Lesson Plan

• Describe how changes in interest rates affect business financing costs and investment decisions.
• Explain the indirect effects on consumer spending, exchange rates and employment.
• Analyse short‑term versus long‑term implications of interest‑rate movements for business strategy.
• Apply the NPV formula to evaluate a project under different interest‑rate scenarios.

• Projector or interactive whiteboard
• Printed handout of the “effects of interest rates” summary table
• Calculators or spreadsheet software for NPV calculations
• Whiteboard markers and chart paper
• Sample exam‑question cards

Begin with a quick poll: “What would happen to your monthly loan if the Bank of England raised rates today?” Connect this to students’ prior knowledge of borrowing costs. Explain that by the end of the lesson they will be able to identify and evaluate both direct and indirect effects of interest‑rate changes and meet the success criteria listed in the objectives.

1. Do‑now (5’) – Students write a definition of interest rates and list two reasons governments adjust them.
2. Mini‑lecture (10’) – Present direct and indirect effects using the summary table; highlight cost of finance, investment decisions, consumer spending, exchange rates and employment.
3. Group NPV activity (15’) – Using a simple case, calculate NPV for a project at 5% and 8% interest rates; discuss how the change influences the decision to invest.
4. Case‑study discussion (10’) – Analyse a real‑world example of a firm reacting to a rate rise; identify short‑term actions and long‑term strategic adjustments.
5. Exam‑question practice (10’) – Students answer one of the provided past‑paper questions, then peer‑review using a checklist.
6. Recap & exit ticket (5’) – Each student writes one key effect of an interest‑rate increase and one effect of a decrease; submit as exit ticket.

Summarise how interest‑rate movements ripple through costs, investment, consumer behaviour and the wider economy. Collect exit tickets to gauge understanding, and assign homework: complete a short NPV worksheet using a different interest rate and prepare a one‑paragraph response to a potential exam question.