Economic factors EST Revision

What are the adverse effects of high inflation on living standards?

• Increased business expansion and profits

• Decreased competition and unemployment

• Decreased purchasing power and confidence

• Increased investment in plant and equipment

How does inflation affect fixed income earners?

• Increases their income and spending power

• Decreases their income and spending power

• Has no impact on their income and spending power

• Increases their savings and investment opportunities

What happens to variable home loan repayments during high inflation?

• They decrease

• They stay the same

• They increase

• They become unpredictable

What is one of the negative impacts of inflation on businesses?

• Increased competitiveness

• Decreased profits

• Increased consumer confidence

• Decreased interest rates

To keep track of inflation, the government uses the

• gross national product.

• consumer price index.

• real GDP.

• NYSE.

The consumer price index measures 

• the cost of buying a fixed basket of goods and services, and calculating how this cost changes from year to year

• the cost of buying a basket of goods and services, which changes from year to year depending on the price level

• the cost of buying a basket of goods and services, which changes from year to year depending on consumer tastes and preferences

• all of the above, depending on what the CPI is trying to measure

A high rate of inflation is likely to have all of the effects listed below except

• uncertainty for business

• reduced saving

• efficiency losses

• greater export competitiveness

Low interest rates means less people will be willing to take out loans. This will increase spending and could lead to inflation.

• False

• True

The price of borrowed money is the definition of ……..

• Interest rates

• Inflation

• Exchange rates

• Loans

Which economic factor is set by the Reserve Bank of Australia (RBA)?

• Unemployment

• Interest Rates

• Inflation

• Supply of Labour

• Exchange Rates