CAIE IGCSE Economics 3.1.2 Banking Questions
Practise Cambridge IGCSE Economics by distinguishing central and commercial banks and explaining their roles and services.
- Syllabus
- 2027–2029
- Course
- Economics 0455
Exam points
- Distinguish central banks from commercial banks and identify their roles.
- Explain services commercial banks provide to households and firms.
- Explain why central banks matter as issuers, regulators and lenders of last resort.
CAIE IGCSE Economics 3.1.2 Banking Questions question 1
[Maximum number: 8]
Central banks influence their countries' money supply. Central banks also regulate commercial banks. Households benefit from these commercial banks in several ways. In recent years, commercial banks have introduced new technology. Global online banking increased by 14% between 2019 and 2022. These advances in technology were combined with a greater use of division of labour.
Question (a)
(a)
Identify two ways central banks differ from commercial banks.
Identify two ways central banks differ from commercial banks.
Award one mark for a characteristic of the central bank such as:
- in the public sector / owned by the government
- operate monetary policy
- main objective is usually price stability
- hold the accounts of the government
- lend to governments and sometimes commercial banks
- manage foreign exchange rate.
Award one mark for a characteristic of a commercial bank such as:
- usually in the private sector / owned by individuals
- provide services for consumers
- main objective is profiting maximization or growth
- hold the accounts of firms and households
- lend to households and firms
- buy and sell foreign currency to firms and households.
2
If more than two ways are given, consider the first three.
The second mark must be a linked difference and not a negative comment e.g. central bank controls money supply, but commercial banks do not, only gets one mark.
Question (b)
(b)
Analyse the services provided to households by commercial banks.
Analyse the services provided to households by commercial banks.
Coherent analysis which might include:
- enable households to save their money (1) provide deposit / time accounts / deposit boxes (1) earn interest (1)
- enable households to make and receive payments (1) provide current / sight accounts (1) credit cards (1)
- lend to households ( 1 ) by providing a loan / overdraft / mortgage (1) to e.g. buy a house / a car (1) pay interest (1)
- give financial advice (1) e.g. on how to manage debt / retirement plans / buy stocks and shares (1)
- arrange insurance (1) e.g. for house / car (1)
- Convert foreign currency ( 1 ) buying / selling goods and service abroad / travelling abroad (1) charge commission (1).
6
Do not reward more than three services as the main assessment objective is analysis, not knowledge and understanding.
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