Who this is for: Cambridge IGCSE Economics (0455) students who want money, banking and trade unions — the functions of money, the role of central banks and collective bargaining — to become a reliable source of marks instead of disconnected definitions they cannot apply.
What query it owns: how to understand and revise money, banking and trade unions in Cambridge IGCSE Economics.
Why this is safe: this page owns the money, banking and trade unions revision-guide angle, while Tutopiya’s Money, Banking and Trade Unions subtopic page owns the learning resource and the free Money, Banking and Trade Unions quiz owns the practice.

Money, banking and trade unions are core institutions in Cambridge IGCSE Economics (0455) Microeconomic Decision Makers. The syllabus expects you to state the functions of money, explain the role of commercial and central banks, and describe how trade unions negotiate wages and working conditions through collective bargaining. This guide links each institution to the explanation questions examiners set.

Key takeaways

• Money has four functions: medium of exchange, measure of value, store of value, method of deferred payment.
• Commercial banks accept deposits, lend to customers and facilitate payments.
• The central bank controls monetary policy, issues currency and supervises the banking system.
• A trade union is an organisation of workers that negotiates with employers on behalf of members.
• Collective bargaining is negotiation between unions and employers over wages and conditions.

What are money, banking and trade unions in Cambridge IGCSE Economics?

Money is anything widely accepted as payment for goods and services. Banks provide financial services and channel savings into investment. Trade unions represent workers’ interests in labour markets. Cambridge IGCSE Economics (0455) tests whether you can define each institution, explain its role in the economy, and evaluate advantages and disadvantages — especially of trade union activity.

You can read the full explanation, notes and examples on Tutopiya’s Money, Banking and Trade Unions subtopic page before you attempt questions.

Functions of money

Function	Meaning	Example
Medium of exchange	Accepted in payment for goods and services	Paying for groceries with cash
Measure of value (unit of account)	Allows comparison of values	Pricing a phone at $500
Store of value	Can be saved and used later	Keeping money in a savings account
Method of deferred payment	Enables borrowing and lending	Paying for a car in instalments

Commercial banks vs central bank

Feature	Commercial bank	Central bank
Purpose	Profit-making financial services	Manage monetary policy, financial stability
Customers	Individuals and businesses	Government and commercial banks
Key activities	Deposits, loans, payments	Issue currency, set interest rates, lender of last resort
Examples	DBS, HSBC, local banks	Monetary Authority of Singapore, Bank of England
Profit motive?	Yes	No

Trade unions: advantages and disadvantages

Advantages for workers	Disadvantages
Higher wages through collective bargaining	May cause unemployment if wages rise above equilibrium
Improved working conditions and job security	Industrial action (strikes) disrupts production
Stronger voice against powerful employers	May reduce firm competitiveness and profits
Reduced exploitation of individual workers	Non-union members may benefit without paying dues

How to analyse money, banking and trade unions — step by step

1. Identify the institution in the question — money, commercial bank, central bank or trade union.
2. State definitions precisely using syllabus wording.
3. List functions or roles — all four money functions; bank activities; union aims.
4. Apply to a scenario — e.g. how a central bank interest rate change affects borrowing.
5. Evaluate trade unions — advantages for workers vs disadvantages for firms/economy.
6. Link to labour markets — unions affect wage determination and employment.

Test yourself with the free Money, Banking and Trade Unions quiz once you can explain each institution’s role.

Money, banking and trade unions in past-paper wording: command words that matter

Command word / phrase	What the question wants	Typical stem
Define	Precise meaning	”Define money.” / “Define a trade union.”
List	Named points without explanation	”List the functions of money.”
Explain	Cause and effect	”Explain the role of a central bank.”
Distinguish between	Clear comparison	”Distinguish between a commercial bank and a central bank.”
Discuss	Advantages and disadvantages	”Discuss the advantages and disadvantages of trade unions.”

Worked exam-style stems (how to answer the wording)

1. “List the functions of money.” Medium of exchange, measure of value (unit of account), store of value, method of deferred payment. Mark-scheme reward: all four functions named.
2. “Explain the role of a central bank.” A central bank manages monetary policy (e.g. setting interest rates), issues the national currency, supervises commercial banks, and acts as lender of last resort to maintain financial stability. Reward: at least two roles explained.
3. “Discuss the advantages and disadvantages of trade unions for workers.” Advantages: higher wages, better conditions, collective strength. Disadvantages: strikes may reduce employment; firms may relocate; non-members free-ride. Reward: both sides with worker focus.

How money, banking and trade unions connect to the rest of Cambridge IGCSE Economics

This subtopic sits in Microeconomic Decision Makers alongside Classification of Firms. Trade unions interact with firms in labour markets; banks channel funds to businesses. The Cambridge IGCSE Economics resource hub links every syllabus subtopic.

Common mistakes students make

• Listing only three functions of money (there are four).
• Confusing commercial banks with the central bank.
• Saying trade unions only benefit workers without acknowledging disadvantages.
• Forgetting collective bargaining as the key union activity.
• Not linking central bank interest rate changes to borrowing and spending.

When you need more support

If money, banking and trade union questions keep costing marks, work through the Money, Banking and Trade Unions quiz, then get focused help from a Cambridge IGCSE Economics tutor.

Frequently asked questions

Is this topic hard in Cambridge IGCSE Economics? It is mainly definitions and comparisons. Learn the four money functions and commercial vs central bank roles.

What are the four functions of money? Medium of exchange, measure of value, store of value, and method of deferred payment.

What is collective bargaining? Negotiation between trade unions and employers over wages, working hours and conditions on behalf of union members.

How do I revise money, banking and trade unions effectively? Memorise definitions, complete comparison tables, practise discuss questions on trade unions, then take the quiz.

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