Economic Influences

Question 1

What is inflation?

Answer 1

Percentage rate at which average prices rise during a year within the whole UK economy

Question 2

How does inflation affect a business? (Negatively)

Answer 2

• if prices are rising, the costs paid by a business for raw materials, property and labour will be rising

Question 3

How does inflation affect a business positively?

Answer 3

If consumers are used to prices rising, firms may be able to increase their selling prices in order to protect profit margins

Question 4

Circumstances in which inflation has a major effect are:

Answer 4

• when rates of inflation are significantly above 2%
• when prices are rising faster than average earning
• when UK inflation is higher than that in most other countries

Question 5

What are exchange rates?

Answer 5

The value of one currency expressed in terms of another

Question 6

What does spiced stand for?

Answer 6

Strong
Pound 
Imports 
Cheaper 
Exporters 
Dearer

Question 7

Appreciation of £

Answer 7

An increase in the value of £ compared to other currency

Question 8

Depreciation of £

Answer 8

A decrease in the value of the £ compared to other currency

Question 9

What does widec stand for?

Answer 9

Weak pound 
Imports 
Dearer 
Exports 
Cheaper

Question 10

How does the £ appreciating impact exports and imports?

Answer 10

Exports: UK exports get pricier, so sales volumes slip

Imports: Imports to UK get cheaper, making it harder for UK firms to compete

Question 11

How does the £ depreciating impact exports and imports?

Answer 11

Exports: UK exports get cheaper, so sales volumes rise

Imports: imports to UK get more expensive, so UK firms can compete more effectively