Money and banking
9.4What the syllabus asks of you
- definition, functions and characteristics of money
- definition of money supply
- quantity theory of money (MV = PT)
- functions of commercial banks: providing deposit accounts (demand deposit account, savings account)
- functions of commercial banks: lending money (overdrafts, loans)
- functions of commercial banks: holding or providing cash, securities, loans, deposits, equity
- functions of commercial banks: reserve ratio and capital ratio
- functions of commercial banks: objectives of commercial banks: liquidity, security, profitability
- causes of changes in the money supply in an open economy: commercial banks as sources of credit creation and the bank credit multiplier
- causes of changes in the money supply in an open economy: role of a central bank
- causes of changes in the money supply in an open economy: government deficit financing
- causes of changes in the money supply in an open economy: quantitative easing
- causes of changes in the money supply in an open economy: changes in the balance of payments
- policies to reduce inflation and their effectiveness
- demand for money: liquidity preference theory
- interest rate determination: loanable funds theory and Keynesian theory
Drill this topic
Every question on Money and banking, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
55 questions
1May / June 2026 · Paper 31 · Q13Show mark scheme →
Adivisibility
Bgeneral acceptability
Cintrinsic value
Dlegal tender
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2May / June 2026 · Paper 32 · Q13Show mark scheme →
ABoth broad and narrow money can be used as a store of value.
BBroad money includes all financial assets that individuals can trade.
CGovernments exercise direct control over narrow money, but have no influence over broad money.
DNarrow money consists of coins and notes only.
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3May / June 2026 · Paper 32 · Q14Show mark scheme →
Atotal amount of tax revenue
Btotal amount of trade
Ctotal value of transfer earnings
Dtotal volume of transactions
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4May / June 2026 · Paper 32 · Q19Show mark scheme →
Areserve ratio
Bthe liquidity trap
Cthe marginal propensity to save
Dthe quantity theory of money
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5May / June 2026 · Paper 33 · Q13Show mark scheme →
Adivisibility
Bgeneral acceptability
Cintrinsic value
Dlegal tender
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6May / June 2026 · Paper 34 · Q14Show mark scheme →
Aeasy to carry
Bgenerally acceptable
Crelatively limited in supply
Duseful in its own right
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7May / June 2026 · Paper 34 · Q15Show mark scheme →
Anotes and coins in circulation ✓, current (checking) account deposits ✓, banks' liquid assets at the central bank ✓, savings account ✗
Bnotes and coins in circulation ✓, current (checking) account deposits ✓, banks' liquid assets at the central bank ✗, savings account ✗
Cnotes and coins in circulation ✓, current (checking) account deposits ✗, banks' liquid assets at the central bank ✗, savings account ✗
Dnotes and coins in circulation ✗, current (checking) account deposits ✗, banks' liquid assets at the central bank ✓, savings account ✓
Mark scheme
8May / June 2026 · Paper 34 · Q16Show mark scheme →
Aan increase in the public's desire to hold cash
Ban increase in government expenditure financed by borrowing from the central bank
Can increase in the proportion of their deposits that banks hold in cash
Dan open market sale of securities by the central bank
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9Oct / Nov 2025 · Paper 31 · Q14Show mark scheme →
AIt suggests changes in liquidity preference lead to proportional changes in the price level.
BIt suggests changes in the money supply lead to proportional changes in the price level.
CIt suggests changes in the price level lead to proportional changes in liquidity preference.
DIt suggests changes in the price level lead to proportional changes in the money supply.
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10Oct / Nov 2025 · Paper 31 · Q15Show mark scheme →
Aa liquidity trap below which interest rates are ineffective
Ban equilibrium price that always clears the market
Ca small value for the government expenditure multiplier
Da vertical short-run aggregate supply curve
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11Oct / Nov 2025 · Paper 31 · Q17Show mark scheme →
AA
BB
CC
DD
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12Oct / Nov 2025 · Paper 33 · Q14Show mark scheme →
A
B
C
D
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13Oct / Nov 2025 · Paper 33 · Q17Show mark scheme →
AA
BB
CC
DD
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14Oct / Nov 2025 · Paper 34 · Q20Show mark scheme →
AThere has been a fall in national income.
BThere has been a rise in the general price level.
CThere has been an increase in government borrowing.
DThere has been an increase in the rate of interest.
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15May / June 2025 · Paper 31 · Q20Show mark scheme →
Amoney supply remains unchanged; total number of transactions remains unchanged; velocity of circulation rises by 3%
Bmoney supply rises by 3%; total number of transactions remains unchanged; velocity of circulation rises by 3%
Cmoney supply rises by 3%; total number of transactions rises by 3%; velocity of circulation remains unchanged
Dmoney supply rises by 3%; total number of transactions rises by 3%; velocity of circulation rises by 3%
Mark scheme
16May / June 2025 · Paper 33 · Q20Show mark scheme →
Amoney supply remains unchanged; total number of transactions remains unchanged; velocity of circulation rises by 3%
Bmoney supply rises by 3%; total number of transactions remains unchanged; velocity of circulation rises by 3%
Cmoney supply rises by 3%; total number of transactions rises by 3%; velocity of circulation remains unchanged
Dmoney supply rises by 3%; total number of transactions rises by 3%; velocity of circulation rises by 3%
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17May / June 2025 · Paper 34 · Q18Show mark scheme →
Ato bring national income and expenditure into line
Bto control the level of economic growth
Cto create a balance between savings and investment
Dto provide a reward for surrendering liquidity
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18May / June 2025 · Paper 34 · Q19Show mark scheme →
AM is a measure of the total value of notes and coins in circulation in the country.
BP measures the average level of prices in the country.
CT stands for the quantity of real transactions during the year.
DV represents the number of times a unit of money is spent during a given time period.
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19Feb / March 2025 · Paper 32 · Q17Show mark scheme →
Aa move to monthly rather than weekly salary payments by firms
Ban increase in interest rates
Can increase in the use of cash machines to reduce money balances held
Da decrease in the use of credit cards by individuals
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20Oct / Nov 2024 · Paper 31 · Q16Show mark scheme →
AIt consists solely of deposits held by commercial banks.
BIt functions as a medium of exchange.
CIts monetary value equals its production costs.
DIt operates only when there is a double coincidence of wants.
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21Oct / Nov 2024 · Paper 32 · Q16Show mark scheme →
Adivisibility
Bdurability
Cstandard of deferred payment
Dstore of value
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22Oct / Nov 2024 · Paper 33 · Q16Show mark scheme →
Amedium of exchange
Bstandard of deferred payment
Cstore of value
Dunit of account
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23May / June 2024 · Paper 31 · Q16Show mark scheme →
Abeing subject to tight controls by the central bank over credit creation
Bholding reserves above the reserve ratio agreed with the central bank
Ctaking excessive risks by demanding insufficient security from borrowers
Dwidening the gap in favour of a bank's assets over liabilities
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24May / June 2024 · Paper 32 · Q16Show mark scheme →
Ato help firms raise finance
Bto hold cash on deposit for firms
Cto lend money to households
Dto provide savings accounts
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25May / June 2024 · Paper 32 · Q21Show mark scheme →
Ahigh economic growth, high inflation, low interest rate
Blow economic growth, high inflation, low interest rate
Clow economic growth, low inflation, low interest rate
Dlow economic growth, low inflation, high interest rate
Mark scheme
26May / June 2024 · Paper 33 · Q16Show mark scheme →
Abeing subject to tight controls by the central bank over credit creation
Bholding reserves above the reserve ratio agreed with the central bank
Ctaking excessive risks by demanding insufficient security from borrowers
Dwidening the gap in favour of a bank's assets over liabilities
Mark scheme
27Feb / March 2024 · Paper 32 · Q16Show mark scheme →
Aa decrease in the use of credit cards by consumers
Ba switch from monthly to weekly payments of wages
Ca decrease in interest rates
Dan increase in the perceived risks involved in holding government bonds
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28Oct / Nov 2023 · Paper 33 · Q17Show mark scheme →
AIt can be divided into small units.
BIt can be easily carried.
CIt is a standard of deferred payment.
DIt is widely accepted.
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29Feb / March 2023 · Paper 32 · Q18Show mark scheme →
Aissues bank notes: central bank yes, commercial bank yes
Blender of the last resort: central bank yes, commercial bank yes
Cmaximises profit: central bank no, commercial bank yes
Dreceives deposits directly from the government: central bank no, commercial bank yes
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30Oct / Nov 2022 · Paper 12 · Q1Show mark scheme →
Ato act as a medium of exchange
Bto be divisible into small units
Cto enable bartering to take place
Dto maintain its value when inflation is high
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31Oct / Nov 2022 · Paper 13 · Q2Show mark scheme →
Aa measure of value
Ba medium of exchange
Ca standard for deferred payment
Da store of value
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32Oct / Nov 2022 · Paper 31 · Q23Show mark scheme →
Athe ability of the foreign exchange market to buy foreign currency
Bthe support a central bank provides for commercial banks
Cthe ease with which an asset can be converted into cash
Dthe reaction of governments to a global financial crisis
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33Oct / Nov 2022 · Paper 31 · Q25Show mark scheme →
AInflation is always caused by increases in the money supply in the long run.
BThe long-run aggregate supply curve is vertical in shape.
CThe velocity of circulation of money is highly unstable.
DWages are flexible both upwards and downwards.
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34Oct / Nov 2022 · Paper 32 · Q23Show mark scheme →
Awhen there is a liquidity trap
Bwhen the money supply increase was not anticipated
Cwhen there is a floating exchange rate
Dwhen there is an immediate adjustment to expectations about future price levels
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35Oct / Nov 2022 · Paper 33 · Q23Show mark scheme →
Aconstant, variable, constant, variable
Bconstant, constant, variable, constant
Cvariable, constant, variable, constant
Dvariable, variable, constant, variable
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36May / June 2022 · Paper 11 · Q4Show mark scheme →
AIt is a medium of exchange.
BIt is a store of value.
CIt is a unit of account.
DIt is a measure of satisfaction.
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37May / June 2022 · Paper 12 · Q4Show mark scheme →
Amedium of exchange ✓, store of value ✓, unit of account ✓
Bmedium of exchange ✓, store of value ✓, unit of account ✗
Cmedium of exchange ✗, store of value ✓, unit of account ✓
Dmedium of exchange ✓, store of value ✗, unit of account ✓
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38May / June 2022 · Paper 13 · Q1Show mark scheme →
ADeflation reduces the internal purchasing power of money.
BMost financial assets are more liquid than physical assets.
CWhen money acts as a medium of exchange, it requires a double coincidence of wants.
DWhen money acts as a store of value, it must be unlimited in supply.
Mark scheme
39May / June 2022 · Paper 14 · Q3Show mark scheme →
Aa fee charged for use of the online payment service
Bboth high and low priced goods can be paid for using the online service
Cpayments can be made at any time of day and night
Dthe online payment service can be accessed through a smartphone
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40May / June 2022 · Paper 31 · Q25Show mark scheme →
ABoth the transactions and precautionary motives for holding liquidity are interest rate elastic.
BThe demand for liquidity is completely interest rate inelastic at low rates of interest.
CThe demand to hold liquidity by households is stable.
DThe rate of interest on long-term government securities is inversely related to their price.
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41May / June 2022 · Paper 32 · Q24Show mark scheme →
Athe money flow between central banks and commercial banks
Bthe money flow between central banks and governments
Cthe money flow between domestic residents and foreign residents
Dthe money flow between the general public and the financial sector
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42May / June 2022 · Paper 33 · Q25Show mark scheme →
ABoth the transactions and precautionary motives for holding liquidity are interest rate elastic.
BThe demand for liquidity is completely interest rate inelastic at low rates of interest.
CThe demand to hold liquidity by households is stable.
DThe rate of interest on long-term government securities is inversely related to their price.
Mark scheme
43Feb / March 2022 · Paper 12 · Q3Show mark scheme →
Amedium of exchange
Bstandard of deferred payment
Cstore of value
Dunit of account
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44Oct / Nov 2021 · Paper 12 · Q2Show mark scheme →
Adivisibility
Bdurability
Cportability
Dmedium of exchange
Mark scheme
45Oct / Nov 2021 · Paper 13 · Q3Show mark scheme →
Aacceptability
Bdivisibility
Cdurability
Dportability
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46Oct / Nov 2021 · Paper 31 · Q25Show mark scheme →
Aprecautionary motive | transactions motive
Bspeculative motive | transactions and precautionary motives
Ctransactions and precautionary motives | speculative motive
Dtransactions motive | precautionary motive
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47Oct / Nov 2021 · Paper 32 · Q27Show mark scheme →
ABank deposits will fall by 10%.
BBanks deposits will rise by 5%.
CThe credit multiplier will fall by 50%.
DThe credit multiplier will increase by 5%.
Mark scheme
48Oct / Nov 2021 · Paper 33 · Q27Show mark scheme →
Aincome motive
Bprecautionary motive
Cspeculative motive
Dtransactionary motive
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49May / June 2021 · Paper 12 · Q3Show mark scheme →
Amedium of exchange
Bstandard for deferred payment
Cstore of value
Dunit of account
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50May / June 2021 · Paper 13 · Q4Show mark scheme →
Ano, because it is not possible to have two currencies in a country
Bno, because they are not generally acceptable outside of Brixton
Cyes, because some shopkeepers are willing to accept them
Dyes, because they fulfil all the functions of money
Mark scheme
51May / June 2021 · Paper 31 · Q26Show mark scheme →
Apurchase long-term government debt from the public
Bpurchase short-term government debt from the public
Csell long-term government debt to the public
Dsell short-term government debt to the public
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52May / June 2021 · Paper 32 · Q25Show mark scheme →
AAn outflow of currency for trade and capital purposes becomes an inflow.
BThe central bank instructs commercial banks to keep higher ratios of cash to deposits.
CThe government budget balance moves from a deficit to a surplus.
DThe government replaces borrowing from the banks with borrowing from the general public.
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53May / June 2021 · Paper 32 · Q26Show mark scheme →
ADiagram A
BDiagram B
CDiagram C
DDiagram D
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54May / June 2021 · Paper 33 · Q26Show mark scheme →
Apurchase long-term government debt from the public
Bpurchase short-term government debt from the public
Csell long-term government debt to the public
Dsell short-term government debt to the public
Mark scheme
55Feb / March 2021 · Paper 32 · Q25Show mark scheme →
Aspeculative; yes; no
Bspeculative; no; yes
Ctransactions; no; no
Dtransactions; yes; no
Mark scheme