B. Word formation

Ex. 7. Make up adverbs by adding the ending - ly to adjectives.

Model: adjective + - ly = adverb

e.g. usual → usually; happy - happily

Absolute, eventual, easy, exact, immediate, independent, normal, original, particular, preferable, smooth, universal.

Ex. 8. Form verbs by adding the ending – ize/-ise to the following nouns and adjectives.

Model: noun/adjective + -ize (ise) = verb

e.g. American → Americanize

Legal, industrial, modern, national, neutral, popular, private, rational, visual; author, apology, computer, hospital, stability, symbol, sympathy

Ex.9. What is the difference between these words? Compare the suffixes –er/or and –ee.

Addresser – addressee, consigner –consignee, dedicator – dedicatee, donor – donee, employer – employee, endorser – endorsee, inspector – inspectee, inviter – invitee, nominator – nominee, payer – payee, vendor – vendee.

Ex.10. Form nouns by adding suffix -ee to the verbs below. Translate these words.

Model: Absent - absentee, etc.

Examine, interview, license, mortgage, refer, train, trust.

Text a: money and its role in the economy

Active Vocabulary

What is money? Why do we use money at all? In order to better understand the concept of money and get an answer to these questions, let us turn to the origins of money and examine its principal functions.

To begin with, money is the result of a long evolutionary process. Before there was money, people living in primitive societies used barter as a means of exchanging goods and services, and it worked quite well. However, as time went by and society advanced, the volume and range of goods and services expanded. Eventually, bartering became very complicated and cumbersome.

It was money that solved the basic problems created by barter - ‘indivisibility’ and ‘coincidence of wants’. The emergence of money was spontaneous. No king, government or person created money. It came into being through barter, and evolved independently in different parts of the world. The oldest recorded use of money dates back to ancient Mesopotamia (now southern Iraq) about 4,500 years ago.

Originally, money took the form of commodity money or money with its own value as a good. It means that the commodity itself constitutes the money, and the money is the commodity. In fact, any commodity used as a medium of exchange is commodity money. At different times different commodities were used as money: iron and bronze, cattle and fish, furs and skins, cowries and precious metals, specifically gold and silver. Gold coins are examples of commodity money because gold is worth something as a commodity, not just as a monetary unit.

Over time other types of money came into use: representative, fiat money, credit money, etc. The system of commodity moneyin many instances evolved into a system ofrepresentative money which refers to paper currency backed by a government or bank’s promise to redeem it for a given weight of precious metal (gold or silver). During the late 19^th and early 20^th century, most currencies were examples of representative money. Money of this type was based on the gold standard, and, in theory, could be exchanged for a fixed amount of gold. For example, the US dollar was convertible to gold until 1934.

Currency that is found today in most countries is fiat money. Unlike representative money, fiat money is not backed by any commodity, and is absolutely irredeemable. It serves as legal tender by a government decree, or fiat which means in Latin ‘let it be done’. “Legal tender for all debts, public and private” is written on the US dollar. The value of fiat currency is based merely on trust that people will accept it in payment for goods and services and that its value will remain relatively stable. A prime example of fiat money is the new international currency - the euro. The introduction of the euro changed the face of money, superseding many of the world's oldest currencies.

Whatever the type of money, it should be judged on how well it performs its major functions: (1) a medium of exchange, (2) a measure of value, and (3) a store of value. As a matter of fact, money is what money does.

Money is a medium of exchange

Firstly, money is the mechanism that enables parties to make an indirect exchange of goods and services. In a money economy, if you want to buy or sell something, you don’t need to find someone who has what you want and who wants what you have. Money effectively eliminates the problem of a double coincidence of wants by serving as a medium of exchange. It is easily accepted in all transactions, by all parties, regardless of whether they desire each others’ goods and services. What is important, money transmits value through space. In a barter system, this is very difficult because transfer of large items and perishable goods makes moving around rather problematic.

Money is a measure of value or a unit of account

Secondly, money is the benchmark for measuring value of goods and services. If you want to buy a mobile telephone, you don’t need to calculate how much tobacco or honey will be necessary to buy it. Instead, you see the product’s price, set in terms that everyone can understand, and you immediately know how cheap or expensive it is, comparing that value to other products.

Money is a store of value

Thirdly, money acts as a store of value for future use or for storing wealth. By saving money, you are able to spend some now and some later. In this way money transmits value over time. This couldn’t occur in a barter economy because not all commodities could be stored for future use. Some items were perishable and subject to decay while others might die. Food items, expensive spices, fine silks, oriental rugs, etc. could not be suitable for use as money.

Note: In the time of high inflation or political instability, money may not be a good store of value.

Money is a means of liquidity

In addition to these three functions of money, economists often point out the fourth criterion – a means of liquidity. Liquidity describes the ease with which an item can be traded for something that you want, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. It has a big advantage over other assets. It can be used immediately to purchase goods and services while converting gold, diamonds, or a house into cash takes time and effort. In this way, money gives consumers the freedom to trade goods and services easily without having to barter.

In a modern society, money has several basic characteristics:

easily carried from place to place. Paper money has proved highly convenient in this regard.

However, it is not only the physical durability that matters. Of no less importance is its social and institutional durability. People are willing to accept money in payment for one good because they are confident that they can use it at a later time for some other good or service. It works as a medium of exchange precisely because it stores value from one transaction to another. And this requires durability. While government-issued paper currency might remain physically intact for centuries, its ability to function as money depends on the institutional durability of the government.