2.5.1 Business Studies Inflation

What does CPI stand for in the context of measuring inflation?

• Consumer Price Index

• Comprehensive Price Indicator

• Costly Product Information

• Consumer Payment Index

How does inflation affect the real value of debt in a business?

• Increases the real value

• Converts it into equity

• Decreases the real value

• Does not affect the real value

What does an increase in asset values imply for a business during inflation?

• Increased operational costs

• Increased financial security

• No change in financial status

• Decreased financial security

What is a potential benefit of inflation for a business in terms of debt management?

• Immediate debt repayment

• Erosion of real value of debt

• Higher borrowing limits

• Increased interest rates on loans

What is likely to happen to the costs of raw materials when inflation increases?

• Costs are subsidized

• Costs increase

• Costs decrease

• Costs remain stable

What decision might a business face regarding pricing during inflation?

• Increase prices to maintain margins

• Decrease prices to increase demand

• Keep prices unchanged

• Remove all pricing

If a business decides to pass inflationary pressures onto consumers, what might be a direct result?

• Reduced operational costs

• Stabilized market share

• Increased product demand

• Decreased product demand

What happens to demand when prices are increased and demand is inelastic?

• Demand increases

• Demand decreases slightly

• Demand remains unchanged

• Demand becomes elastic

How might consumers react to inflation in terms of brand preference?

• Shift to more expensive brands

• Do not change their preferences

• Shift to less expensive brands

• Stop purchasing brands

In the context of inflation, what does 'branding down' refer to?

• Investing more in brand marketing

• Consumers opting for cheaper alternatives

• Businesses rebranding their products

• Reducing the number of brands offered