In February 2016, share prices on stock exchanges declined across the world. This occurred for several reasons, including worries about a slowdown in world growth, the risk of deflation and unemployment, and fears that some commercial banks might fail.
(a)[2]
Define the term commercial bank.
(b)[4]
Explain how a stock exchange might help to encourage economic growth.
(c)[6]
Analyse the causes of deflation.
(d)[8]
Discuss whether government policy measures designed to reduce unemployment will cause inflation.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A financial institution that provides services to households and firms” …