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UK total bank lending to individuals, percentage change on previous year 2014 2.5% 2015 3.2% 2016 4.0% (Source: Bank of England 2017) (a) Explain one likely reason why consumer demand for bank loans has increased - Edexcel - A-Level Economics A - Question 5 - 2018 - Paper 2
Question 5
UK total bank lending to individuals, percentage change on previous year 2014 2.5% 2015 3.2% 2016 4.0% (Source: Bank of England 2017) (a) Explain one likely ... show full transcript
Worked Solution & Example Answer:UK total bank lending to individuals, percentage change on previous year 2014 2.5% 2015 3.2% 2016 4.0% (Source: Bank of England 2017) (a) Explain one likely reason why consumer demand for bank loans has increased - Edexcel - A-Level Economics A - Question 5 - 2018 - Paper 2
Step 1
Explain one likely reason why consumer demand for bank loans has increased.
Answer
One likely reason for the increased consumer demand for bank loans is the decline in interest rates. Lower interest rates make borrowing more affordable for consumers as it reduces the cost of repayments. Additionally, increased consumer confidence can also spur demand; when consumers feel optimistic about their financial stability, they are more likely to take on loans, believing they can manage future repayments.
Step 2
Step 3
Calculate the index number for the total value of bank lending in 2016 using 2015 as a base year.
Answer
To calculate the index number, we can set the base year (2015) as 100. The bank lending growth from 2015 to 2016 is 4%. Thus, the index number for 2016 is calculated as:
Therefore, the index number for 2016 is 104.