Help in Economics question for June 2005 Paper 2

[arvind0708]

3 (a) Explain why economies make use of money. [8]
(b) Discuss whether stability in the domestic value of money is essential for a country’s economic
well-being. [12]

What i should write in this 2 question.

 

[Shahnam]

in part a.
you need to mention the functions of money. i.e.
1. store of wealth.
2. means of deffered payments,
3. measure of value.
4. medium of exchange.

in part b.
it was to be your opinion based on the arguments you put forward.
a answer would have included the backdraws of domestic inflation, stagflation, uncertainity, lack of competitiveness in international market
together with high rates of return if the inflation rates are below then competitors, PED is low, monopoly is created, value added products hence high prices could be justified, etc.

Hope this helps