A parcel delivery firm holds cash reserves in a savings account. It is deciding whether to use some of these reserves to install automated parcel-sorting equipment. The firm expects demand for deliveries to remain stable. Following a cut in Bank Rate, the interest rate paid on its savings falls.
State how the fall in interest earned on the reserves is likely to change the firm's decision about installing the sorting equipment, and briefly explain why.
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.