Reference no: EM13841582

In your introduction, briefly describe the plot of a disaster movie in which an electromagnetic pulse causes the shutdown of all electronic equipment and financial activity to grind to a halt.

Then, using what you have learned during the course, from the text readings, and from scholarly sources, forecast the effects of such an event on financial institutions and the economy using the following prompts as a framework:

Hypothesize how the four functions of money would be missed.

Explain what the immediate effects would be on:
the rationing of goods,
employment,
demand for paper money.
demand for commodity money (e.g., gold),
production of goods and services

Speculate what emergency measures might be enacted to keep the economy running in lieu of having an organized banking system.

Identify and justify any incidents from history that tell us what we might expect if an electromagnetic pulse actually caused the shutdown of all electronic equipment and financial activity to grind to a halt.

Thesis: This paper is about the after effects of an unexpected shutdown of all the electronic equipment and financial activity due to an electromagnetic pulse.

Introduction:

Without the machines operating and have electronics running, the economy would plummet. This paper goes through the idea of what would happen in present society and the economy if the machines took a day off.

Body:

1. It would have a drastic impact over the economy of the country because of the changes in the economic transactions frequency.

2. The major impact would be over the use of money and curbing down of the four functions of money like medium of exchange, store of value, unit of account.It leads to very high demand for money and people would like to hold money in their hands irrespective of the interest rate prevailing in the economy.

3. he distribution of goods would be much more inefficient because of the too large discrepancy of distribution of income and access of resources.

4. The employment level would fall drastically as most of the financial activities would come to a halt. People would not be able to find any work accept simple labor jobs but they would also be suffering in the form of non-payment of wages.

5. The demand for paper money would increase too much as people do not have access to banking facilities including non-withdrawal of cash through ATMs. (Ejiofor, 2012)

6. Demand for commodity money like Gold and other such kinds of money will fall because the function of money as unit of account will vanish away.

7. There would be fall in the overall production of goods and services in the economy as they would become insecure about their payments and also they would not be able to purchase raw materials and other inputs from the suppliers.

8. The banking system and Fed can take several emergency steps in order to resume the economy and to reduce the loss amount to its minimum by introducing another source of hard money so that people would have something in their hands to spend.