A ferry operator is considering borrowing to buy an additional ferry. The ferry is expected to return 7% a year. The interest rate on the loan falls from 8% to 5%.
Which outcome is most likely?
The purchase is likely to be postponed because 7% is below the previous 8% loan rate, limiting future productive capacity
The purchase is likely to go ahead because 7% exceeds the new 5% loan rate, adding to future productive capacity
The purchase is likely to be postponed because the lower loan rate makes saving more attractive, limiting future productive capacity
The purchase is likely to go ahead, but borrowing to buy the ferry is unlikely to affect future productive capacity
75 exam-style questions on AQA GCSE Economics 2.1 Introduction to the national economy, covering 2.1.1a What an interest rate is, 2.1.1b Interest rates and consumer decisions, 2.1.1c Interest rates, producer decisions and calculations, 2.1.2a UK government revenue and spending, and 2.1.2b Direct, indirect and progressive taxation. Each one has a worked solution and a mark scheme showing where the marks go.