interest and inflation rates

Question 1

interest rates

Answer 1

determine cost of borrowing or return of savings

increase in interest rates-increase in cost of borrowing

decrease in interest rates-decrease in costs of borrowing

Question 2

inflation

Answer 2

where the prices of goods and services increase overall in an economy

Question 3

what are the two types of inflation

Answer 3

demand pull inflation-too much demand for economy to supply for as people disposable income has increased
then have to increase their prices to reduce their demand

cost push inflation-rising costs push up prices
e.g wages rise for staff so prices go up

Question 4

what is the rate of inflation

Answer 4

percentage chnage in price of foods and services in one year compared to previous year

Question 5

deflation

Answer 5

overall decrease in prices of goods and services within an economy

not enough demand so businesses reduce their prices

Question 6

what can inflation be tracked on

Answer 6

consumer price index

like going up, shows inflation
like going down, shows deflation

Question 7

index number calculation

Answer 7

average value of basket divided by base value of basket times 100

Question 8

which business does changes in inflation affect most

Answer 8

businesses selling premiums goods as if customers have less money, they then would more likely start to look for cheaper alternative options

premuim priced business could react by reducing prices however risk of lower price can associate to lower quality