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Which one of the following could be an effect on small businesses if interest rates were to rise significantly? Select one answer - Edexcel - GCSE Business - Question 10 - 2016 - Paper 1
Question 10
Which one of the following could be an effect on small businesses if interest rates were to rise significantly? Select one answer. A. Improved net cash flow B. Re... show full transcript
Worked Solution & Example Answer:Which one of the following could be an effect on small businesses if interest rates were to rise significantly? Select one answer - Edexcel - GCSE Business - Question 10 - 2016 - Paper 1
Step 1
Select one answer.
Answer
The correct answer is B. Reduced consumer demand.
When interest rates rise significantly, small businesses often face higher borrowing costs. This can lead to reduced consumer spending as individuals and families may cut back on expenditures due to increased costs of loans, mortgages, and credit. Consequently, lower consumer demand negatively impacts small businesses, affecting their sales and overall financial performance.