In 2022, the President of Zimbabwe ordered the country’s commercial banks to stop lending. He was concerned that people were borrowing money to buy foreign currency. At this time, Zimbabwe faced several economic problems. The inflation rate was very high at 105%. In 2023, it rose to 850% despite the government’s aim of a fall in the inflation rate.

3(a)InflationEasy2 marks

State what is meant by a fall in the inflation rate.

3(b)Household Spending Saving BorrowingHard4 marks

Explain two reasons why households may save their money in a commercial bank.

Answer

0 words

3(c)InflationHard6 marks

Analyse how a fall in a country’s foreign exchange rate can cause inflation.

Answer

0 words

3(d)Monetary PolicyHard8 marks

Discuss whether or not a reduction in bank lending will harm an economy.

Answer

0 words