Money, banking and households
G3 Economics - syllabus K343, 2027
What money is, how central and commercial banks work, and why households spend, save and borrow.
- Money: forms, functions and characteristics
Money is anything widely accepted in exchange; it works as a medium of exchange, store of value, unit of account and standard of deferred payment.
- The central bank
A central bank issues currency, is the government's bank and the banks' bank, and runs monetary policy.
- Commercial banks
Commercial banks take deposits, make loans and handle payments, linking savers with borrowers.
- How income and interest rates affect spending, saving and borrowing
Higher income raises spending and saving; higher interest rates encourage saving and discourage borrowing.
- Confidence, age and culture
Confident households spend and borrow more; saving peaks in middle age; culture shapes attitudes to debt.
- Put it together: Interest rates change
The central bank is deciding what to do with interest rates. Compare how each choice affects different households and firms.
What you will be able to do
I can describe the forms, functions and characteristics of money.
Syllabus K343, 3.1.1. Money: forms, functions and characteristics of money
I can explain the roles of central banks and commercial banks.
Syllabus K343, 3.1.2. Banking: role and importance of central banks; role and importance of commercial banks
Taught in The central bank, Commercial banks
I can explain how income, interest rates, confidence, age and culture affect household spending, saving and borrowing.
Syllabus K343, 3.2.1. Influences on households' spending, saving and borrowing: income; rate of interest; confidence; age; culture
Taught in How income and interest rates affect spending, saving and borrowing, Confidence, age and culture