1 Identify the impact that the interest rate cut may have on:
a) business.
b) consumers.
2 The article suggests that the Chancellor of the Exchequer and the Governor of the Bank of England disagreed about the desirability of a cut in the base rate. Why might Eddie George, the Governor of the Bank of England, think a cut in interest rates ill-advised?
3 Produce a flow diagram to show how a reduction in base rates may lead to a reduction in the number of people unemployed.
4 Why might a reduction in the unemployment rate lead to a fall in the PSBR?
5 Interest rates are referred to as 'a macro-economic variable'. Explain what you understand by the term.
6 Discuss the effect that a reduction in interest rates may have upon the exchange rate and Britain's International Trade.
