Group 3

Increasing in government spending

• An increasing in government spending
caused the aggregate demand curve shift to
the right.
• The price level will rise and the real GDP
will increase due to the increasing of
E1 government expenditure on goods and
services
E0 • For example: When government want to
develop the real GDP, they will spend money
on the goods and services that unable
supplied by the private sector.
 Increase in government tax on goods
• Increasing in government tax on goods
causes the aggregate supply curve shift to
the left.
• When government increase taxes on
goods, it will lead the falling of aggregate
supply
• For example, when government increase
the tax of foods, the cost of production
will automatically increase. Therefore, the
suppliers will decrease the salary of
employees to affords the cost of
production. Thus, the productivity of
employees will fall and causes a decrease
of supply. This is because the employees
have less motivation to do their jobs
because of the falling of salary.
What is commodity
money?
• Commodity money is money whose value comes from
a commodity of which it is made.
• A commodity money is a physical good that has
intrinsic value that a use outside of its use as money.
• For example, gold, silver, rice, salt, peppercorns, tea,
large stones are commodity money.
• The characteristics of commodity money has 4 types.
It is durable, divisible or measurable, easily
exchangeable, and rarity.
Explain what is fiat money:

• Fiat money is also known as representative money and is issued by the

central bank.
• Fiat money, which was offered by government regulation, is a currency,
established as money but has no intrinsic value
• The actual value of a note of one, ten, or fifty dollars is basically zero. It is a
small a small piece of paper with ink on it.
• Instead, fiat money does not have use value and has value only because its
value is maintained by a government or because exchange parties agree on its
value.
• The government usually declares the fiat currency (typically notes and coins)
to be the legal tender of a central bank, such as Bank Negara Malaysia
• The currency we use in Malaysia for transactions is fiat money.
Function of Commercial Banks
• Accepting Deposits - Current account deposits
- Saving Account deposits
- Fixed Account deposits

• Give out loans - Secured loan

- Unsecured loan

• Other functions - foreign exchange

-provide locker facilities