In August 2015, China lowered the value of its currency, the yuan. The Chinese Government wanted to raise output, including food output. It had faced a slowdown in economic growth. Yet some other countries had in fact seen output fall. One reason for the drop in economic growth in some countries was difficulties linked to their commercial banks. Some commercial banks were in danger of closing down.
(a)[2]
Define ‘devaluation’
(b)[4]
Explain two disadvantages of a fall in a country’s output.
(c)[6]
Analyse the effect on the market for food of population growth together with a prolonged spell of bad weather.
(d)[8]
Discuss whether a central bank ought to lend to commercial banks that run into financial difficulties.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “A fall in a currency’s value” …