A manufacturer is considering two investment projects, both to be funded by borrowing. After the Bank of England raises Bank Rate, the annual interest rate on the manufacturer's loans rises from 5% to 7%. The expected annual return on each project is shown below.
| Project | Expected annual return |
|---|---|
| Project A | 6% |
| Project B | 9% |
Using the information above, state and briefly explain how the rise in the interest rate is likely to affect the manufacturer's investment decisions.
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.