In February 2017, China’s central bank increased the interest rate. It aimed to curb borrowing and slow the growth of the money supply, although it was concerned that a higher interest rate could lower the country’s economic growth rate. The rise in interest rates is likely to have added to the workload of skilled workers in commercial banks.
(a)[2]
Identify any two functions of money.
(b)[4]
Explain two reasons why a central bank might want borrowing to fall.
(c)[6]
Analyse why skilled workers are generally paid more than unskilled workers.
(d)[8]
Discuss whether or not a higher rate of interest will reduce economic growth.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A medium of exchange” …