Lesson 1.5.4b

1.5.4b Interest rates, government taxation and exchange rates Quiz: Pearson Edexcel Business, Unit 5

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 1.5.4b, Interest rates, government taxation and exchange rates: 20 multiple choice questions for the Pearson Edexcel GCSE Business (1BS0), Unit 5: Understanding external influences on business, written with Revision Ninja.

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The 20 questions

  1. What happens to a business's loan repayments when interest rates rise?

    • Overdrafts become free
    • Interest payments fall
    • Interest payments increase
    • Loan balances disappear

  2. How might a rise in interest rates affect consumer spending on credit?

    • Spending doubles immediately
    • Consumer savings vanish
    • Consumer spending rises
    • Consumer spending falls

  3. What is the effect on loan interest payments if interest rates fall?

    • Loans are cancelled
    • Payments stay fixed
    • Payments increase
    • Payments decrease

  4. Which business metric falls when corporation tax rates are increased?

    • Gross profit
    • Profit after tax
    • Operating turnover
    • Sales revenue

  5. How can an increase in Value Added Tax (VAT) affect consumers?

    • Higher retail prices
    • Lower retail prices
    • Increased disposable income
    • Cheaper imports

  6. What happens to UK exports when the pound strengthens against the dollar?

    • Exchange rates freeze
    • Exports become cheaper
    • Exports become pricier
    • Export volume surges

  7. What is the effect on a UK importer if the pound weakens against the euro?

    • Import costs rise
    • Profits double instantly
    • Suppliers give refunds
    • Import costs fall

  8. How does a weaker domestic currency generally affect an exporter's sales?

    • Sales drop sharply
    • Sales always halt
    • Sales may rise
    • Sales remain static

  9. What is the most likely effect on a business if the base interest rate rises?

    • Increased government grants
    • Lower interest payments
    • Higher interest payments
    • Fixed loan repayments

  10. What is the main reason why governments levy taxes on businesses?

    • To lower inflation
    • To fix exchange rates
    • To fund services
    • To boost exports

  11. How do high interest rates typically affect a business planning to expand?

    • Borrowing becomes free
    • Investment speeds up
    • Investment is delayed
    • Expansion is guaranteed

  12. What happens to the price of UK exports when the pound strengthens?

    • Become cheaper
    • Fluctuate randomly
    • Remain unchanged
    • Become more expensive

  13. What is the main effect on consumers of a government cutting income tax?

    • Production costs rise
    • Interest rates fall
    • Disposable income increases
    • Disposable income decreases

  14. How might a business primarily respond to a rise in corporation tax?

    • Cut investment
    • Abolish dividends
    • Increase wages
    • Reduce selling prices

  15. Why do firms with overseas customers regularly monitor foreign exchange rates?

    • To check weather
    • To pay wages
    • To track prices
    • To source staff

  16. What happens to variable-rate mortgage payments when interest rates rise?

    • They increase
    • They become optional
    • They remain frozen
    • They decrease

  17. What might an importer do when the pound falls against the dollar?

    • Lower prices
    • Stop trading
    • Raise prices
    • Cut staff wages

  18. What is a likely impact of a government increasing VAT on luxury goods?

    • Sales increase
    • Profits double
    • Sales decrease
    • Costs disappear

  19. Which of these is a key benefit of lower interest rates for a business?

    • Increased import tariffs
    • Cheaper borrowing
    • Higher tax returns
    • Greater dividend payouts

  20. How might a business protect profits after a tax rise without cutting staff?

    • Improve efficiency
    • Lower productivity
    • Close factories
    • Reduce output

All Pearson Edexcel Business quizzes