2.5.1 Economic Influences

What is inflation?

• A global shortage of a specific good or service

• The process of printing more money (Quantitative Easing)

• The sustained increase in the general price level of goods and services in an economy over time

• The term to describe increasing taxation

What is the target rate of inflation for the majority of economies?

• 0%

• 2%

• 5%

• 11%

What events can reduce the level of inflation?

• Economic slowdown (recession)

• Tax cuts

• Quantitative Easing (printing more money)

• Increase in interest rates

What does CPI stand for?

• Consumer Price Index

• Cost of Products Index

• Currency Price Index

• Corporate Profit Indicator

Which of the following best describes interest rates?

• A way to measure inflation

• A measure of economic growth

• The cost to exchange one currency to another

• The price of borrowing or saving money

Who are typically responsible for setting the base rate of inflation in an economy?

• The Central Bank

• The Government

• The General Public

• Nobody

Which of these typically follows a Boom in the Business Cycle?

• Growth

• Downturn

• Recession

• Upswing

Which of the following best describes exchange rates?

• A rise in the value of a currency

• The amount spent by the government in its provision of public services

• A common measure of national income, output or employment

• The price of one currency in terms of another

When a currency appreciates (goes up in value compared to another), which 2 things typically happen?

• Imports become cheaper

• Imports become more expensive

• Demand for exports increases

• Demand for exports decreases

If I am a business that mostly exports to North America and the dollar ($) greatly increases in value against the pound (£), what should the impact be on my business?

• Decrease in sales

• Increase in sales

• No impact will be felt