase each point you’ve identified under six words. This will make it easier for you when combining the points together.

Step 4: Writing your answer
You have identified the answers, collated and categorised them, and changed the key words. Now all you have to do is to write everything down.
The grid method This is something that most students are taught in schools today hence it is common enough for examiners to accept seeing it.
What you do is basically draw grids on your paper to make counting the number of words used a breeze.
Writing in the grid would look something like this:

Draw an 8 by 10 table on your paper and simply multiply the rows by columns to obtain your word count. It also means you can easily check your word quota while you are writing.

BONUS Step: Check your writing for mistakes
This is a step many forget or simply do not have time to go through. Once you’ve familiarised yourself with the various steps for summary it should speed up your process and leave you enough time to look through your final answer at least once.

Informal Letters

An informal letter should be fairly informal – but don’t overdo it. The examiner will not be impressed by text messaging shorthand such as "U" for you. Likewise, please avoid excessive use of slang: your objective is to show off your knowledge of standard English vocabulary and grammar.

The content of informal letters is difficult to predict. However, they often include an account of recent events. If you have to write a letter like this, then take care with your verbs! Also, try to use some time phrases (e.g. Shortly after that, Later, That afternoon, After dinner, …) Try to use a good range of vocabulary too, avoiding dull words such as "nice", "fun" and "scary".

Notice and practise writing common phrases found in formal letters:
• Recently I read your advertisement for a …
• I would like to apply for …
• the position of … / the job of … / the vacancy.
• I believe that I am suitable for the job in a number of ways.
• Firstly, … Secondly, … Thirdly, …. Finally, …
• Also, … In addition, …
• I have worked as a …
• I had a holiday job as a …
• I have good _________ skills
• I have experience of ______ing …
• If you wish to obtain a reference, you may contact …
• Please feel free to contact me at any time.
• I read your recent article on ...
• I would like to lend my support to ...
• The School Council recently proposed that …
• I believe that this idea should be rejected.
• There are a number of reasons for this. Firstly, … Secondly, …

Informal Letter Structure

Dear Winston

BEGINNINGS
Thank you for your lovely letter.
Many thanks for your letter.
Thanks for writing.
It was good to hear from you.
Sorry for not replying sooner. I have been very busy.
Sorry for taking so long to reply. I have been revising for my exams.

SIGNALLING: "THE END IS NEAR"
Well, that’s all my news for now.
It’s getting late, so I’d better stop now.
I’d better stop now. It’s past midnight and I have an exam tomorrow.
Time to stop: Mum’s calling me for dinner.
I’d better finish – I’m running out of space.

ENDINGS
I look forward to hearing from you.
I can hardly wait to meet you.
Please write again soon.
Please keep in touch.
Give my regards to …

BEST WISHES
Lots of Love
Regards
Thinking of you

Example

4144B Irvine Ave
Bradfield, Bulawayo

4 October 2014

Dear Nathan

How has life been treating you, friend? I read your novel and I am writing to tell you I thoroughly enjoyed it. Well done.

Since you left to Madrid to pursue your writing career, we have drifted apart. I hope we can start a correspondence here. I wish to hear as much as I can about your Spannish expolits.

Give my regards to Winnie, your pet.

Best,
Vince

Formal Letters

Re-read good examples of formal letters; notice the structure:

Where I read the advertisement + Basic information about myself (not name!)
• Why I believe I am suitable for the job: 1…… 2….. 3…… 4……
• Who to approach for references
• Yours faithfully/sincerely + name

Notice and practise writing common phrases found in formal letters:
• Recently I read your advertisement for a …
• I would like to apply for …
• the position of … / the job of … / the vacancy.
• I believe that I am suitable for the job in a number of ways.
• Firstly, … Secondly, … Thirdly, …. Finally, …
• Also, … In addition, …
• I have worked as a …
• I had a holiday job as a …
• I have good _________ skills
• I have experience of ______ing …
• If you wish to obtain a reference, you may contact …
• Please feel free to contact me at any time.
• I read your recent article on ...
• I would like to lend my support to ...
• The School Council recently proposed that …
• I believe that this idea should be rejected.
• There are a number of reasons for this. Firstly, … Secondly, …

Letter Structure

Open and Close
Dear Sir or Madam -----> Yours faithfully
Dear Ms Waters -----> Yours sincerely

Use a formal tone: this affects your choice of vocabulary and grammar. For example, the first text below would not be appropriate in a formal letter, whereas the second would be:

Hey

I saw some stuff in your mag about activities for kids and I just wanna say that the activities in this town suck. I mean what are we supposed to do in the evenings?

Dear Sir or Madam

With regard to your recent feature on leisure activities for young people, I would like to make a few suggestions. Firstly, there is a clear shortage of playing fields with the result that many children play football in the road, which is dangerous. Secondly, …

NOTE: You should not use short forms (e.g. don’t, won’t, isn’t) in a formal letter.

Letter applying for a job

Your address

Date

Thier Address

Dear Sir or Madam

SUBJECT: IN BLOCK LETTERS AND UNDERLINED

I have read your advertisement in the Weekly News and would like to apply for a position as a Playworker. I am a fifteen-year-old student at Bulawayo College and will be available for work throughout the school holidays.

I believe that I am suitable for the job in a number of ways. Firstly, I have worked as a babysitter for the past three years and my employers have been very satisfied with my work. The children I have looked after are between four and ten years old. Secondly, I have good organisation skills as I am a Girl Guide leader and have helped to plan four camping trips. As part of my duties, I supervise team games and sing-song sessions. I also play the guitar. Thirdly, I am a reasonably good cook. I can prepare simple pasta dishes and I have a lot of experience of making sandwiches for Girl Guide outings. Finally, I am bilingual, speaking both Indonesian and English fluently. I am also beginning to learn Ndebele.

If you wish to obtain a reference, you may contact my Headteacher, Mr L Jongwe (Tel: 123456) or Mrs V Lee (345098) who has employed me as a babysitter.

Yours faithfully

Argumentative Essays

There are three basic ways of organising an argumentative essay:

1. Set ‘em up and knock ‘em down (present your opponents’ arguments and destroy them with your own stronger points)
2. The balanced approach (present arguments from both sides of the debate, but then say what you think yourself)
3. Problem-Solution (explain the problem/s and then propose solutions)

Set ‘em up and knock ‘em down

Using this approach, you present each of your opponents’ arguments in turn (you "set it up" like a bowling skittle) and then demonstrate that it is false or weak (you "knock it down").

Below you can read an example on the topic of zoos. (Phrases have been highlighted to draw your attention to the way the essay is organised.)

Zoos – Sanctuaries or Prisons?

Zoos have been popular for hundreds of years, introducing a wide variety of animals to visitors who otherwise would never have seen them. Times change,however, and we must question whether zoos are still relevant in a world where we wish to treat animals humanely.

It is often said that zoos are educational. They teach people, especially children, about animal behaviour and encourage an interest in animal welfare. This may be partly true, but does a captive animal behave like its counterpart in the wild? Zoo animals are often confined to a very small area compared with their vast natural habitat. Polar bears, for example, roam for hundreds (even thousands!) of kilometres in their Arctic home whereas in zoos they can only manage about 20 metres. As a result, many animals develop unnatural habits such as pacing back and forth or swaying.

Another argument put forward in favour of zoos is that they help to conserve endangered species through breeding programmes. Thus, for example, a rare species such as the orang-utan can be protected and encouraged to reproduce in a zoo environment. In reality, though, breeding programmes often fail because the animals do not benefit from natural selection and successive generations grow weaker. For example, attempts to breed pandas in captivity have been very costly and unsuccessful. Even successful breeding programmes have their limitations. For instance, two rare lynxes released into the wild in Colorado died from starvation even though their natural prey, a hare, was abundant. Evidently zoo life does not prepare animals for the challenges of life in the wild.

Supporters of zoos sometimes claim thatthe inhabitants are even better off than their counterparts in the wild. On the contrary, the zoo is an unnatural environment that exposes animals to numerous dangers. Diseases often spread between species that would never co-exist naturally. For example, many Asian elephants have died in US zoos after catching herpes from African elephants. Zoo animals are often exposed to chemicals, solvents and other toxic substances. Also, in an effort to control their behavior, animals are sometimes forcibly medicated and tranquilized.Furthermore, it is not uncommon for visitors to tease and provoke confined animals.

In summary, therefore, the continued existence of zoos cannot be defended. They do not educate people; they do not conserve wildlife; and they do not treat animals humanely. They are cruel prisons and the time has come to abolish them.

The Balanced Approach

A different approach is to look at both sides of the argument in a more balanced way. In the end, however, you must indicate your opinion. The following is an example of how such an essay might be structured:

Introduction: The issue of handgun ownership
A. Some people believe individuals should not own handguns
B. Others believe ownership is an important personal right
Disadvantages of handgun ownership
- Adults and children can have accidents
- People can use guns for crimes

Advantages of handgun ownership
+ People can protect themselves from intruders
+ People can use guns for recreational purposes

Conclusion - summary & evaluation of arguments presented
Problems of accidents and crime make gun ownership difficult to accept
Gun ownership should not be allowed in the interest of a better society

Now here is the essay itself:

A spate of recent murders at American schools has led to a lot of debate about the issue of gun ownership. While some believe that private individuals should not be allowed to own guns, others maintain that gun ownership is an important personal right. Both sides present convincing arguments, but I have little doubt that that the possession of such weapons threatens the safety of society as a whole.

One of the strongest arguments against handgun ownership is that accidents can happen when adults use guns carelessly or when children discover them. Statistics also show a relationship between the crime rate and the number of privately owned handguns. The number of deaths by shooting in the USA, where handguns are legal, is far higher than in Britain where they are not.

Those in favour of handgun ownership argue that citizens should be able to protect their homes and families from intruders. On the other hand, in a society where guns can be bought over the counter, even petty criminals find it easy to obtain a weapon. Supporters also argue that guns are used for recreational purposes such as hunting. However, such "hobbies" often result in the death or injury of innocent bystanders.

Supporters of gun ownership claim that these weapons have been part of our life for centuries. Nevertheless, the problems of increasing crime and family conflict in today’s society make gun ownership difficult to accept. Handguns are too dangerous to be made freely available to just anyone who wants them.

Problem-Solution

This approach does not work for every topic. However, if you are discussing a problem of some sort (e.g. graffiti, litter, poverty, examination stress), then it makes sense to use it.

A Problem-Solution essay or letter has a fairly simple structure: first, you explain the problem (or problems), and then you propose a solution (or solutions). The following example looks at health problems in shanty towns (slums) and suggests a few solutions:

There are numerous health problems in shanty towns. Firstly, because the sites are illegal the government does not provide piped water. As a result, drinking and bathing water are usually dirty and this causes diseases such as dysentery, typhoid and hepatitis, as well as skin and eye diseases. Secondly, houses are often overcrowded and have poor air circulation. This makes it easier to catch diseases like flu, TB and diphtheria where infection enters through the throat. Thirdly, there are no drains, sewers or rubbish collection services. The resulting pools of stagnant water and heaps of household waste attract rats and insects, which can pass on diseases.

The government could do a lot to solve these problems. For example, they could supply clean, piped water to individual houses or, at least, to neigbourhoods. This would make drinking water safe and reduce infections. In addition, the authorities could provide householders with building materials to improve their conditions and educate them about the importance of ventilation. Lastly, the city council could construct drains and provide a rubbish collection service to reduce the risk of infections spread by rats and insects.

If the government took these steps, the result would be a safer, healthier environment. Furthermore, the improvements would also lead to increased employment opportunities in areas such as construction, plumbing and rubbish disposal. It is time for politicians to come to the aid of the people who elected them!

Looking more closely, we can see that the actual structure of text is:
PROBLEM -> SOLUTION -> CALL FOR ACTION

Vocabulary for Argumentative Writing
When we write an argumentative essay, our opinions carry more weight if we look at both sides of the issue. In other words, we acknowledge our opponents’ views but try to convince the reader that our own argument is stronger.
Our essay would be extremely dull if we used the words "supporters" and "opponents" all the way through. Similarly, it would be unimpressive if we only used the verb "say" to refer to people’s opinions. Alternative terms can be Supporters, Proponents, Those in favour of …, Advocates of …; used in place of "say" to avoid repeating the same verb over and over.

Report Writing

Writing Format

Here are the main sections of the standard report writing format:

Title Section – This includes the name of the author(s) and the date of report preparation.

Summary – There needs to be a summary of the major points, conclusions, and recommendations. It needs to be short as it is a general overview of the report. Some people will read the summary and only skim the report, so make sure you include all the relevant information. It would be best to write this last so you will include everything, even the points that might be added at the last minute.

Introduction – The first page of the report needs to have an introduction. You will explain the problem and show the reader why the report is being made. You need to give a definition of terms if you did not include these in the title section, and explain how the details of the report are arranged.

Body – This is the main section of the report. There needs to be several sections, with each having a subtitle. Information is usually arranged in order of importance with the most important information coming first.

Conclusion – This is where everything comes together. Keep this section free of jargon as most people will read the Summary and Conclusion. Recommendations – This is what needs to be done. In plain English, explain your recommendations, putting them in order of priority.

Appendices – This includes information that the experts in the field will read. It has all the technical details that support your conclusions. Remember that the information needs to be organized logically with the most important information coming first.

Pointers to score high in Report Writing

Use names and pronouns: (I, he, her) when you write about yourself and others at the scene. Avoid outdated expressions like “this officer” and “the abovementioned person” or “official 1.”
There are certain people who advocate that use of impersonal terminology brings in guaranteed objectivity and accuracy, but it not true. You have the same integrity whether you are calling yourself “I” or “this officer.” And think about this: if you were testifying in court, and sworn to tell the truth, you would use everyday language (“I,” “me”) in your testimony. Follow the same practice in your reports.

Limit yourself to one idea per sentence
Short, straightforward sentences are easy to read, understand and save time for everyone. You will appreciate this time-saving tip when you are reviewing a report to prepare for an important business meeting. Also, the longer a sentence is, the more likely you are to make an error.
Short sentence and its structure in English generally begin with a noun, and the grammar is simple. Complicated sentences, on the other hand, require complicated punctuation, and they open the door to sentence errors.
Try to limit yourself to three commas per sentence. If a sentence has more than three commas, it’s probably too complicated to be read easily, and it may contain usage or punctuation errors.

Be as clear and specific as possible
“Contacted” is vague: Did you visit, phone, or email the witness? “Residence” is just as confusing: House, apartment or mobile home? Always strive for clarity.

Use simple language
“Since” is easier to understand (and write) than “inasmuch as.” “Pertaining to” is a fancy (and time-wasting) way to write “about.”

Stick to observable facts
Conclusions, guesses, hunches, and other thought processes do not belong in a report. Stick to the facts. A statement like “He was aggressive” won’t stand up in court. You can, however, write “Jackson clenched his fists and kicked a chair.”

Write in paragraphs
Organizing information in groups has two important benefits: Your report is more logical, and it’s easier to read and understand later on.

Use active voice
A widespread mistaken notion is that passive voice guarantees objectivity and accuracy. However, it is not true. Writing a sentence like “A revolver was seen under the nightstand” does not guarantee that you are telling the truth. It is much simpler to just write “I saw a revolver under the nightstand.” That is what you would prefer to read in the report submitted by someone else as well, isn’t it?

Use bullet style
Bullet style is nothing but the style you have probably been writing shopping lists all your life when your mother asks you to bring something from the grocery shop nearby. Use the same format when you’re recording several pieces of related information, like this:

Zibanani Hama told me:
- He and Sibahle have been “fighting a lot”
- She was drunk when he came home from work
- She threw a package of frozen chicken at him
- He didn’t touch her

Sample Report

Typical structure template for writing a committee report:

Members to which the report is meant for
[Name, institution, location, Chair]
[Name, institution, location, member]

[Date, Time, and Location]

[Provide simple documentation of any meetings of the committee or subset of the committee, in whatever mode and format, e.g., in person, conference call, etc.]

Purpose
[Here you mention the purpose of the report in a brief. This enables the reader to understand the purpose behind writing the format.]
Issues [Write different issues as sub headings and explain their highlights in bullet points below the respective sub headings]

Current Status
•
•

Accomplishments / Issue 1
•
•

Future Goals
•
•

Near-Term Plans / Main Body of the Report [Use Sub Headings as and where needed. In bullet form, outline near-term actions and plans as well under those sub headings.]

Informal Recommendation(s) [An opportunity to make recommendations, suggestions, and comments to the Board and Executive Director] Respectfully Submitted,

[Authocr’s Name]

Speech Writing

What is a speech?
Speech refers to a formal address or discourse delivered to an audience.

Before writing a speech, make sure you are writing to inform people, to persuade them, to convince them or to entertain them. Clarity of purpose will ensure clarity in the choice of style and vocabulary.

Generally, there is a choice (internal) between the following:-
- Debate writing
- Article writing
- Speech writing
- Report writing

Format of a speech

A perfect speech must consist of :-

HEADING- The heading should be catchy and in not more than 5-6 words. You can go as creative as you want with this one just make sure you do not devote too much time on it in the exam.

OPENING LINE- This includes salutations, introduction and the topic. Make sure you do not mention your personal details (name, school name, etc.).
Example- Respected Principal, teachers and my dear friends! Today, I (name given in the question) stand before you all to speak on the topic “(given in the question)”.
OR you could start with a quote related to the topic and then go with the salutations and introduction.

BODY- It is the main part of your writing piece.
It is always prescribed that you begin with a short introduction on the topic, it’s meant to be precise.
Then you need to explain the current situation, the problems (if any) and whether after any corrective actions, betterment in the situation has been observed or not.
It may include advantages/ disadvantages depending upon the topic in question.
Now here, it is important you follow a sequence. It is possible that you have too many points or very few points. When you have a lot of varied points, it is better you choose a few best ones and write a line on each. In case you have very few already, explain them in at least two lines each.
You have to strictly follow the prescribed word limit in a limited time frame so just do not go on writing and writing.

MOST IMPORTANT- Always begin with your strongest point. You can accommodate the weaker ones in between and end with another strong point.
Feel free to give your personal opinion in one or two lines.
It is very important that you do not deviate from the topic. There are chances you may get ideas linking from one to another that may deviate you from the main point. You have to refrain from doing so.

SOLUTION/CONCLUDING PARAGRAPH- Now, it is to be remembered that wherever you elaborate a problem, you always have to mention the steps being taken to improvise the situation and suggest a few solutions as well.
Now, it would be great if you could add a few quotes relating to motivating the people to take action.
Here also, the rule of STRONG-WEAK-STRONG applies.

Last but not the least, the concluding line, thanking the audience for their cooperation and their patience. It is very important to conclude what you've started. Never leave a speech or for that matter, any of your answer open-ended.

Speech Writing Tips

Here are a few valuable tips for you to attempt the class 12 English writing skills - speech writing question in a better way-

1. Make sure you use language which is suitable for the audience you are addressing to. Usage of complex vocabulary for addressing children is not advisable.

2. Usage of quotes is highly recommended. Quotes can be used at the time of commencement or as an ending statement. A quote in the middle of the speech would also be fine.

3. Make sure you write in paragraphs.

4. Practice previous year question papers.

5. Read as many samples as you can. It will give you an idea as to how they are actually written.

6. Read newspaper editorials or opinions. They give new ideas and opinions that may help during exam.

7. Plan before you pen. Just make a list of all your important points on the rough sheet (last sheet of your answer booklet) so that you do not forget relevant points while writing. This also helps you in maintaining a sequence, which is very important.

8. Presentation is very important.

9. Make sure you double check for grammatical accuracy and spellings. They carry marks.

10. Leave adequate number of lines between paragraphs to make it look clean.

11. Underlining the main points is very important. But it is advised to do it after finishing your exam. Use a pencil and scale for underlining.

12. Always have a few general quotes in handy. They help in presentation and shows that you’re prepared.

Speech Writing Example

You are Babongile, Head girl / Head boy of your school. You are deeply disturbed by the rising cases of aggressive behaviour of students in your school. You decide to speak during the morning assembly about it. Write a speech on ‘Indiscipline in Schools’. (150 – 200 words)

INDISCIPLINE IN SCHOOLS

It has been reported that number of fights and cases of bullying has gone up tremendously in the last few months in our school.
Good morning to one and all present here. Today, I, Ali/Alia, your head boy/girl stand before you to throw light upon the grave issue of “Increasing Indiscipline in Schools”.

It has been brought into lime light that disobedience of teachers, bullying, fights with peers, truancy and insults is becoming a common trend. Not only this, there have been complaints of parents witnessing a shift in their children’s attitude. This is resulting in a lot of children getting hurt emotionally, mentally and physically. The impact this attitude is having on kids at early age is disastrous and irreversible.

Not to forget the damage that has been done to the school property. Stealing chalks, scribbling on desks, walls and washroom doors, destroying CCTV cameras and the list goes on. By doing this, we are only letting us deprive ourselves of the amenities being provided to us.

After a lot of meetings, lack of proper guidance, excessive use of social media and peer pressure have been observed to be the root causes of the problem. The counsel is taking steps to improve the situation. Life skill classes are being made mandatory for everyone. Teachings will include counselling, motivation and inculcating friendly values. Seminars for parents and students will be regularly organised. A counsellor to help you all share your feelings, grudges and sharing your personal problem is being made available. We are doing everything we can and expect the same from you.

So, let’s join our hands together and build an environment where we encourage, motivate, help and be kind to each other for we are good and civilised beings capable of a lot of love.

Thank you.

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A LEVEL ECONOMICS 6

Money and banking

  13.0 Introduction

“Money bewitches people. They fret for it, and sweat for it. They devise most ingenious ways to get it. Money is the only commodity that is good for nothing but be gotten rid of. It will not feed you, clothe you, shelter you or amuse you unless you spend it or invest it. It imparts value only in parting. People will do almost anything for money and money will do almost anything for people. Money is a captivating, circulating, masquerading puzzle” Federal Reserve Bank of Philadelphia, ‘Creeping Inflation’; Business Review, August 1957 p3. In this chapter among other issues, we are going to define money and discuss its functions. In additionmarket equilibrium interest rates will be determined where money supply equals the demand for money.

  13.1 Functions of money

Good money is characterised by stability, scarcity, portability, divisibility, uniformity, acceptability, and durability. Money can be identified as anything that is generally acceptable in the settlement of debts.  It can be described by what is does, that is, money can best be described by its functions. Money plays the following important roles in the economy

13.1.1 Medium of exchange

Money as a medium of exchange allows consumers to exchange their preferences. That is people exchange their goods and services for money rather than for other goods and services like what used to happen in barter trade. Thus money is usable in buying goods and services.

13.1.2 Measure of value

Money as a measure of value becomes a common denominator upon which relative exchange values can be established. The value of one product can be expressed in monetary terms (price). For example the value of a vehicle can be expressed as $200m and not 20 herds of cattle.

13.1.3 Store of wealth

Money presents a convenient form in which to store wealth especially because of its liquidity, that is, money can easily be used to pay for transactions.  People can prefer to keep their wealth in the form of money which is liquid rather than illiquid assets such as bonds. One other reason for this preference is because money is not perishable as compared to some other assets such as cattle.

13.1.4 Standard of deferred payments

Deferred payments are future payments obligations. Money as a standard of deferred payments allows credit transaction to be undertaken. For example people can buy on hire purchase and sign a contract to repay in monthly instalments.

NB* Money should maintain a constant purchasing power over a long period if it were to perform these functions properly.  The purchasing power of money is what a given currency can buy in the domestic economy. The purchasing power or value money is reduced by inflation. For example, if our Z$ loses its purchasing power, people would quote their prices in other currencies such as the US$ and they would prefer to accumulate assets that appreciate in value such as houses rather than storing their wealth in the form of money.

  13.2 Money Supply

The different functions of money give rise to different definitions of money supply in the economy. The official definition of money supply in Zimbabwe is M₃ which is derived as follows:

13.2.1 Money as medium of exchange (M₁)

M₁ defines transaction money, that is, money used to pay for day to day transactions and it is given by;

M₁ = Notes and coins in circulation + Demand deposits with financial institutions.

Demand deposits refer to deposits that can be withdrawn without giving notice of withdrawal to the bank, for example current account deposits which can be withdrawn by writing a cheque.

13.2.2 Money as a spending potential of the economy (M₂)

This definition identifies all deposits that are easily convertible into cash. These deposits are made up of notes and coins in circulation, demand deposits with financial institutions, savings deposits and fixed time deposits that mature within 30 days.

Thus M₂ is given by;

M₂ = M₁ + Savings deposits + Fixed time deposits that mature within 30 days.   

13.2.3 Money as store of wealth (M₃)

This definition includes quasi or near money, that is, assets that are not easily convertible into cash. This is the official definition of money supply in Zimbabwe and it is given by;

M₃ = M₂ + Fixed time deposits that mature after 30 days.

Thus M3 has five items, namely notes and coins in circulation, demand deposits with financial institutions, savings deposits, fixed time deposits that mature within 30 days and fixed time deposits that mature after 30 days.

NB* The supply of money at any given time is a measurable aggregate.  It is determined by the Reserve Bank and thus can be taken as fixed in the short-term. The supply of money curve is vertical showing that money supply is independent interest rates.

   13.3 Money Demand

Keynes described the demand for money as “demand for money to hold.”  This is the amount of cash balances people wishes to hold rather than illiquid assets that yield income such as bonds or government securities.  The demand for money is called liquidity preference. Keynes identified three motives for holding money:

13.3.1 Transactions motive

People hold money to use to buy goods and services, that is, they need money to pay for day-to-day transactions such as bus fare.

13.3.2 Precautionary motive

In addition to the amount of money they hold to pay for day-to-day transactions, additional  cash is held for precautionary purposes, that is, to make it available in case of need, not only for the emergency situation such as illness but even to buy a bargain if it should be available.

NB* The amount of money held as transactions and precautionary balances are referred to as active balances. The amount held as active balances depend upon the level of prices, the level of income, the frequency at which income payments are made and the financial development of the economy.

13.3.3 Speculative motive

People also hold cash balances in order to take advantage of improving interest rates and prices of financial assets.  People holding money for speculative purposes must be convinced that for the time being, it is more rewarding to hold money than real income earning assets. People will prefer to hold cash balances than bonds when the yield on bonds (interest rates) is low.  At lower interest rates, less will be lost by not investing it, whereas the reverse is true for higher interest rates. The demand for money is positively related to income and negatively related to the rate of interest.  Thus the liquidity preference curve (demand for money curve) is downward sloping.  

  13.4 Determination of market interest rates

The intersection of the demand for money curve and the supply of money curve determine the market equilibrium rate of interest.

Fig 13.1 The market equilibrium rate of interest

                                 O                         M₀               Money Balances

Any changes in the level of income and prices will shift the money demand curve while money supply changes will shift the money supply curve.  The equilibrium interest rate will change in the process.

  13.5 Credit creation by commercial banks

In their duty of lending commercial banks create bank deposits that are directly related to money supply. To determine the extent to which commercial banks create credit, we use the credit multiplier.

13.5.1 Simplifying assumptions

i.               Assume a multiple banking system that is, assume that there are numerous banks in theeconomy.. 

ii.              Assume a 20% cash reserve ratio, that is, 20% of total deposits need not be advanced as loans but set aside as cash reserve requirement. This amount is set aside fro client withdrawal and will not be advanced as an overdraft.

iii.             Bank transactions are only loans and payments are made and paid by way of cheques.

iv.             There are no cash leakages and banks keep no excess reserves.

13.5.2 Illustration of the credit creation process

Based upon the above assumptions, an initial $100m deposit into CBZ will increase CBZ’s deposits by $100m. CBZ will have $100m at its disposable and can give out an 80% overdraft of $80m to Ben by writing a cheque in his favour. Ben will deposit the cheque into his FBC account where upon FBC’s deposits will increase by $80m. FBC will give an overdraft of $64m to Chen while reserving $16m for client withdrawal. Chen will deposit the cheque into his Stanbic account. The process will continue until further deposits approach zero. The total deposits or credit generated can be summarised by the following table.

Table 13.1 The credit creation process

Stage	Bank	Deposit	Cash Reserves	Overdraft
1	CBZ	100	20	80
2	FBC	80	16	64
3	Stanbic	64	-	-
-	-	-	-	-
-	-	-	-
Total		5000	1000	4000

The total amount of bank deposits created can be calculated using the credit multiplier:

           Credit multiplier                      =                                                         1 

                                                                                    Cash ratio

          Thus,   total deposit created        =                 Initial deposit

                                                                                   Cash Ratio

                                                               =                  $100m

                                                                                      0.2

                                                               =                  $100m x 5

                                                                =                  $5 000m

NB* It should be understood that the money supply in this case is not only notes and coins alone but the ‘invisible money’ called credit. Banks can not create notes and coins but they can as illustrated, create credit by giving out loans or overdrafts. The amount of cash money in the system remains the same. The system works because of a fundamental assumption that the depositor, who is the bank’s creditor, comes back to withdraw only a little which is catered by 20% cash ratio, in this case. A bank could collapse if all depositors claimed their money back all at one time because the bank would not have enough liquidity to pay cash (bank run). However this seldom happens.

13.5.3 Limitations to the credit creation process

There are four limitations to the ability of commercial banks to increase money through credit creation. a.No increase in deposits.

b.              Lack of willingness to borrow on the part of the public.

c.               Lack of willingness to lend on the part of commercial banks.

d.              The cash ratio, the smaller the cash ratio the greater the amount of credit created and the larger the cash ratio, the smaller the amount of credit created. This can best be illustrated if you answer the following example.

Example

Given an initial deposit of $200b into the banking system, how much credit or bank deposits will be created if the cash reserve ratio is 10% and 50%?

  13.6 Monetary policy

Monetary policy refers to deliberate attempts to manipulate the rate of interest and money supply in order to bring about desired changes in the economy.

13.6.1 Aims of the monetary policy

In general terms monetary policy is used to regulate credit conditions and the supply of money in order to fulfil macroeconomic objectives. The overall objective is to improve the standards of living within the economy. Alternative objectives can be listed as follows: -

a.               To maintain stable prices, that is, control inflation or deflation.

b.              To attain a rising level of employment.

c.               To achieve real economic growth which is prerequisite to improvement in the standards of living. d.     To secure a healthy BOP position.

13.6.2 Targets of monetary policy

To achieve the above objectives of economic policy, the authorities through monetary policy will seek to manipulate: a.            Interest rates.

b.              Growth in money supply.

c.               Exchange rate and, 

d.              Growth in the volume of credit.

13.6.3 Instruments of monetary policy

There are two main categories of monetary policy instruments.  On the one hand there are those instruments of policy that are designed to have a general effect on the financial sector and through that sector, on the whole economy. On the other hand there are instruments of control that are specific in their effects on particular financial organisations.

a. Instruments for general control

General control instruments affect certain key interest rates or the authorities may directly engage in transactions in key financial markets in order to affect credit throughout the economy.

i.               Open Market Operations

‘Open market operations’ refers to the buying or selling of government securities (bonds or treasury bills) by the central bank to the public. The principle is to exchange ‘paper assets’ for ‘cash.’ For example, if there is excess liquidity in the market the central bank will enter the market selling government securities. People will exchange their cash for the securities and hence the excess liquidity is mopped up. Conversely if there is a shortage, the central bank will enter the market buying the securities from the public thereby injecting liquidity into the market.

ii.              Discount policy or accommodation window

The discount policy refers to variations in the rates at which the central bank discounts first class bills and other terms at which the central bank, as a lender of last resort, advances funds to certain domestic parties in the money market, usually to enable those parties to make good a reserve asset deficiency. Holders of first class bills such as treasury bills can apply to the central bank for the maturity dates of their bills to be brought forward. This is granted on condition that the holder will receive an amount less than what they were going to receive upon maturity of the bill. Thus the central bank will ‘discount’ the bill. For example if an investor holds a $100m bill that will mature in the next three months, the investor can apply to liquidate the bill today but instead of receiving $100m the central bank will pay an amount less than $100m e.g. $80m. The bill would have been discounted by 20% which is the $20m. Discounting increases the liquidity situation in the market. Thus if the central bank is pursuing a tight monetary policy it will increase the rediscount rate or the central bank can close the accommodation window facility. 

iii.             Non-marketable government debt

The government can seek to borrow direct from the central bank for some general or specific purpose. In such cases, the terms of the loan are negotiated beforehand and those negotiating on behalf of government will be anxious to ensure that the agreed interest rate does not have an adverse influence on the absolute level of interest rates, in nominal terms.

iv.             Public debt management

The Reserve Bank operates a government account through which borrowing and interest payments pass. Government borrowing or specifically the PSBR directly fuels credit creation by commercial banks if the government borrows from the banking sector.

b. Instruments of specific control

Specific instruments of control have their impact on specific financial institutions and that impact is in the short-term restricted to those specific institutions.

i.               Moral suasion

Moral suasion or moral persuasion consists of central bank requests or admonitions to banking institutions to act or not to act in certain ways and it may cover any of the bank’s activities e.g. lending policy. Moral suasion in not compulsory and hence banks may not agree to change. However because of the nature of the relationship between the central bank and these banks moral suasion has been successfully implemented in Zimbabwe.

ii.              Calling for special deposits with the Reserve Bank

The central bank can wish to make credit tighter and call specifically for a special deposit from commercial banks.  This dampens optimism and so curtails business spending.

iii.             Ceilings and directional controls

This refers to lending ceilings and selective credit controls.  It involves the authorities imposing formal or informal maximum or minimum levels of amounts banks can lend to certain specific borrowers or categories of borrowers or for certain specific purposes.

iv.             Variable reserve ratio

This refers to attempts to control credit creation by commercial banks by manipulating the cash ratio.  From the illustration on the credit creation process we concluded that the smaller the cash ratio, the greater the banks’ ability to increase money supply and vice versa. For example the central bank can increase the cash ratio if it wants to reduce the level of money supply growth from the creation of credit.

v.              Statutory Reserve Requirement 

Banks are required to maintain reserve cash balances with the Reserve Bank for management purposes. These reserves can be varied depending on the monetary policy. For example with a tight monetary policy the reserves can be increased so as to reduce excess cash in the market.

vi.             Directives

The central bank can issue directives such as demanding pension funds to hold a portion of their earnings in prescribed government paper.

13.6.4 Limitations of monetary policy in Zimbabwe

The advantage of monetary policy is that it is flexible and can be applied fairly quickly unlike fiscal policy that needs to have both cabinet and parliamentary approval before it can be applied.However the effectiveness of monetary policy in Zimbabwe is affected by;

a.           Financial dualism that is the existence of a monetised and non-monetised sectors in the economy. The monetised sector uses money fro its transactions while the non-monetised sectors engage in barter trade. There is a largenonmonetized sector which is little affected by monetary policy.

b.          There is a narrow size and inactive money and capital market.

c.           There is a limited array of financial stocks and assets.

d.          The notes constitute a major proportion of total money supply, which implies the relative insignificance of bank money in the aggregate supply of money.

e.          Foreign owned commercial banks in Zimbabwe can easily neutralise the restrictive effects of a strict monetary policy as they can replenish their reserves by selling foreign assets and can draw on the international market. 

  13.7 Zimbabwe’s financial system

It has been argued that the Zimbabwean financial system is one of the well developed, mature, diversified and geographically spread financial system. The financial system may promote or hinder the process of economic development depending on its nature. If the financial system is well developed, it may provide economic development, that is, financial development lead to economic development. Howeverthe financial system in Zimbabwe recently has been involved in non-core activities such as buying the whole year’s production of bricks and other speculative activities. This has led to placement of more than five financial institutions including commercial banks under curatorship and some were subsequently liquidated. The historic case of ENG and Trust Bank will come to mind. 

13.7.1 The Reserve Bank of Zimbabwe (RBZ)

The RBZ or the central bank is at the apex of the financial institutions. It plays a supervisory and regulatory role in the financial sector. The RBZ plays important internal and external roles. 

a. Internal functions of the RBZ

The internal functions of the RBZ can be grouped into three classes

i.              Banking functions

 Banker to the government – the RBZ operate a government account through which government revenue, expenditure and borrowing is processed.

 Banker to other banks - banks are required by statute to maintain reserve requirement accounts with the central bank for administrative purposes. In addition the RBZ operates a cheque clearing house through which cheques from various commercial banks are settled.

 Lender of last resort - the central bank acts a lender of last instance.

 Banker to the nation – Firstly, the RBZ is responsible for the printing and replacement of notes (money). Secondly, the central bank maintains the country’s gold and foreign currency reserves.

ii.             Regulatory institutions

The RBZ is a licensing authority, that is, it licenses all financial institutions for example it issues commercial banks with banking licenses. The central bank is there to supervise the activities of other financial institutions. It ensures that codes and practices that the government lays down are conformed to by the financial sector.

iii.            Monetary policy function

The central bank formulates monetary policy; supervise the implementation of the monetary policy and makes periodic evaluations of the monetary policy (for example quarterly reviews) on behalf of the government.

b. External functions of the RBZ

i.               Stabilisation of the exchange rate function

This is done in conjunction with government policy. The central bank can devalue or revalue the dollar depending on the state of the economy. The RBZ administers the foreign currency movements.

ii.              Interactive function

The central bank is the one that interacts with external financial institutions. The RBZ represents the government in the international money markets for example repayment of the government debt to the IMF.

13.7.2 Commercial banks

Commercial banks accept deposits from the public and pay the depositors interest rates which are the interest earnings of the deposits. They also offer overdrafts and charge lending rates and these are the cost of borrowing. Commercial banks offer a variety of services that include, current accounts, ATMs, safe custody of valuables such as jewellery, financial advice and savings deposits.

13.7.3 Building societies

These basically provide finance for home ownership (mortgage lending) and act as a medium for small savings through various types of accounts which offer different rates of interest. However it is now difficult to draw a line between a building society and a commercial bank because they have the same legal requirements and building societies can also offer the serves that commercial banks offer. 

13.7.4 Merchant banks

Merchant banks offer trade finance and give advice to those companies dealing with international finance. In addition merchant banks advice companies on mergers and acquisition. They also underwrite the issue of new shares (Initial Public Offer). That is, merchant banks guarantee the issue of shares not bought by the general public in order for the issuing company to raise the required funds.

13.7.5 Discount houses

Discount houses act as intermediaries between other financial institutions and the central bank. They specialise in the sale and purchase of securities with different maturities and dates. They operate ‘call accounts’ which form part of the liquid assets held by banks and other institutions.

  13.8 Money and capital markets

Financial markets are the means by which savings are channelled back into the economy as loanable funds. The process is known as financial intermediation. Financial intermediation arises because lenders and borrowers have different requirements in terms of risk and time. One of the more important distinctions within the financial markets is that between money and capital markets.

13.8.1 Money market

Money market is a submarket of the finance market and specialises in short term lending or borrowing. That is the money market contracts are up to one year. Institutions in the money market include commercial banks, savings clubs, micro finance corporations and individuals. The instruments through which people can borrow in the money market include treasury bills, trade bills, call loan and negotiable certificates of deposits. Interest rates in the money market apply to periods of usually up to twelve months. The interest rate is dependent on the bank rate, that is, the rate at which the central bank advances loans to financial institutions as a lender of last resort. Thus interest rates in the money market are influenced by the central bank (commercial bank lending rate equals bank rate plus mark-up).

13.8.2 Capital market

The capital market constitute of institutions such as the stock exchange market, mortgage market, new issues of shares market and the corporate market (bonds issued by the government).The capital market, unlike the money market, specialises in longterm lending. Amounts involved are generally bigger and are supposed to be repaid in more than one year. The capital market deals with long-term private and government securities and funds. It’s a market for long-term borrowing and lending using instruments such as bonds, equity shares, debentures and preference shares. The central bank does not influence interest rates in the capital market. The market is a free market where the rate of interest is determined by the forces of demand and supply of securities. As a result, interest rates in the capital market are one of the best indicators of the market’s current expectations about future interest rates.

13.8.3 The role of money and capital markets

The money and capital markets are of great importance in Zimbabwe because

a.           They promote savings and investment

b.          They represent a counter for borrowings (deficit units) hence are a major source of funding. c.            They offer financial advice

d.          They offer banking and financial services to the community

e.          Money and capital markets 

f.           Standards of living are improved through transactions in the money and capital market 

13.9 The quantity theory of money

In the Quantity Theory of Money, Milton Friedman improved Irvin Fisher’s equation of exchange to illustrate the role of money in the economy. 

13.9.1 The Classical Quantity Theory 

Fisher thought that money was used only as a medium of exchange. Its sole function was to act as a means of payment in transactions for goods and services. According to Fisher, if the number of transactions is independent of the amount of money, then the total money value of transactions will be given by:

                 P, the price level of goods and services bought and sold, multiplied by,

                 T, the number of transactions, to equal PT (P x T = PT)

The amount of money required to pay for these activities is given by:

                   M, the money supply, multiplied by

                 V, the velocity of circulation, to give MV (M x V = MV).

The velocity of circulation (V) measures the speed at which money changes hands in the economy. MV must always equal PT because they are simply two different ways of measuring the same transactions. MV looks at society as consumers while PT looks at society as producers.

13.9.2 The new quantity theory

Friedman improved the classical quantity theory of money to

                                      MV      =         PQ     where,

M = Money supply

V = Velocity of circulation

P       = General level of prices

Q      = National income or real output.

The velocity of circulation (V) is assumed to be fairly constant. The economy is assumed to be at or near full employment such that it is not possible to increase output. Thus Q is constant. Given that V and Q are constants, a change in M will directly affect P. for example, if M doubles, Q must also double for the equation to remain holding. Thus an increase in money supply will directly result in an increase in the level of prices (inflation).

13.9.3 Criticism of the quantity theory

a.               The assumption full employment of resources is unrealistic. It is true that at full employment any increase in the money supply can only result in a higher price level since output cannot expand. With unemployed resources available, a rise in the amount of money is likely to result in changes in production as well as prices.

Velocity of circulation is unlikely to remain constant. An increase in the money supply will probably cause an increase in velocity when people expect a sharp rise in inflation. They will try to spend before prices rise. In every depressed economy, an increase in the money supply may cause a compensating fall in velocity as people cut back spending. This leaves the price level and the number of transactions unaltered.

Theory of national income distribution

  14.0 Introduction

The assumption is that all factor income generated through economic activity will be distributed among the factors of production used to produce the output. Land will earn rent, capital earns interest, labour earns wages and salaries and the entrepreneur will earn profit. The question remaining is how to determine how much each of the factors of production will receive (pricing of factors of production). In this chapter we are going to illustrate in theory how wages and salaries, rentals, interest payments and profits are determined. However, it may be important to note that in reality these theories are not religiously applied in determination of the factor earnings.

   14.1 The marginal revenue productivity theory of wages

The marginal revenue productivity theory is based on the fact that labour is wanted not for its own sake but for the sake of the product it can produce. As a result the payments for labour (wages) are derived from the return from the sale of the product of labour hence if labour productivity increase, labour tend to enjoy increased remuneration.

14.1.1 Assumptions

a.               Assume a perfectly competitive labour market; for example, assume that there are very large numbers of employers and workers, that labour is homogenous and so on.

b.              Assume that labour is the only variable factor of production to be applied to other fixed factors.

c.               Assume that the marginal physical product of labour can be measured; that is, each additional workers contribution total product can be measured.

Given the above conditions, a profit maximising firm will employ additional units of labour up to the point where MRP = MC.

14.1.2 The marginal revenue productivity (MRP)

Marginal Revenue Product (MRP) of labour is the addition to the firm’s total revenue that comes as a result of employing one more unit of labour. It is given by,

Marginal Revenue Product = Marginal Physical Product x Price of the Product

The marginal physical product (MPP) of labour is the addition to total product that comes as a result of the employment of an additional unit of labour. Due to the law of diminishing returns which maintains that as you add more and more units of a variable factor, with all other factors held constant, the addition to output (MPP) becomes smaller and smaller. Thus the MRP curve initially rises, reaches a maximum and then falls due to the influence of diminishing marginal returns.

Marginal Cost (MC) of labour is the amount that each additional unit of labour adds to the firm’s total costs.  Since we assume conditions of perfect competition, this is the wage rate and is constant because workers take the wage as given. Under conditions of perfect competition the price of the product does not change as the firm changes its output.

A profit maximising firm operating under conditions of perfect competition where it cannot influence the price of labour will employ additional units of labour up to the point where the MRP = MC. Infact   the MRP curve is the firm’s demand curve for labour because it indicates to the firm what the additional unit of labour is worth in terms of revenue.

  

14.1.3 Demand for labour

The demand for labour is derived demand rather than direct.  It is derived from the demand for the product of labour, that is, the demand for labour just like the demand for any other factor of production depends on its productivity and on the price at which the product which is produced is sold. This is because labour does not directly satisfy consumer need but do so indirectly by producing goods and services. Demand for labour is downward sloping due to the influence of diminishing marginal returns and equal to that part of the MRP curve that lies below the ARP curve.

The demand for labour depends on:

a.    The demand for the product of labour and therefore the prices of the product of labour. b.         The productivity of labour (MRP).

c.               The importance of labour costs in total costs of production.

d.              The possibilities of substituting labour with other factors as wages rise.

Any changes in these factors will shift the demand for labour curve either to the right or to the left.

14.1.4 The supply of labour

The supply of labour curve is upward sloping.  Justification for the upward sloping supply curve can be found in the need to pay workers higher wages to induce them to work longer hours (as illustrated by higher rates on overtime work) and by the need to pay higher wages to attract new workers into the industry.

The supply of labour to a particular industry depends on:

a.               The standard of living and the extent to which workers value leisure relative to income.

b.              The prevailing social attitudes towards the nature of work.

c.               The mobility of labour, that is, the extent to which restrictions on entry such as education, training and skills requirement is applicable.

d.              The extent to which trade unions and professional associations are able to control recruitment.

14.1.5 The equilibrium wage and level of employment

The intersection of the demand for and supply of labour will determine the market wage rate and the level of employment. Fig 14.1 Market equilibrium wage rate and level of employment

Any changes in the factors that affect demand for and supply of labour will change the equilibrium position.  In which case, the curves will shift either to the right or to the left.

14.1.6 Criticism of the marginal revenue product theory

The theory is based on several assumptions, some of which are not realistic, for example labour can never be homogeneous and it is difficult to measure the productivity of each individual labour. In reality the productivity of labour depends on the productivity of other factors of production such as capital. In addition, the theory ignores the importance of trade unions and government policy which often set wages.

  14.2 Imperfectly competitive labour markets

The supply of labour is not at all competitive in the labour market. Instead, it is controlled by a labour monopoly know as a trade union.  A trade union is a group of workers who band together to pursue certain common aims, especially the achievement of wage increases for their members and the lobbying of government to pass legislation in favour of workers.

14.2.1 Effects of trade union on wages and the level of employment - restriction of supply

Workers with specific skills such as doctors and accountants can form acraft union that can restrict supply by controlling the length of apprenticeship programmes and restricting membership for example by imposing licensing and other entry requirements.

Fig 14.2 The effect of restricting labour on wages and the level of employment

           

                       W₁

If supply is restricted, the supply curve will shift from S₀ to S₁thereby increasing the wage rate from W₀ to W₁.  However, at the higher wage rate (W₁), it becomes expensive for firms to hire labour hence the level of employment decreases from L₀ to L₁.

14.2.2 Effects of trade union on wages and the level of employment - wage setting –

 Workers in a single industry may be represented by an industrial union or workers union.  Such unions derive their strength from numbers of their membership and hence can force firms in the industry to bargain exclusively with the union over wages and other conditions of employment. Thus bargaining power enables the union to obtain wages for its members above the level that would pertain in a perfectly competitive market.

Fig 14.3 The effect of a minimum wage on wages and the level of employment

                Wage Rate

                     

                                          W₁   

                              W₀ Wage floor

                     

                                                                                       D

                                         

  O                    L₁      L₀  L_s        No of workers

The perfectly competitive wage rate is W₀.  If the union gains control of the supply of labour, it can fix the wage rate at W₁. 

Given a downward sloping demand curve, the level of employment will decrease to L₁. Thus involuntary unemployed labour is L_s –

L₁.

14.2.3 Effects of trade union on wages and the level of employment - increasing labour demand

Trade unions may support, or even conduct training courses to increase productivity and therefore the demand for labour. Unions also have an interest in supporting employers in lobbying for tariff legislation that protects their industry from import competition. Tariffs raise the price of imports. This will tend to increase the demand for domestically produced goods which are substituted for the more expensive imported goods. Thus the demand for labour used to produce the domestic goods will increase (the demand curve will shift outwards) as shown on the following diagram.

Fig 14.4 The effect of increasing labour demand on wages and level of employment

                                             O             L₀      L₁                     No. of workers

An outward shift of the demand curve for labour from D₀ to D₁ will raise wages from W₀ to W₁ and employment rises from L₀ to

L₁.

14.2.4 Monopsony

A monopsony is a market where one buyer purchases a product or factor of production from many sellers.  It is, in a sense, the opposite of monopoly.  A labour market where one employer confronts a non-unionised group of workers competing for jobs is a monopsony. To attract additional workers, the monopsonistic firm must raise wages, that is, it faces an upward sloping supply of labour curve. If we assume that labour is the only factor of production, the supply curve will be equal to the AC curve (S=AC). 

If AC is rising the MC will be rising even faster.

According to the marginal productivity theory, a profit maximising firm will hire labour by equating MC to MRP. The same will apply for a monopsonist who will hire L₀ units of labour at a wage rate W₀ as illustrated in the following diagram

Fig 14.5 Monopsony level of wages and employment

The monopsonistic firm will equate MC to MRP to employ L₀ number of workers.  The wage is determined from the supply curve, since a point on the supply curve indicates the wage for which workers are willing to supply their labour services. Hence, the wage will be W0 per worker.  Not only is employment depressed by monopsony but also the wage rate paid (W₀) is lower than would have resulted under competitive conditions in the labour market (W₁).

  14.3 Wage differentials in the labour market

Why do workers in the same industry or in the same occupation earn different wages? Wage differentials can be explained by differences in labour productivity, that is, highly productive labour will be in great demand and hence will be paid higher wages. 

However, other reasons can be cited.

a.               Labour markets can be segmented into distinct segments and it is extremely difficult and costly for an individual to move from one segment to another.

b.              Differences in labour market structures - wages in perfectly competitive labour markets differ markedly form those in monopsony.

c.               Institutions in the labour market – trade unions could through a number of activities ranging from bargaining to a restriction of supply, also alter the wage rate from that which would hold in a perfectly competitive market.

d.              Human capital – education and training impart skills but requires effort, time and resources.  Thus higher wages should be paid for qualified labour.

e.              Opportunity cost – acquiring human capital involves foregoing income.  As a result, individuals expect to recover this opportunity cost through higher incomes on completion of studies.

f.               Experience and on the job training – there is a positive relationship between the individual’s wage and the length of time spent at a specific company.

g.               None monetary rewards – such as esteem and social status given to doctors or the country’s president who happen to earn a salary far less than what most managing directors in industry get..

h.              Discrimination – racial, tribal and gender discrimination.

   14.4 The loanable fund theory of interest

The term capital is used either to describe capital goods or to describe financial resources. Capital is formed by forgoing current consumption and diverting these resources to the production of future wealth. In other words capital accumulates by doing without now and using the resources so freed to create more wealth in the future. Interest is the reward for parting with liquidity for a specified period. According to the loanable fund theory or classical theory of interest, the interaction of the savings (supply of loanable funds) and borrowings (demand for loanable funds) determine the rate of interest. The theory is an alternative to the Keynesian’s liquidity preference theory looked at in chapter 13. 

14.4.1 The supply of loanable funds (savings)

The supply of loanable funds refers to the willingness and ability of households or firms with excess funds (savings) to make them available to borrowers at a certain rate of interest. People save from their current incomes and the level of savings will depend on:

a.               The social framework of the society – if the society encourages savings and there are saving intermediaries such as savings clubs, people will save.

b.              The size of the income of an individual – the higher the income the more likely will the present wants be fully satisfied with some funds being left over as savings.

c.               The preference of individuals for present over future consumption – if people are impatient to spend their incomes in the present, that is, if they have a greater preference for present over future enjoyment of goods, then the higher have to be the rate of interest to induce them to save and lend their money.

d.              The degree of uncertainty regarding enjoyment in the future – the more certain an individual is of the ability to enjoy his income in the future, ceteris paribus, the less impatient he will be to spent money in the present.

The supply of loanable funds curve is upward sloping showing that higher interest rates encourage individuals to consume less now and save more.

14.4.2 The demand for loanable funds (borrowings)

The demand for capital refers to the willingness and ability of households, firms and the government to borrow funds to finance their various consumer needs and investment projects. Capital is demanded because it makes it possible a much future output. Firms borrow with the aim that these productive investments will yield a rate of return that exceeds the cost of borrowing thereby reaping profits for the firm. Just like the demand for labour, the demand for capital is derived demand and it depends on the marginal revenue product of capital (the marginal efficiency of capital).

14.4.3 The market interest rate

The interaction of the supply and demand for loanable funds curves determines the market interest rate.

Fig 14.6 Determination of the market equilibrium interest rate

                           O                L_e                   Loanable funds                                                                                                        The market interest rate i₀ is determined at the intersection of the savings and borrowings curves. Any changes in the factors that determine the supply and demand for loanable funds will change the market equilibrium interest rate.

14.4.4 Why interest is paid

a.               Lenders want to be compensated for the sacrifice that they make when parting with liquidity. This sacrifice comes in the form of forgoing present consumption for that of the future. Utility derived from present consumption is greater than that of the future.

b.              A dollar advanced today as a loan will be worth less than a dollar by the same time next year due to inflation. To cushion against this, interest rate greater than the inflation rate must be charged on loans.

c.               Lenders should also be paid interest because the loans made to borrowers carry risk even if the loans are fully secured by collaterals. The interest rate must vary according to the degree of risk involved.

d.              When loans are issued out, administrative costs such as the cost of the loan application form are incurred. These costs are incorporated in the interest charge to the borrowers.

   14.5    Profit

Profit is defined as the reward for risk-taking or the reward for uncertainty bearing. There are insurable and non-insurable risks in business. Insurable risks include fire, theft and accident. Since this risk can be insured against, they are not rewarded by profit. Profits therefore are rewards for non-insurable risks such as changes in demand for the product or cost conditions for the product.

14.5.1 The role of profit

a.               Profits are the reward to the entrepreneur hence they act as an incentive.

b.              Profits influence the level of resource utilisation and the allocation of resources among alternative uses.

c.               It is the profit or the expectation of profit that induces firms to innovate. Innovation stimulates investment, total output and employment. That is, it is the pursuit of profit that underlies most innovation.

d.              The occurrence of economic profit is a signal that society wants that particular industry to expand.

e.              Profits are the financial means by which firms can add to their productive capacities, that is, ploughed back profit inject working capital.

14.5.2Why profits vary from firm to firm in the same industryFirms in the same industry may earn different profits because

a.               One firm may be enjoying economies of scale while the other is not, that is, cost differences.

b.              One firm may have built a reputation by excellent service in the past and hence the firm may derive advantages from an outstanding goodwill.

c.               The nature of the returns in production; firms that are operating under conditions of increasing returns to scale tend to make greater profits than those in which diminishing returns are threatening, if not actually operative.

14.5.3 Why profits vary from firm to firm in different industries

a.               Differences in degrees of risks for example new industries have high degree of risk and high profit levels.

b.              Market structure for example one firm may be operating in a monopolistic industry and making great profits than the other firm that may be operating under a perfectly competitive industry.

c.               Differences in the degree of elasticity of demand for the commodity or service.

  14.6    Rent

The meaning of the word ‘rent’, in its everyday usage, is the payment made for the use of property, usually in the form of land or buildings. The same word is often used as a synonym for ‘hire’. The rent that is paid in this case is commercial rent. Any payment made to any factor, therefore, simply for the purpose of retaining, as it were, possession of it should be regarded as rent; where the supply of the factor is fixed, and it is specific in its use, so it cannot be used for anything else, any surplus or extra money paid to it is economic rent. The earnings of most factors of production consist of economic rent and transfer earnings. Transfer earnings are defined as the minimum amount that must be earned to prevent a factor of production from transferring to another use. Economic rent is said to be earned whenever a factor of production receives a reward that exceeds its transfer earnings.

14.6.1 Determination of rent

The total quantity of land is fixed in supply. Unlike the other factors of production such as capital and labour, the available supply of land cannot be increased by human efforts. Thus, the total quantity of land supplied is the same at every price. That is, the supply of land is represented by a vertical or perfectly inelastic supply curve. On the other hand demand for land just like demand for any other factor of production is derived from demand for its product. It will depend on the quality or the productivity of the piece of land (fertile versus barren), its location (rural land versus urban land) and the number of uses for that piece of land. Given these conditions, the free market rent will be determined by the intersection of the demand and supply of land curves.

          Fig 14.7 Determination of rent    

                                        O                       Q₀             Quantity of land

From the diagram, the total supply of land is to a large extent fixed. Increased demand does not bring increased supply but it increases the rent earnings of those who are fortunate enough to own land. For example if demand for housing increase in Harare due to Operation Murambatsvina which destroyed illegal structures, the demand curve will shift fromD₁ to D₂ and rentals will increase to R₂ .