CAIE IGCSE Economics 3.1 Money and Banking Topic Practice

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Covered syllabus points

3.1.1—Money3.1.2—Banking

Question 1

[Maximum number: 12]

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.

[ 2 ]

Question (b)

(b)

Explain two characteristics that coins possess which mean they can perform the functions of money.

[ 4 ]

Question (c)

(c)

Analyse the services provided to households by commercial banks.

[ 6 ]

Question 2

[Maximum number: 1]

Why do banknotes function as money?

A

They are backed by gold.

B

They are durable.

C

They are generally acceptable.

D

They have intrinsic value.

Question 3

[Maximum number: 6]

Japan has faced significant periods of deflation in recent decades. Despite efforts to stimulate the economy through fiscal policy measures and monetary policy measures, economic growth remains low. Some economists have also argued that the monetary policy used by the central bank is one of the causes of low productivity in Japan.

Analyse reasons why central banks are important for an economy.

Question 4

[Maximum number: 4]

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.

Explain two characteristics that coins possess which mean they can perform the functions of money.

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