LIBF UNIT 1 Topic 8

Inflation means that:

• the value of our money depreciates over time

• the value of our money increases over time

• the value of our money is maintained over time

Demand–pull inflation is caused by:

• an insufficient supply of goods and services

• increased costs

• inadequate profits

The government's inflation target is around:

• 0%

• 2%

• 5%

• 10%

High inflation:

• reduces nominal income

• reduces real income

• increases real wages

Who out of the following will benefit from a higher Bank Rate?

• Someone with a variable-rate mortgage

• Someone with savings in a fixed-rate account

• Someone with savings in a variable-rate account

The two main types of interest rate offered on bank products are fixed and variable rates.

• true

• false

Compound interest is calculated only on the principal, or however much of the principal is left after making repayments.

• true

• false