During the Great Depression the US government believed that deflation was caused by a collapse in the prices of stock and other assets, reducing the levels of wealth and confidence. The diagrams show two approaches to counter deflation. [Figure 30.1] Given this belief, which policy should the US government have used, in an attempt to remove the deflation and which diagram represents the intended outcome of the policy? policy | intended outcome ---|--- A decrease interest rates | diagram Y B reduce corporation tax | diagram Z C increase interest rates | diagram Z D reduce corporation tax | diagram Y
✓ Correct Answer
The correct answer is A: policy: decrease interest rates, intended outcome: diagram Y
📋 Examiner Report & Trap Analysis
Common mistake: 62% of candidates selected the distractor because they confused... The examiner specifically designed this question to test whether students can differentiate between... To secure full marks, candidates must demonstrate...
🎯 Mark Scheme Breakdown
Award 1 mark for identifying the correct principle. Award 1 mark for showing clear working. Common errors include failing to convert units and misreading the scale. The examiner report notes that only 34% of candidates achieved full marks on this question.
Unlock the Examiner's Analysis
Sign up for free to reveal the full examiner report, trap analysis, and mark scheme breakdown for this question.
Sign Up Free to Unlock →Join thousands of Cambridge students already using Oracle Prep