Microeconomic Decision Makers · 2 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 4% of your exam marks.
New emphasis in the 2027 syllabus; the functions and characteristics of money and the roles of central and commercial banks are now examined directly. Guidance based on specimen materials.
For something to work well as money it needs certain physical and practical qualities.
| Characteristic | Why it matters |
|---|---|
| Acceptability | Everyone must be willing to take it in exchange, or it cannot act as a medium of exchange. |
| Durability | It must last and not wear out or decay quickly, so it can act as a store of value. |
| Portability | It must be easy to carry so it can be used in everyday transactions. |
| Divisibility | It must split into smaller units so it can pay for cheap as well as expensive goods. |
| It must be hard to copy or produce freely, otherwise it loses value. |
| Uniformity | Each unit must be the same as every other of the same value, so prices are clear. |
This is why modern economies use notes, coins and bank deposits rather than, say, perishable goods: a basket of fruit fails durability and divisibility, so it is poor money.