Economic Climate MCQs

What is inflation?

• A decrease in the general price level of goods and services

• An increase in the general price level of goods and services

• The total value of goods and services produced in a country

• A rise in employment levels

How can high inflation affect businesses?

• It reduces the cost of raw materials

• It increases consumer purchasing power

• It can lead to higher wage demands from employees

• It makes borrowing money cheaper

What is the base interest rate set by the Bank of England called?

• Exchange rate

• Inflation rate

• GDP rate

• Bank rate

How do rising interest rates typically affect consumer spending?

• Consumers borrow more and spend more

• Consumers save less and spend more

• Consumers borrow less and spend less

• Consumers are unaffected by interest rates

What is the main measure of economic growth?

• Consumer Price Index (CPI)

• Gross Domestic Product (GDP)

• Exchange rate

• Unemployment rate

If the UK economy is experiencing a period of high economic growth, what is most likely to happen?

• Unemployment will rise

• Consumer demand for goods and services will increase

• Interest rates will automatically decrease

• Businesses will see a fall in sales

How does a decrease in interest rates affect businesses?

• It increases the cost of borrowing for businesses

• It makes saving more attractive than spending

• It encourages businesses to invest and expand

• It leads to lower demand for products and services

What happens when the value of the pound (£) strengthens against other currencies?

• UK exports become cheaper for foreign buyers

• UK imports become more expensive

• UK exports become more expensive for foreign buyers

• There is no effect on international trade

What is a likely effect of high unemployment on businesses?

• Increased consumer spending

• Higher demand for luxury goods

• Lower wage expectations from job seekers

• Difficulty in recruiting staff

What is the term for an extended period of negative economic growth?

• Inflation

• Recession

• Boom

• Deflation