A small engineering firm has a £150,000 variable-rate bank loan, taken out to buy new machinery, and keeps £40,000 in an interest-bearing business deposit account. Both balances stay the same for one year. After a rise in Bank Rate, the interest rate on the loan rises from 5.5% to 6.5%, and the interest rate on the deposit account rises from 1.5% to 2.25%.
Calculate by how much the firm is better off or worse off over the year because of these rate rises, taking into account both the interest it pays and the interest it receives.
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.