2.5.1 - Economic Influences Flashcards
1
Q
What is inflation?
A
Sustained increase in the general level of prices
2
Q
How is inflation measured?
A
Cost of a typical basket of goods is measured and they calculate the difference in price from one year to another
3
Q
Effects of inflation of businesses
A
- Increased costs of supplies
- Cut back on investment
- Less exports
- Consumer changing habits
4
Q
What are interest rates?
A
An interest rate is the cost of
borrowing money or the reward for saving
5
Q
What does an increase in interest rates for consumers mean?
A
- Increase in loan costs
- Borrow less as more expensive
6
Q
Increase in interest rates for businesses means
A
- Reduced production
- Reduced investment
