Economic Factors

Who sets the bank interest rate?

• De la rue.

• The Bank of England

• Bitcoin

• The Queen

What is interest?

• Interest that is calculated on the principal plus the interest that has been charged or paid so far.

• The cost of borrowing someone else's money.

• This means that at least 51% of all of the people who are given the product are charged that interest rate; the other 49% of customers are charged a different rate of interest.

• The increase in prices over time, as measured by how much a typical ‘basket’ of goods costs.

If interest rates go up what is the impact?

• Encourages spending.

• Encourages saving.

What is a fixed interest rate?

• The interest paid on savings after income tax has been taken off.

• The original amount of money put into something or taken as debt.

• The interest paid on savings before income tax has been taken off.

• An interest rate that is set at a particular amount for a particular period of time and does not change for that period.

When interest rates fall, this is bad news for people with:

• credit cards.

• mortgages.

• overdrafts.

• savings.

What is an exchange rate?

• The rate at which goods are exchanged between two countries

• The price of one nation's currency in terms of another's

• How many US dollars you can exchange for RMB at Travelex

• The price of goods in terms of a foreign currency

Tags

CCSS.6.RP.A.3B

How is an exchange rate determined in the money market?

• The forces of supply and demand

• Government/the Federal Reserve Bank

• Whatever sellers of goods are willing to take

• Investors decide the value of the currency they wish to invest

How does inflation rate affect currency value/exchange rate?

• Higher inflation leads to depreciating currency & vice versa

• Increasing inflation leads to more favourable exchange rates

• Higher inflation leads to currency appreciation

• Lower inflation leads to more favourable exchange rate

What is the value of a nations currency in relation to a foreign country?

• Trade Deficit

• Foreign Exchange Market

• Exchange Rate

• Trade Surplus

Which of the following groups suffer from high inflation

• Borrowers
• Lenders
• Taxpayers
• Property Investors