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Discuss the Risks of Using Paper Money to Provide an Adequate

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Essay

Discuss the risks of using paper money to provide an adequate supply of money for the economy.Describe how a central bank,government regulation or coordinated actions by banks can help ?reduce these risks.


Definitions:

Hedge Derivatives

Hedge derivatives are financial instruments used to reduce or mitigate the risk of adverse price movements in an asset, typically involving futures, options, and swaps.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting its liquidity.

Foreign Currency

Currency used in a country that is different from the one in which a company operates, affecting financial transactions and reporting.

Depreciates

Refers to the reduction in the value of an asset over time, typically due to wear and tear, obsolescence, or usage.

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