Bank of England QUESTION

Question 1

POINT ONE

Answer 1

When the Bank of England reduces Bank Rate, commercial banks will also end up reducing their lending rates because of competitive pressure in the financial market

Question 2

POINT TWO

Answer 2

As a result, consumers will be less incentivised to save and more incentivised to spend.
Business, too, will be less incentivised to save and more incentivised to spend

Question 3

POINT THREE

Answer 3

Assets prices are likely to rise as people seek alternative forms of investment. Demand for assets rises and this puts upward pressure on prices. This creates a wealth effect and a
further stimulus for spending.