THEME 2 :SECTION 5 (EXTERNAL INFLUENCE)

Question 1

Define inflation

Answer 1

An overall increase in the price of good in an economy

Question 2

Define the term CPI and why it is important

Answer 2

CPI picks out hundreds of the most brought goods/services by UK households and tracks a ‘basket’ of items to see If they’re changing in price. They will measure the basket as a whole and measure how it has changed compared to the last measurement.
-The CPI gives the government, businesses, and citizens an idea about price changes in the economy and can act as a guide in order to make informed decisions about the economy.

Question 3

What are exchange rates

Answer 3

• The value of one currency compared to another currency

Question 4

What effects does appreciation have on a business?

Answer 4

Strong
Pound
Imports 
Cheap
Exports
Dear

Question 5

What effects does depreciation have on a business?

Answer 5

Weak
Pound
Imports
Dear
Exports
Cheap

Question 6

Define the term interest rates

Answer 6

The costs of borrowing or return on savings.

Question 7

What are the three main types of government spending?

Answer 7

• Welfare (benefits etc.)
• Public services (NHS)
• State investment

Question 8

What is the three main types of taxation?

Answer 8

• personal
• business
• spending

Question 9

What are the aspects of the business cycle and what do they mean?

Answer 9

• BOOM = Production reaches maximum capacity but there are shortages and price increases
• RECESSION = Income starts to go down and demand goes down
• SLUMP =Factories close/ redundancies
• RECOVERY = An upswing period, production increases, employment increases. Will lead to a boom.

Question 10

What are the 3 main types of competition a market might face?

Answer 10

• perfect
• oligopoly
• monopoly

Question 11

What is the market size?

Answer 11

The number of buyers and sellers within a market

Question 12

How do you convert between currencies?

Answer 12

• To convert from a double unit to a single, you will divide by the exchange rate
• To convert from a single unit currency to a double, you will multiply by the exchange rate.

Question 13

What laws and legislation could have an effect on a business?

Answer 13

• consumer protection
• employee protection
• environmental protection
• competition policies
• environmental legislation
• health and safety policies