Money & Banking
Microeconomic Decision Makers · 2 question types
Exam Frequency Analysis
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.
The syllabus expects you to know the four functions of money.
| Function | What it means |
|---|---|
| Medium of exchange | Money is accepted in return for goods and services, so people no longer need a double coincidence of wants. It is used to buy, sell and trade. |
| Store of value | Money keeps its value over time, so people can save now and spend later (this only holds well when inflation is low). |
| Unit of account (measure of value) | Money provides a common measure in which the price of every good can be expressed and compared. |
| Standard of deferred payment | Money lets people buy now and pay later, so debts, loans and contracts can be set in money terms. |
Explain the functions of money (2 or 4 marks)
What comes up: "Identify two functions of money" (2 marks) or "Explain two functions of money" (4 marks).
Write: Name a function and develop it: Medium of exchange (1) — money is used to buy and sell products and to trade (1). Store of value (1) — money can be saved and keeps its value over a period of time (1). For "identify" questions, simply naming two (medium of exchange, store of value, unit of account, standard of deferred payment) earns the marks.
Watch out: The mark scheme accepts a correct description of a function even without the technical term (for example, "money can be used to buy and sell products"), but a vague answer like "money helps the economy" earns nothing. Match each function to a distinct role.