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Business Notes Emma Rudd BMA




External influences

Interest Rates and Exchange Rates
Interest Rates
The bank of England is responsible for setting the base rate of interest. The Bank of
England's Monetary Policy Committee meets each month and takes decisions on
whether to alter the base rate of interest.

Changes…

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Business Notes Emma Rudd BMA




If interest rates rise businesses save more, as returns are greater. Postponing
investment decisions will reduce the level of economic activity within the economy.
At times of declining interest rates businesses will increase their investment
spending as consumer spending is rising and more productive capacity…

Page 3

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Business Notes Emma Rudd BMA




Exchange Rates
Exchange rates between most currencies vary regularly according to the balance
supply and demand for each individual currency.

Why do Firms Purchase Foreign Currencies?
The main reason businesses purchase foreign currencies is to pay for goods and
services brought from overseas. Firms purchasing…

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