Syllabus: AQA - GCSE Economics
Module: How the Economy Works
Lesson: 3.2.5 Role of Money and Financial Markets

Introduction

This lesson is built around AQA’s GCSE Economics syllabus, section 3.2.5, titled The Role of Money and Financial Markets. It sits within the broader theme of How the Economy Works, helping students explore how financial systems support economic activity. From a teaching perspective, it connects the dots between theoretical learning and the real-world institutions that underpin everyday transactions—exactly the kind of clarity and relevance that supports engagement and long-term understanding.

Key Concepts

As outlined in AQA’s official specification, this topic expects students to understand:

• The role of money in facilitating transactions, acting as a medium of exchange, a measure of value, a store of value, and a standard for deferred payment.

• The importance of the financial sector in the UK economy, including banks, building societies, and insurance companies.

• The role of financial institutions in providing services like saving, borrowing, and insurance.

• The influence of interest rates on borrowing, saving, and investment decisions.

• The impact of changes in interest rates on households, firms, and the wider economy.

These ideas underpin later macroeconomic thinking and help students apply analytical tools to current events.

Real-World Relevance

Financial literacy isn’t just a “nice-to-have”—it’s a necessity. Whether students are considering student loans, mobile banking apps, or headlines about inflation and interest rates, this topic gives them the tools to make sense of it all.

A recent, tangible example is the Bank of England’s response to post-pandemic inflation. By raising interest rates steadily across 2023–24, the Bank aimed to control consumer spending and stabilise prices. Students can explore how this affected mortgage repayments, business investment, and consumer saving—real impacts on real lives.

You might also reference the rise of fintech platforms like Monzo or Revolut to spark discussion on how modern money and banking have evolved.

How It’s Assessed

In AQA’s GCSE Economics exam, this topic appears in both Paper 1 (How Markets Work) and Paper 2 (How the Economy Works), depending on context. Expect:

• Multiple-choice questions testing understanding of functions of money or impacts of interest rates.

• Short-answer data response questions, often asking students to interpret how financial trends impact consumers or firms.

• Extended writing tasks asking students to evaluate, for example, the pros and cons of rising interest rates on different economic agents.

Command words like explain, analyse, and evaluate will be key—students should practise building reasoned arguments using real-life data.

Enterprise Skills Integration

This topic is perfect for nurturing transferable skills, especially:

• Decision-making: Comparing the benefits and risks of saving versus borrowing.

• Critical thinking: Evaluating how different groups respond to interest rate changes.

• Numeracy: Calculating how interest rates affect repayments or savings growth.

If your school uses tools like MarketScope AI, students can analyse financial data trends, simulate decision-making, and explore trade-offs faced by consumers and firms—bringing classroom content to life.

Careers Links

Understanding money and financial markets has clear career relevance. This lesson supports:

• Gatsby Benchmark 4 (linking curriculum learning to careers).

• Gatsby Benchmark 5 (encounters with employers, if extended via a finance-focused speaker or virtual Q&A).

Relevant career pathways include:

• Personal finance adviser

• Investment banking analyst

• Insurance underwriter

• Financial journalist

• Retail banker

It’s also an early nudge for students interested in business, economics, or finance-related further study.

Teaching Notes

Time-saving tip: Introduce this lesson with a “What would you do with £1,000?” scenario. This hooks students while leading naturally into financial decision-making and the role of interest.

Common pitfalls:

• Students often confuse interest paid on loans with interest earned on savings. Reinforce these as mirror images of each other.

• Ensure clarity on the distinction between money (as a concept) and financial institutions (the system that uses it).

Extension activity: Run a “Bank of You” simulation. In pairs, one student acts as a bank and the other as a customer needing a loan. Give them basic data and interest rate options. Let them negotiate terms and explain their reasoning.

Plug-and-play activity: Use a local news story involving a bank closure or an interest rate change. Ask students to write a short piece on who benefits, who loses, and why.