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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. Red... 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, borrowing costs increase for both consumers and businesses. Higher interest rates typically discourage spending and borrowing, leading to decreased consumer demand for goods and services. As a result, small businesses may experience a decline in sales, affecting their overall profitability.