The government has £50 million of one-year borrowing. Its interest rate rises from 3% to 4%. Ignoring repayments, which statement is correct?
Annual interest falls by £500,000, leaving more for public services
Annual interest rises by £50,000, with no effect on government finances
Annual interest rises by £500,000, increasing the cost of government borrowing
Annual interest rises by £2 million, which equals the new total interest
30 exam-style questions on OCR GCSE Economics 2.8 The role of money and financial markets, covering 2.8.1 Money as a medium of exchange, 2.8.2 Role of the financial sector, 2.8.3 Importance of the financial sector, 2.8.4 Interest rates and saving, borrowing, investment, and 2.8.5 Effect of interest rate changes. Each one has a worked solution and a mark scheme showing where the marks go.