Bitcoin, a digital currency, was created in 2009. From 2009 to 2014, more people and businesses began to accept it as a medium of exchange and store of value. Financial experts have urged that digital money should be controlled by central banks. One concern is that it could expand 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 lower saving.
(d)[8]
Discuss whether price stability ought to be the government’s main economic aim.
Worked solution & mark scheme
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