This set has ten original questions, from easier to harder, covering all five lessons in money, banking and households. Questions 1 and 2 practise functions of money, 3 and 4 saving and investment, 5 and 6 banks, 7 to 9 budget constraints, and 10 borrowing incentives.
All people, firms and figures are invented, and none of the questions copies an exam paper. Write each answer on paper first, then open the solution. Note the ones you missed and use the routing list at the end. The mistake log and retest queue helps you retry a fresh question later.
Questions
1. A fictional shop prices a jar of honey at RM18 and a bottle of cooking oil at RM6. Which function of money lets a customer compare them, and how many bottles of oil equal one jar of honey in value?
Show answer
The unit of account function. Both goods are priced in ringgit, so 18 ÷ 6 = 3 bottles of oil equal one jar of honey.
2. Hasnah buys a laptop bag for RM90 today and agrees to pay in three equal monthly amounts. Name the function of money shown by the agreement and state each payment.
Show answer
Standard of deferred payment, because the amount owed later is stated in money. Each payment is 90 ÷ 3 = RM30, and 3 × 30 = 90 confirms the total.
3. Ravi earns RM2,500 a month and spends RM2,000. Calculate his saving and his saving as a percentage of income.
Show answer
Saving = 2,500 − 2,000 = RM500. Percentage = 500 ÷ 2,500 × 100 = 20%.
4. Label each as saving or investment in the syllabus sense: (a) Ayu deposits RM300 of her pay in a bank account; (b) Delta Farms buys a tractor for RM25,000.
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(a) Saving, because income is kept rather than spent on consumption. (b) Investment, because a firm is buying a capital good, the tractor.
5. A fictional bank receives RM800,000 in deposits and keeps 25% as reserves. How much does it have available to lend?
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Reserves = 0.25 × 800,000 = RM200,000. Available to lend = 800,000 − 200,000 = RM600,000.
6. The bank lends the RM600,000 at 6% a year and pays depositors 2% on RM800,000. Find the gap between interest received and interest paid, and say what it is used for.
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Received = 0.06 × 600,000 = RM36,000. Paid = 0.02 × 800,000 = RM16,000. Gap = 36,000 − 16,000 = RM20,000. It is used to cover the bank’s running costs, and what remains is profit.
7. A household has RM120 to spend on item A at RM4 and item B at RM10. Find the end points of its budget line.
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All on A: 120 ÷ 4 = 30. All on B: 120 ÷ 10 = 12.
8. The household buys 6 units of B. How many units of A can it buy with the rest of its income?
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B costs 6 × 10 = RM60. Left = 120 − 60 = RM60. A = 60 ÷ 4 = 15 units. Check: 60 + 60 = 120.
9. Income stays at RM120 but the price of A rises to RM5. Find the new end points and say whether the budget line shifts or pivots.
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All on A: 120 ÷ 5 = 24. All on B: still 120 ÷ 10 = 12. Only the A end point changes, so the line pivots inward on the A axis.
10. Lim Tailor can borrow RM20,000 at 12% and expects a gain of RM2,100 a year before interest. (a) Does it borrow? (b) The rate falls to 9%. Does the decision change? Explain using figures.
Show answer
(a) Interest = 0.12 × 20,000 = RM2,400. The gain of RM2,100 is lower, so it does not borrow.
(b) Interest = 0.09 × 20,000 = RM1,800. The gain of RM2,100 is now higher, with a net gain of RM300. The fall in the rate cut the yearly cost from RM2,400 to RM1,800, so the incentive to borrow rose and it now borrows, other things equal.
If you got these wrong
- Questions 1 and 2: you named the wrong function. Match the verb to the function in explaining a function of money.
- Questions 3 and 4: you mixed up saving and investment. See saving and investment in the syllabus sense.
- Questions 5 and 6: the reserve or interest arithmetic slipped, or you described the bank as a vault. Work through a bank’s role.
- Questions 7 to 9: you missed an end point or confused shifting and pivoting. Rebuild the table in the household budget constraint.
- Question 10: you left the stated facts or skipped the comparison. Practise the chain in borrowing incentives.
Percentage steps in questions 3 and 6 can be checked with the percentage-base explorer.
What next?
When you can finish this set without looking, move on to labour and wages or return to the module overview. Feedback on your written explanations is where one-to-one teaching helps most, and you can read about it in online one-to-one Economics tuition.