Interest Rates and Business Effects

What is an interest rate?

• The amount of money a business makes in a year

• The cost of borrowing money

• The number of employees in a company

• The price of a product in a shop

How do interest rates affect business loans?

• They make loans free

• They determine how much extra money businesses pay back

• They have no effect on loans

• They make loans cheaper

What happens to consumer spending when interest rates go up?

• People spend more money

• People save more money

• People buy more toys

• People go on more holidays

Why might a business decide not to expand when interest rates are high?

• Because it is too sunny

• Because borrowing money is more expensive

• Because they have too many employees

• Because they have too much money

What is one effect of low interest rates on businesses?

• Businesses close down

• Businesses find it cheaper to borrow money

• Businesses stop selling products

• Businesses hire fewer people

How do interest rates influence investment decisions?

• They make investments free

• They affect the cost of borrowing money for investments

• They have no effect on investments

• They make investments more fun

What might happen to a business's profits if interest rates increase?

• Profits might increase

• Profits might decrease

• Profits stay the same

• Profits become zero

How can high interest rates affect consumer spending?

• People buy more sweets

• People spend less money

• People buy more clothes

• People spend more money

What is one reason a business might expand when interest rates are low?

• Because it is raining

• Because borrowing money is cheaper

• Because they have no customers

• Because they have too many products

What is the relationship between interest rates and savings?

• Higher interest rates encourage more savings

• Higher interest rates discourage savings

• Interest rates have no effect on savings

• Interest rates make savings disappear