After the UK decided to leave the European Union (EU) in June 2016, the British currency, the pound (£), lost value. Even so, in August 2016, despite the fall in the £, the Bank of England cut interest rates from 0.5% to 0.25%. This was intended to stimulate more spending and borrowing so that economic growth would not slow further.
(a)[2]
Identify two motives behind consumer spending.
(b)[4]
Explain two benefits a firm can gain from borrowing.
(c)[6]
Analyse two effects of a depreciating foreign exchange rate.
(d)[8]
Discuss whether a reduction in interest rates will benefit an economy.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “To meet needs” …