1.5.4 - The economy and businesses

Which of following best describes the term interest rate?

• The price of one currency against another

• The cost of borrowing money or reward for saving money

• The value of goods and services bought by consumers

• The reward for borrowing money or cost of saving money

Which of the following is true in relation to the rate of inflation? Business costs are:

• More likely to increase if the rate of inflation rises

• More likely to stay the same if the rate of inflation rises

• More likely to increase if the rate of inflation falls

• More likely to decrease if the rate of inflation rises

Which of the following businesses is most likely to experience a rise in demand as consumer income falls?

• Travel agent selling specialist holidays

• A producer of high quality chocolate

• A department store selling discounted goods

• A specialist bakery selling luxury products

Which of the following is the most likely impact of rising unemployment levels on a business selling luxury goods?

• Falling sales and rising profit

• Rising sales and falling profit

• Falling sales and falling profit

• Rising sales and rising profit

Which of the following is true of a UK importer of goods from Italy, if the value of the pound becomes weaker against the euro?

• Sales increase and profit increases

• Sales decrease and profit increases

• Sales increase and profit decreases

• Sales decrease and profit decreases

A business has borrowed money from a bank in the form of an overdraft. If interest rates rise, the impact on the business will be:

• Costs increase and profit decreases

• Costs decrease and profit increase

• Costs increase and profit increase

• Costs decrease and profits decrease

If the government increases the rate of corporation tax, companies are likely to:

• Pay more tax and invest more into the business

• Pay more tax and invest less into the business

• Pay less tax and invest more into the business

• Pay less tax and invest less into the business

Which of following best describes the term exchange rate?

• Which of following best describes the term exchange rate?

• The sales made from importing goods and services

• The profit made from exporting goods and services

• The price of one currency against another

Which of the following is most likely to be true if the rate of inflation rises sharply? Businesses are:

• More likely to be able to manage rising costs

• More likely to reduce selling prices

• Less likely to be able to manage rising costs

• Less likely to raise selling prices

When an economy becomes weaker, interest rates are often reduced meaning consumers are more likely to:

• Save more and spend less

• Save less and spend more

• Save more and spend more

• Save less and spend less