Macro 1

Question 1

What are the two factors affecting Household borrowing?

Answer 1

Interest Rates

Consumer confidence

Question 2

What is interest rates?

Answer 2

Interest rates are the cost of borrowing money set by the Bank of England

Question 3

What is consumer confidence?

Answer 3

Consumer confidence is the outlook that consumers have towards the economy and their own personal financial situation.

Question 4

How do interest rates affecting borrowing?

Answer 4

As interest rates are the cost of borrowing money if the interest rates are high, interest payments on credit cards and loans are more expensive. Therefore this discourages people from borrowing.

Question 5

How does consumer confidence affecting borrowing?

Answer 5

The level of consumer confidence will be an important factor that determines the willingness of consumers to borrow. A high level of consumer confidence will encourage increased borrowing as consumers will be more confident towards the stability in the economy.

Question 6

What is expansionary fiscal policy?

Answer 6

Expansionary fiscal policy is intends to increase the aggregate demand in the economy through lower tax rates and increased government spending.

Question 7

What is expansionary monetary policy?

Answer 7

Expansionary monetary policy aims to increase aggregate demand and economic growth in the economy ways it can do this involves cutting interest rates or increasing the money supply to boost economic activity.

Question 8

How does expansionary fiscal policy sustain recovery in an economy?

Answer 8

As the economy is currently in a recession and there is a negative output gap in the economy as seen in Source A, expansionary fiscal policy is a way to recover the economy. If the government increases spending in the economy this will result