Edexcel Economic Influences 2.5

Question 1

Inflation

Answer 1

Percentage rise in average price level in economy

Question 2

Consumer price Index

Answer 2

Typical price of a basket of goods and services

Question 3

Inflation harmful to business

Answer 3

Uncertainty discourages spending and investment
Damage international competitiveness

Question 4

Inflation as a benefit to business

Answer 4

Reduce value of loans and money owed

Question 5

Business cycle

Answer 5

Shows regular changes that occur to GDP in an economy

Question 6

GDP

Answer 6

Total value of all output produced in an economy during a time period

Question 7

Economic growth

Answer 7

Annual % change in real GDP

Question 8

What axis is GDP on?

Answer 8

The Y axis

Question 9

What axis is time on?

Answer 9

The X axis

Question 10

Four stages of business cycle

Answer 10

Boom
Slump
Recession
Recovery

Question 11

Exchange rates

Answer 11

Price of one currency in terms of another

Question 12

Products sold to Uk called

Answer 12

Imports

Question 13

Products sold abroad called

Answer 13

Exports

Question 14

Appreciation of Exchange rates

Answer 14

Harm exporters and help importers

Question 15

Interest rates

Answer 15

cost of borrowing or return from saving money

Question 16

Decrease in interest rates

Answer 16

Increase business profits.
Higher demand for borrowing.
Discourages saving.

Question 17

Increase in interest rates

Answer 17

Decrease business profits.
Lower demand for borrowing.
Encourages saving.

Question 18

Depreciation of exchange rates

Answer 18

Help exporters and harm importers

Question 19

Increase in government spending

Answer 19

Boosts demand
Increases GDP
Reduces unemployment

Question 20

Cuts to taxation

Answer 20

Increase disposable income
Boost business profit

Question 21

What does the government need to do?

Answer 21

Maintain budget
Prevent threat of inflation

Question 22

Uncertainty

Answer 22

Makes it difficult for business to plan ahead
Delay big spending and investment which is negative on economy

Question 23

Main causes of inflation

Answer 23

Demand pull
Cost push

Question 24

Why does cost push happen?

Answer 24

External shocks.
Depreciation of exchange rates.
Acceleration in wages.

Question 24

Why does demand pull happen?

Answer 24

Depreciation of exchange rates. Rising consumer confidence. Faster rate of economic growth.

Question 25

Boom

Answer 25

High levels of consumer spending. Unemployment low. Price and costs rise.

Question 26

Slump

Answer 26

Weak consumer spending. Rise of unemployment. Prices fall.

Question 27

Recession

Answer 27

Lower levels of consumer spending. Lower profits. Rise in unemployment.

Question 28

Recovery

Answer 28

Consumers increase spending. Investments made again. Unemployment takes a while to stop growing.

Question 29

Main changes in a business cycle

Answer 29

Changes in business and consumer confidence, Alternating stocking and destocking. Changes in value of investing.

Question 30

Real income

Answer 30

Amount of disposable income available to a consumer.

Question 31

Strengthen pound

Answer 31

Cheaper for UK to buy. More expensive for country buying.

Question 32

Weaken pound

Answer 32

More expensive for Uk to buy, Cheaper for country buying.