A household has a variable-rate loan of £30,000 and £10,000 in a savings account. After a cut in Bank Rate, the interest rate on the loan falls from 5% to 4% and the interest rate on the savings account falls from 3% to 2%. The loan balance and the amount saved stay the same for the next year.
Calculate the reduction in the household's annual interest payments on its loan.
Using your answer to (a), explain how the cut in interest rates could affect the household's consumer spending.
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.