Interest & Exchange Rates

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1. Which of the following affect the demand for the pound on the foreign exchange market?

  • Boeing (US aircraft manufacturer) buying engines from Rolls-Royce in the UK
  • UK speculator buying shares on the New York Stock Exchange
  • UK tourists going on holiday
  • ICI (a UK firm) buying raw materials from overseas
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2. If the value of the pound increases, who will benefit most?

  • UK businesses
  • UK importers of materials
  • UK tourism
  • UK exporters of goods

3. A business is most likely to be badly affected by a rise in interest rates if it has:

  • High borrowings at fixed a rate
  • High borrowings at a variable rate
  • High fixed costs
  • High cash balances

4. In the UK, the base interest rate is set by...

  • The chancellor of the exchequer
  • Chief secretary to the treasury
  • Monetary Policy Commitee
  • The house of commons

5. Interest rates are most likely to be cut when the economy is:

  • Entering a recession
  • Enjoying a boom
  • Experiencing high inflation
  • Experiencing much lower employment

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