Money and banking are closely linked. Money performs a number of functions, including being a standard for deferred payments, and it is used to pay workers, often directly into their bank accounts. The amount workers earn differs depending on the industry in which they work. Bank lending from both private sector and public sector (state-owned) banks has increased in some countries in recent years.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [2] A function of money that enables people to borrow (1) pay back at a later date (1) and to lend (1). The function of money that enables a price/interest rate to be set on the amount a borrower will pay (1) that a lender will earn (1).
2. [4] 1 mark each for each of two reasons identified: ∞ may be in less demand ∞ may be in higher supply ∞ may have less bargaining power ∞ may benefit less from government policies 1 mark each for each of two explanations given: ∞ may be in less demand as less productive/product they produce can be sold for less/replaced by capital good e.g. tractors ∞ may be in higher supply as work may require fewer qualifications/less skill ∞ may have less bargaining power as they may not belong to a trade union ∞ may not be covered by minimum wage legislation
3. [6] May have different goals (1) private sector banks may aim for profit maximisation (1) while public sector banks may seek to e.g. provide a service/keep employment high (1). Private sector banks may have lower costs of production (1) due to greater size (economies of scale) or lower size (less experience of diseconomies of scale (1) or due to more efficient production (1). Private sector banks may earn more revenue (1) may be better at attracting consumers through e.g. higher quality products (1) may respond quicker to changes in consumer demand (1).
4. [8] Up to 5 marks for why it might: It may enable households to borrow more (1) increasing their spending (1) to increase their living standards (1) be able to buy housing or other basic necessities (1) educate their children (1) reduce poverty (1). It may enable firms to borrow more to expand output (1) raise employment (1) increase economic growth (1). It may enable firms to buy better capital equipment (1) lower costs of production (1) lower prices (1) increase exports (1). Up to 5 marks for why it might not: It may increase consumer expenditure/total demand (1) this may cause inflation (1) total demand exceeding total supply (1) demand-pull inflation (1). Households and firms may spend more on imports (1) increasing a current account deficit (1) and may result in imported inflation (1). It may encourage households to get into debt (1) borrowing more than they can repay (1). It may encourage inefficient firms to expand (1) rising costs (1) increasing prices (1).