Theme 2 key terms (External Influences)

Question 1

inflation

Answer 1

% change in price level over a time period

Question 2

exchange rate

Answer 2

rate at which one currency can be swapped for another

Question 3

appreciation of a currency

Answer 3

rate at which 1 currency can be swapped for another increases
currency has strengthened

Question 4

depreciation of a currency

Answer 4

rate at which 1 currency can be swapped for another decreases
currency has weakened

Question 5

interest rate

Answer 5

cost of borrowing

reward for saving

Question 6

business cycle

Answer 6

pattern of economic growth

followed by a boom, recession, recovery and back to growth an economy follows

Question 7

boom

Answer 7

economic growth is high
employment is high
inflation may also be high

Question 8

recession

Answer 8

economy growth is negative
unemployment high
inflation usually low

Question 9

recovery

Answer 9

period immediately after a recession

positive growth but slow

Question 10

unemployment

Answer 10

workers is willing and able to work

cant find a job

Question 11

income elasticity of demand

Answer 11

measures sensitivity of demand to change in income

-ve income elasticity = income rise = demand falls

+ve income elasticity = income rise = demand rise