Inflation

Question 1

Define inflation

Answer 1

The sustained increase in the general price of goods and services in an economy over a period of time

Question 2

When was inflation at an all time high?

Answer 2

1970s - 25%

Question 3

How do you work out inflation?

Answer 3

Difference/ original x 100

Question 4

What does CPI stand for?

Answer 4

Customer price index

Question 5

What is the CPI?

Answer 5

The main measure of inflation which takes into account over 700 regularly changing popular products to get an average UK shopping basket

Question 6

What are the effects of inflation on customers? State 2

Answer 6

The cost of living increases because the prices of goods and services increase AND higher borrowing costs and risk of wage inflation

Question 7

State 2 positive effects on business as a result of inflation

Answer 7

Average cost of product rises so more revenue for the business. AND debt as a source of finance because cheaper in real terms

Question 8

What are the negative effects of inflation on a business? State 2

Answer 8

Disruption of business plans AND interest rates and costs increase

Question 9

What are the negative effects of inflation on currency exchange rate? STATE 2

Answer 9

The pound will be worth less (less demand) AND rising prices of goods and services make it less competitive