Interest Rate
Cost of borrowing; return on savings.
Formula
Interest Payment = Principal × Interest Rate × Time
Real World
When the Bank of England raised the base rate to 5.25% in 2023, millions of UK homeowners on variable mortgages saw monthly payments rise by hundreds of pounds, cutting their disposable income.
Exam Focus
Always state the direction of change and then its effect on business borrowing costs AND consumer spending separately to access full marks.
How well did you know this?