Cambridge International (CAIE) Economics past paper questions: Money and banking

Multiple choice questions

1. A-level Paper 3, November 2025, Q13

   What is likely to reduce the domestic money supply?

2. A-level Paper 3, November 2025, Q16

   In these four diagrams, the money supply in an economy is initially at MS1 and the demand for money is initially at LP1. Which diagram shows the effect of a policy of quantitative easing on the rate of interest?

3. A-level Paper 3, November 2025, Q19

   What would cause an individual’s demand curve for an active money balance to move to the left?

4. A-level Paper 3, June 2025, Q23

   The central bank of a country decreases interest rates. What are the likely consequences?

5. A-level Paper 3, March 2025, Q17

   In the quantity theory of money equation, MV = PT, V is defined as the income velocity of circulation. Which change would tend to reduce the value of V?

6. A-level Paper 3, March 2025, Q20

   If prices increase in country X but stay the same in country Y, what will be the most likely impact on the internal and external value of money in country X?

7. A-level Paper 3, November 2024, Q16

   When buying a car, Salma agrees to pay half of the cost now and the other half in six months time. Which function of money does this illustrate?

8. A-level Paper 3, June 2024, Q16

   What is not a function of a commercial bank?

9. A-level Paper 3, June 2024, Q21

   Which row correctly identifies the characteristics of an economy experiencing the liquidity trap?

10. A-level Paper 3, March 2024, Q16

    Which change is likely to result in a decrease in the demand for money?

11. A-level Paper 3, March 2023, Q18

    Which statement applies to a central bank and to a commercial bank?