In one country, the central bank cut its interest rate from 4.5% to 2.5%. Table 1 shows survey evidence and the inflation rate before the cut and 12 months later.
| Indicator | Before the cut | 12 months later |
|---|---|---|
| Average monthly mortgage payment per household | £950 | £820 |
| Firms planning to increase investment | 18% | 31% |
| Inflation rate | 2.0% | 3.4% |
Using Table 1, explain one possible trade-off between macroeconomic objectives caused by the interest rate cut.
104 exam-style questions on AQA GCSE Economics 2.3 How the government manages the economy, covering 2.3.1a Fiscal policy and income and expenditure, 2.3.1b Fiscal policy and government objectives, 2.3.1c The government budget, 2.3.2a The meaning of monetary policy, 2.3.2b Uses of monetary policy, 2.3.3a Supply-side policies and their trade-offs, 2.3.3b Using supply-side policies, and 2.3.4 Policies to correct positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.