Inflation And Intrest Rates

Question 1

Inflation

Answer 1

Inflation is the general increase in prices over time

Question 2

Interest rates

Answer 2

The cost of borrowing money and also a reward for saving money

Question 3

Exchange rates

Answer 3

Exchange rates are the amount of one currency you can exchange for another.

Question 4

The business cycle

Answer 4

a cycle or series of cycles of economic expansion and contraction.

Question 5

Government legislation

Answer 5

a law or set of laws suggested by a government and made official by a parliament

Question 6

Taxation

Answer 6

A means by which governments finance their expenditure by imposing charges on citizens and corporate entities

Question 7

Impact of inflation

Answer 7

It can raise the price of borrowing money (interest rates), mortgages, corporate and government bond yields

Question 8

Interest rates impact on a business

Answer 8

An increase in interest rates can affect a business in two ways: Customers with debts have less income to spend because they are paying more interest to lenders. Sales fall as a result. Firms with overdrafts will have higher costs because they must now pay more interest.