Economics B 1.2.5

What happens to the demand for firms' goods when interest rates fall?

• The demand decreases because consumers prefer to save their money.

• The demand increases because consumers are more likely to spend than save.

• The demand remains the same as consumers are indifferent to interest rates.

• The demand fluctuates unpredictably.

What is the opportunity cost in the context of investing when interest rates go up?

• The cost of borrowing decreases.

• The cost of borrowing increases and firms are less likely to invest.

• The benefit from saving falls and firms are more likely to invest.

• The return a firm gets from investing leads to immediate profits.

What does it mean when a currency appreciates?

• It loses value and can buy less of another currency.

• It gains value and can buy more of another currency.

• It remains the same in terms of purchasing power.

• It is no longer valid in the foreign exchange market.

What happens to the value of the $ when the £ appreciates?

• The value of the $ increases.

• The value of the $ decreases.

• The value of the $ remains unchanged.

• The value of the $ fluctuates without a clear pattern.

According to the graph, what happens when the demand for £ increases from Dₑ1 to Dₑ2?

• The price of £ in $ decreases.

• The price of £ in $ remains the same.

• The price of £ in $ increases.

• The quantity of £ available decreases.

Based on the graph, what is the result of selling $ for £?

• The supply of $ increases for Sₓ1, and the price of $ in £ decreases by Pₐ.

• The supply of $ decreases, and the price of $ in £ increases.

• The demand for $ increases, and the price of $ in £ remains constant.

• The supply of $ remains constant, and the price of $ in £ increases.

What does "ceteris paribus" mean in economics?

• With all else remaining constant

• With all factors being variable

• With all resources being unlimited

• With all markets being efficient

If the UK currency appreciates, what is the likely impact on UK exports?

• The demand for UK exports will rise

• The demand for UK exports will fall

• UK exports will become cheaper

• UK businesses will gain international competitiveness

What is the effect of a currency depreciation on the costs of importing companies?

• It increases the costs of the products they are purchasing

• It decreases the costs of the products they are purchasing

• It has no effect on the costs of the products they are purchasing

• It eliminates the costs of the products they are purchasing

Which of the following is an example of an indirect tax?

• Income tax

• Value Added Tax (VAT)

• Poll tax

• Corporate tax