Insurance companies stop offering flood cover for shops, warehouses and factories in a riverside town that has flooded several times in recent years.
Which is the most likely effect on the town's economy?
Banks may lower loan interest rates there, because insurers no longer compete with them for customers.
The Bank of England may pay for flood damage there, because it acts as lender of last resort.
Firms may delay building or expanding premises there, because they would bear any flood loss alone.
Firms may expand their premises there, because they no longer have to pay insurance premiums.
82 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.