Money & Banking is a core part of GCSE Economics. Revise the key concepts and common mistakes below, then lock them in with the free games.
Key concepts
PrincipalOriginal sum borrowed or saved.
Simple interestInterest on principal only.
Compound interestInterest on principal plus past interest.
APRAnnual Percentage Rate — total borrowing cost.
Monetary policyUse of interest rates to control inflation.
MPCMonetary Policy Committee at the Bank of England.
FCAFinancial Conduct Authority — UK financial regulator.
Prudential regulationRules ensuring banks hold enough capital.
Quantitative easingCentral bank buys bonds to inject money.
LiquidityHow easily an asset is turned into cash.
Moral hazardBanks take risks knowing they'll be bailed out.
Financial crisisSevere disruption to banking system.
Commercial bankHigh-street bank serving households/firms.
Central bankBank of England — runs UK monetary system.
Common mistakes to avoid
Questions where students often pick the tempting wrong answer — make sure you know the right one:
Compound interest is calculated on?✗ Only the original principal ✓ Principal plus accumulated interest
What is opportunity cost?✗ Only the money price of an item. ✓ The next best alternative given up when you make a choice.
What did the original Phillips curve suggest, and how has thinking changed?✗ The Phillips curve still proves you can always reduce unemployment by allowing more inflation. ✓ The original Phillips curve suggested a stable inverse relationship between unemployment and inflation. Friedman and the 1970s stagflation experience added expectations — the long-run Phillips curve is vertical at the natural rate of unemployment.
Practise Money & Banking — free games
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