In 2009, a digital currency named Bitcoin was created. From 2009 to 2014, more people and firms began to accept it as a medium of exchange and store of value. Financial experts have urged that digital money should be regulated by central banks. One concern is that it could raise the money supply and lead to inflation.
(a)[2]
Define the term ‘medium of exchange’.
(b)[4]
Explain two ways in which a central bank is different from a commercial bank.
(c)[6]
Analyse how a rise in the money supply may lead to inflation and a fall in saving.
(d)[8]
Discuss whether price stability should be a government’s principal economic aim.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A type of money” …