In August 2015, China lowered the value of its currency, the yuan. The Chinese Government was aiming to boost output, including food output. It had seen a slowdown in its economic growth. By contrast, some other countries had in fact experienced a fall in output. One reason for the weakening of economic growth in some countries was problems linked to their commercial banks. Some commercial banks were at risk of closing down.
(a)[2]
Define the term ‘devaluation’.
(b)[4]
Explain two drawbacks of a decrease in a country’s output.
(c)[6]
Analyse the effect on the food market of a rise in population together with a long 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 decrease in the currency's value” …