Economic

October 2010

Question 1

a) Explain how money is linked to inflation, unemployment and interest rates over the business cycle.

Money plays an important role in generating business cycle, the upward and downward movement of aggregate output produced in the economy. Excessive money will create inflation while too little of them could cause recession.

BUSINESS CYCLE PATTERN

National output

Boom

Long- run output trend line

Boom

Recovery

Depression

Recession

Time (years)

b) The age of electronic money (e- money) is upon us. What is your opinion? Is it negative or positive change?

Nowadays, there are electronic money which is we called as e- money . The uses of e- money are very popular today and in my opinion the use of e- money was a positive change to us.

There are many types of e- money, for example debit cards. Debit cards is looks like credit card, it enables user in order to purchase goods by electronically transferring funds directly from their bank accounts to a merchant’s account. The value of the card will depend on your bank’s account balance. For example is the BSN matrix card.

Next is the stored- value card. These cards also look like debit and credit card but differ in that they contain a fixed amount of digital cash. The stored- value card also called as smart card. It is contain with the computer chip that can be loaded with digital cash from its owner’s bank account whenever needed. Smart card can be loaded from the ATM machines, personal computers, and so forth.

Furthermore, there is also electronic cash which is we called as e- cash. It is a form of electronic money that can be used on the internet to purchase goods and services. With these, it wills enables customer in order to purchase items direct from the internet without need to go to the shopping mall which is can waste time.

From above, it seems that the use of e- money is more preferable to us as we live in...