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Identify two possible effects of this change in the interest rate on Paul's business - Edexcel - GCSE Business - Question 4 - 2015 - Paper 1

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Identify two possible effects of this change in the interest rate on Paul's business. Select two answers: A. Greater competition from rivals B. Increased variable... show full transcript

Worked Solution & Example Answer:Identify two possible effects of this change in the interest rate on Paul's business - Edexcel - GCSE Business - Question 4 - 2015 - Paper 1

Step 1

Select two answers:

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Answer

The two possible effects of a change in the interest rate on Paul’s business are:

  1. C. Lower sales - An increase in interest rates can lead to higher borrowing costs for consumers, which may cause them to reduce their spending, ultimately leading to lower sales for businesses like Paul’s.

  2. D. Higher loan repayments - When interest rates rise, businesses with existing loans will face higher repayment amounts due to increased interest costs, impacting their overall financial situation.

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