The Bank of England raises Bank Rate from 3.5% to 4.5%. A household had planned to take out a new bank loan next month to pay for home improvements. What is the most likely direct effect on the household's plan?
The new loan would cost more in interest, so the household may delay the improvements.
The household may do the improvements sooner, because saving has become less rewarding.
The new loan would cost less, because banks cut their own rates when Bank Rate rises.
The new loan would cost the same, because only existing variable-rate loans respond to the rise.
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.