Saturday, July 07, 2007

Unit 3: The effect of a rise in interest rates

This BBC clip explains the effects of a rise in interest rates
< >

a) Draw an AD/AS diagram to show the position of the economy as the MPC of the BoE see it
b) Show on the diagram and explain what the BoE believe will happen as a result of the rise in interest rates
c) The interst rate rise produces both winners and losers. Give examples of people in both catagories
d) Interest rate rises particularly hit those with large mortgages. How would the increase in monthly payments from £391 to £477 effect the economy if reflected across the economy?
e) One problem often cited with using interest rates to control the economy is there is a time lag before the full effect is seen in the economy. What evidence is there to support this view in the clip?

No comments: