Inflation

Question 1

Impact of Inflation - Losers

Answer 1

Uncertainty for investors and savers

Real value of wages + pensions eroded

Reduce international competitiveness

Question 2

Impact of Inflation - Winners

Answer 2

Borrowers as real value of debt eroded

Governments as real value of debt eroded

rising values of assets such as property - people feel more wealthy

Question 3

Regulation of Credit Control

Answer 3

Bank of England - regulates interest rates

Banks : Capital ratios

CR = level of reserves expect each bank to keep at BOE

Higher Capital Ratios = less bank can lend out

Question 4

Deflation

Answer 4

General fall in prices

encourages Reduced consumer spending

Real cost of debt increases - Borrowers bad