Interest & Exchange Rates

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1. What is an interest rate?

  • The rate at which foreign goods are bought
  • A tariff on foreign imports
  • The percentage reward or payment over a period of time that is given to savers on savings or paid by borrowers on loans
  • A tax paid by consumers when buying foreign goods
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2. What is meant by a fixed interest rate?

  • A tax paid by tradesmen
  • Interest rates will only change if the prime minister says they must
  • An interest rate which will not change at whatsoever over the life of a loan
  • An interest rate which can flucuate

3. If the value of the pound decreases, who will be affected?

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

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

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

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

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

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