Topic 9: Budgets and forecasts

Question 1

Aspirations

Answer 1

Things or experiences that people would like to have in the future, for example owning a home instead of renting, having a luxury holiday or buying a sports car.

Question 2

ATM

Answer 2

Automated teller machine, also known as a cash machine

Question 3

Balance

Answer 3

Income minus expenses

Question 4

Budget

Answer 4

A plan of expected incomings and outgoings over a set time period such as a month. The Budget is also the term given to the
government’s spending plan, which the Chancellor sets out in the House of Commons.

Question 5

Budget balance

Answer 5

Total income minus total expenditure: a person’s net financial situation.

Question 6

Budget deficit

Answer 6

A situation in which outgoings exceed income.

Question 7

Budget surplus

Answer 7

A sum of money available once all the essential expenditure in a given period, e.g., a month, has been made.

Question 8

Cash flow forcast

Answer 8

A plan of expected incomings and outgoings over several time periods, such as the next three months.

Question 9

Chancellor of the Exchequer

Answer 9

The British Cabinet minister responsible for financial and economic matters and in charge of the Treasury

Question 10

Consumers Prices Index (CPI)

Answer 10

One of the means the government uses to measure inflation. It is calculated by checking the price of a representative sample of
goods on a monthly basis – this enables statisticians to measure how much prices are rising or falling.

Question 11

Credit history

Answer 11

A record of money borrowed and repaid by an individual. These records are held by credit reference agencies and providers will
check the individual’s credit history when a prospective customer applies for a borrowing product

Question 12

Current account

Answer 12

Bank or building society accounts where people can store their money in the form of electronic balances and withdraw it to make payments

Question 13

Discretionary expenditure

Answer 13

Voluntary spending on products and services that people want now, and savings towards items they aspire to buy in the future

Question 14

Dividend

Answer 14

A payment of profits from a company to its shareholders, often at twice-yearly intervals, either as cash or (depending on the
plan) as further shares or reacquisition of shares.

Question 15

Duty

Answer 15

The tax paid on certain items, including fuel, cigarettes and alcohol.

Question 16

Essential expenditure

Answer 16

Spending on items required to live, eg rent or mortgage repayments, food and drink, water supplier, gas and electricit

Question 17

Income

Answer 17

Earnings, savings and interest payments received within a certain time frame

Question 18

Income tax

Answer 18

Tax paid on earnings from employment, self-employment and interest on savings

Question 19

Inflation

Answer 19

A rise in prices, which means that the purchasing power of
money falls

Question 20

Inflation

Answer 20

A rise in prices, which means that the purchasing power of money falls

Question 21

Insurance

Answer 21

Products that give financial protection against certain events. For example, someone who has travel insurance might be able to
claim back the cost of a holiday if they have to cancel through illness.

Question 22

Investments

Answer 22

Money paid into financial products; the aim is that the value of the product will grow over time and so the person will eventually
receive back more money than they paid in. Investments are a way of saving over the medium or long term

Question 23

Mandatory expenditure

Answer 23

Compulsory outgoings; they do not necessarily apply to everyone but if they do apply, they must be paid.

Question 24

Mortgage

Answer 24

A loan taken out to pay for a property, usually over a long term such as 25 years.

Question 25

National Insurance contributions

Answer 25

Money deducted from the pay of people who are employed or self-employed and used by the government to fund state pensions and other benefits.

Question 26

Needs

Answer 26

Things that people need to survive, such as food, basic clothing and a place to live.

Question 27

Office for National Statistics

Answer 27

The independent organisation that produces statistics on many aspects of life in the UK such as employment, health, how long
people live for in different areas of the country, housing, etc.

Question 28

Pension

Answer 28

An income that people receive after retiring from work. In the UK people receive a pension from the state; some people also
receive pension payments from schemes run by their former employers or arrangements that they have made for themselves.

Question 29

Premium Bond

Answer 29

A lottery bond, issued by NS&I, entered into a monthly prize draw with tax-free prizes or ‘premiums’. Bonds must be held for
a full calendar month after the month in which they were purchased, and retain an equal chance of winning until cashed
in.

Question 30

Real terms

Answer 30

A value adjusted to account for changes in prices. For example, although someone may receive a nominal pay increase of 5%, if
inflation (ie rise in general prices) is 3% then in real terms the pay increase is approximately 5% – 3% = 2%

Question 31

Retail Prices Index

Answer 31

One of the ways the government measures inflation. It is calculated by checking the price of a representative sample of
goods on a monthly basis but unlike CPI (see above), it also takes into account mortgage interest payments and other costs
associated with home ownership.

Question 32

Self-employment

Answer 32

Earning an income by selling your goods or services directly to a consumer, rather than being employed by somebody else and
being paid a wage or salary.

Question 33

Transaction

Answer 33

Buying or selling something.

Question 34

Utility

Answer 34

An essential public service, such as electricity, gas, water and sewerage.

Question 35

Wants

Answer 35

Things that people would like to have but can survive without,
such as entertainment, fashionable clothes, etc.