In Lydon, inflation is below the central bank's target and many households have variable-rate mortgages. The central bank cuts interest rates.
Which is the most likely result?
Saving becomes more rewarding, so households spend less and inflationary pressure decreases
Firms' borrowing costs rise, so they raise their prices and inflationary pressure increases
Mortgage repayments fall, so households spend more and inflationary pressure increases
Mortgage repayments rise, so households spend less and inflationary pressure decreases
189 exam-style questions on AQA GCSE Economics 2.2 Government objectives, covering 2.2.1a The main economic objectives, 2.2.1b Conflicts between government objectives, 2.2.1c Other objectives and ethical considerations, 2.2.2a The significance of economic growth, 2.2.2b Causes, costs, benefits and policies for growth, 2.2.2c GDP measures and calculations, 2.2.3a Measuring employment and unemployment, 2.2.3b Types and causes of unemployment, 2.2.3c Consequences and policies for unemployment, 2.2.4a What inflation is, 2.2.4b Measuring inflation with the CPI, 2.2.4c Causes, consequences and control of inflation, 2.2.5a Balance of trade and balance of payments, 2.2.5b Current account surpluses and deficits, 2.2.5c Policies to influence the balance of payments, 2.2.6a Income and wealth inequality in the UK, 2.2.6b Causes and consequences of inequality, and 2.2.6c Redistributing income and wealth. Each one has a worked solution and a mark scheme showing where the marks go.