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.

Guangyao M. A Level Maths tutor, A Level Economics tutor

1 year ago

Answered by Guangyao, an A Level Economics tutor with MyTutor

Still stuck? Get one-to-one help from a personally interviewed subject specialist


PremiumMegan J. A Level Business Studies tutor, GCSE Business Studies tutor,...
£24 /hr

Megan J.

Degree: BSc Business (Bachelors) - Lancaster University

Subjects offered:Economics, Extended Project Qualification+ 2 more

Extended Project Qualification
Business Studies
-Personal Statements-

“I study BSc Business at Lancaster University which is in the top 10 and the management school is triple accredited.”

£20 /hr

Gleb P.

Degree: BSc International Management (Bachelors) - Warwick University

Subjects offered:Economics, Business Studies

Business Studies

“I am a passionate and outgoing university student who has a passion for teaching and bringing excitement to the subject.”

MyTutor guarantee

£20 /hr

Luke H.

Degree: Economics (Bachelors) - Bath University

Subjects offered:Economics, Spanish+ 2 more

-Personal Statements-

“I am a second year Economics student at the University of Bath, aiming to ensure you fulfil your potential!”

About the author

£20 /hr

Guangyao M.

Degree: BSc Economics (Bachelors) - LSE University

Subjects offered:Economics, Maths


“Top tutor from the renowned Russell university group, ready to help you improve your grades.”

MyTutor guarantee

You may also like...

Posts by Guangyao

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

What is the impact of a rise in national minimum wage on the labour market?

Other A Level Economics questions

How can I show the impact of a NMW on employment using a supply and demand graph?

What is a Pigouvian Tax?

What is the best way to revise for Transport Economics?

Why is profit maximising at MC=MR?

View A Level Economics tutors

We use cookies to improve your site experience. By continuing to use this website, we'll assume that you're OK with this. Dismiss