Explain how the functions of money are affected when there is a high rate of inflation in an economy.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [1] Medium of exchange
2. [1] Store of value
3. [1] Unit of account
4. [1] Standard of deferred payment
5. [4] showing how each function will be affected by a high rate of inflation
6. [4] an explanation of the way in which monetary policy can be used to solve the problem of inflation with due reference to the effectiveness of such a policy
7. [4] an explanation of the way in which monetary policy can be used to solve the problem of deflation with due reference to the effectiveness of such a policy
8. [3] For evaluation that assesses and compares the likely effectiveness of monetary policy in solving inflation with its likely effectiveness in solving deflation
9. [1] and reaches a conclusion on whether it is likely to be effective in solving only one or both problems
10. If only inflation or deflation considered then 4 maximum.