What is the impact of a fall in the central bank interest rate on the macroeconomic performance of the UK economy?

Firstly, it expands the aggregate demand since invesment rises. Hence GDP rises. However, this depends on whether the fall is anticipated by markets already.

Secondly, it devalues the UK's exchange rates against other currencies, boosting exports. This depends on other countries' interest rate policies and import policies.

Thirdly, consumer spending rise, leading to rising AD. Hence, GDP rises. However, this depends on whether the economy is already at its full productive capacity.

Answered by Guangyao M. Economics tutor

2224 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What is the effect on price and quantity on flight tickets when the oil price has increased.


Why is a monopoly inefficient?


What is the difference between external and internal economies of scale?


What are the determinants of Demand? What is the effect of a change in the determinants of demand?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2024

Terms & Conditions|Privacy Policy