Following a cut in Bank Rate, a bank reduces both its variable business loan rate and its business savings rate by 1 percentage point. The balances remain unchanged for one year.
Annual net interest cost is the interest paid on the loan minus the interest received on savings.
| Firm | Variable-rate loan balance | Savings balance |
|---|---|---|
| Bicycle repair business | £18,000 | £5,000 |
| Catering business | £30,000 | £20,000 |
| Printing business | £12,000 | £0 |
| Gardening business | £25,000 | £14,000 |
Which firm will have the largest reduction in its annual net interest cost?
The bicycle repair business
The printing business
The gardening business
The catering business
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.