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Money in a Modern Economy and its Impact on Prices


Explain what is used as money in a modern economy and how an increase in the quantity of money can cause prices to rise. (8)


Macroeconomic Factors and Policies

[CIE AS level November 2016]

Preview Answer

Step ➊ : Define money.

A simple definition of money is that it is anything that is regularly used to buy goods and services. Money can take various forms.

Step ➋ : Explain what is used as money in a modern economy.

Money is generally cash in the form of coins and notes but the definition also includes bank deposits, cheques, debit cards and credit cards. To be acceptable from a day to day practical standpoint, money must also be portable and durable.

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