The amount of interest payments that the savers will receive on their specific deposits is determined by the interest rates. When the interest rate is high then the saving becomes more attractive and further it promotes savings whereas when the interest rate is lower the savings will be reduced and it will discourage savings to a certain extend. There are many factors which are affecting savings which is why the link between the interest rates and the saving is unclear in the real world scenario. In the situation when the interest rate is lower then the consumer substitute savings for spending, this is called the substitution effect. At this state the consumers notice a fall in the income because they get back lower income payments. The money which the lenders and investors are willing to lend and invest is totally dependent on the interest rate. When the interest rate is falling people will not be willing to borrow more always because if the confidence is low, a fall in the interest rate may not promote more spending.

2

If the overtime premium is increased to pound 7.50 per hour with a simultaneous decrease in 0.5 pound per hour in the basic wage rate the worker would still be in a better position than before with respect to earning potential as an extra hour would lead to pound 2 extra compared to the situation before. Hence, workers would be encouraged to work harder and earn more in the present situation.

There might be competition in the workers to work more and make benefits out of overtime premium. As workers were ready to work for 10 hours per day when they were given just pound 5 in excess of 8. Now, the workers are getting overtime premium same as their rate of salary they would be willing to put in more effort in order to earn maximum and maximise their welfare.

The workers efficiency and productivity can show a sharp increase because of the increase in the rate plan. The willingness to not take leave and work regularly can also flourish the entire company as workers are ready to work extra inordrer to earn extra.

The 0.5 pound decrease in the salary rate may not make much difference because they are getting pound 2 extra compared to pound 5 in excess of 8 which means that they are getting 7.50 pound for every hour excess of 8.

The standard of living of the workers may increase and help the workers to easily fulfill their basic needs along with wellbeing of their family will be taken care.

Therefore, the situation will be better off with the current rate plans of the workers.