1. Starter Activity
Think point:

2. Lesson Objectives All students will understand Most students will
The role interest rates in controlling inflation
Most students will
be able to apply this to different contexts
Some students will
Understand the importance of monetary policy
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3. Interest rates
Specify the amount that has to be paid by the borrower to the lender.
Rates will vary depending on
Risk associated with the loan
Time of repayment
Purpose of the loan

4. Task
Discussion points pg 30

5. Monetary Policy
The Bank of England is in charge of controlling inflation (amongst other things)
Mostly it seeks to do this by adjusting interest rates
So if data suggests inflation is increasing, the BofE will may increase interest rates to force borrowers to pay more for their loans, which will decrease borrowing and disposable income.
However recent years have been unusual!!
Read “interesting times” pg 31 and summarise key issues

6. Task
Discussion Points
What is inflation?
Why is it a bad thing?

7. Inflation Inflation means a general rise in prices
It is an issue for several reasons, including
Uncertainty – businesses need to be able to plan ahead
Demands for pay increases
Balance of Payments - Imports from countries with lower rates of inflation may increase, damaging demand for domestic products – exports seem dearer
There are costs associated with constant price changes, e.g. menus, displays, promotion

8. Plenary Progress Arrow
Consider the winners and losers if interest rates are increased in the coming months.
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