Identify two possible effects of this change in the interest rate on Paul's business - Edexcel - GCSE Business - Question 4 - 2015 - Paper 1
Question 4
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
C. Lower sales
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Answer
An increase in interest rate can lead to higher borrowing costs for consumers. This may cause potential buyers to reduce their purchasing, leading to lower sales for Paul's business.
Step 2
D. Higher loan repayments
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Answer
If the interest rate rises, the cost of servicing existing loans will increase, resulting in higher loan repayments for Paul’s business. This additional cost can strain cash flow and reduce available capital for other operational needs.
