Extract 1: Belland interest-rate decision Belland has inflation of 6%, slowing growth and high household mortgage debt. The central bank is considering a rise in Bank Rate.
| Indicator | Current value |
|---|---|
| Inflation rate | 6% |
| Economic growth | 0.8% |
| Unemployment rate | 5.6% |
| Average variable-rate mortgage | £160,000 |
Explain how a higher interest rate can reduce inflation.
Calculate the extra annual interest on a £160,000 mortgage if its rate rises by 0.75 percentage points.
Analyse how the rate rise may affect business investment.
State two economic objectives monetary policy may influence.
Explain one effect of a rate rise on savers.
Evaluate whether Belland should raise Bank Rate.
29 exam-style questions on OCR GCSE Economics 3.6 Monetary policy, covering 3.6.1 What is monetary policy, 3.6.2 Monetary policy and macro objectives, and 3.6.3 Effects of monetary policy. Each one has a worked solution and a mark scheme showing where the marks go.