Intrest Rates

Question 1

What will happen to savers if interest rates rise

Answer 1

They will save more

Question 2

Describe the process buyers will experience if interest rates rise

Answer 2

1. They will have to pay more
2. They will have less disposable income
3. Won’t spend as much
4. Less business get money
5. Businesses close or jobs are lost
6. More unemployment
7. More people seek benefits- don’t pay tax
8. Big companies don’t borrow (as it costs more) - less production

Question 3

Define interest rates

Answer 3

The proportion of a loan that is charged as interest to the borrower