4.1.4

A-A* (AO3/4) - The Future of Interest Rates

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A reduction in the base rate (interest rate set by the central bank), then the interest rate that businesses and businesses borrow at should fall.

Illustrative background for Rightward shift in ADIllustrative background for Rightward shift in AD ?? "content

Rightward shift in AD

  • After a cut in the bank rate:
    • Businesses will borrow from banks at a lower interest rate.
    • Households on floating rate or tracker mortgages will pay a lower interest payment on their debt each month.

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1Introduction to Markets

2Market Failure

3The UK Macroeconomy

4The UK Economy - Policies

5Business Behaviour

6Market Structures

7A Global Perspective

8Finance & Inequality

9Examples of Global Policy

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