A hotel operator has delayed extending its guest accommodation because borrowing costs made the project financially unattractive. Following a cut in Bank Rate, its bank reduces the interest rate charged on business loans.
Following this change, what is the most likely decision by the hotel operator?
Keep delaying the extension, because lower interest rates reduce the return the project earns
Save the money instead, because the cut means its bank deposits will earn more interest
Cancel the extension, because the cut in Bank Rate is intended to slow down spending
Go ahead with the extension, because its expected return may now cover the cost of borrowing
116 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.