1. Inflation and Interest Rates
Topic 8

2. Inflation and Interest Rates
If interest rates are high who are the winners in society? Borrowers or Savers
Low interest rates help? Mortgage buyers, savers
What is inflation? A rise in interest rates, a rise in prices, a fall in the exchange rate
Inflation will make pensioners on a fixed income? Better off, worse off
If you have a house on mortgage which is perfect for them? Low interest rates & high inflation, high interest rates & low inflation, low inflation & low interest rates, high interest rates & high inflation
If inflation is 4% and a product costs £500, how much is it likely to cost at the end of the year? £504, £520, £540, £2,000
As inflation increases our money? Appreciates, depreciates, not affected
Will inflation? Encourage you to spend more & save less or spend less & save more
What is a real wage? Gross wage – inflation or Gross wage – tax & stoppages
If your wage is £200 per week and inflation is 3%, you get a pay rise of 1%, what is your real wage increase? -2%, +2%, +4%
The percentage increase in a typical basket of goods is how inflation is calculated, it is known as? MFI, INF, CPI, UKI
The Consumer Price Index is monitored by? Office for National Statistic (ONS), Treasury, Bank of England
The government’s inflation target is? 0%, 1%, 2%, 5%
Demand Pull inflation is when prices rise? As demand for goods exceeds supply, Businesses put up prices to cover costs
Cost push inflation occurs when prices rise? As demand for goods exceeds supply, Businesses put up prices to cover costs
When inflation rises rapidly it is known as? Rapid inflation, gross-inflation, sustained inflation, hyperinflation
Which two of the following go up at the same level as inflation? Wages, salaries, state benefits, state pension
What does the government use to control inflation? Interest rates, government spending, exchange rate
Interest rates are set by the? the Monetary Policy Committee (MPC), Treasury
An increase in interest rates? Will increase saving, reduce consumption & slow down the economy or boost the economy
Increasing the interest rate will? Increase the value of the pound or decrease the value of the pound

3. interest rates are quoted using different measures:
an annual equivalent rate (AER) for savings
an annual percentage rate (APR) for mortgages, credit cards and loans
an equivalent annual rate (EAR) for overdrafts

6. Inflation and Interest Rates
If interest rates are high who are the winners in society? Borrowers or Savers
Low interest rates help? Mortgage buyers, savers
What is inflation? A rise in interest rates, a rise in prices, a fall in the exchange rate
Inflation will make pensioners on a fixed income? Better off, worse off
If you have a house on mortgage which is perfect for them? Low interest rates & high inflation, high interest rates & low inflation, low inflation & low interest rates, high interest rates & high inflation
If inflation is 4% and a product costs £500, how much is it likely to cost at the end of the year? £504, £520, £540, £2,000
As inflation increases our money? Appreciates, depreciates, not affected
Will inflation? Encourage you to spend more & save less or spend less & save more
What is a real wage? Gross wage – inflation or Gross wage – tax & stoppages
If your wage is £200 per week and inflation is 3%, you get a pay rise of 1%, what is your real wage increase? -2%, +2%, +4%
The percentage increase in a typical basket of goods is how inflation is calculated, it is known as? MFI, INF, CPI, UKI
The Consumer Price Index is monitored by? Office for National Statistic (ONS), Treasury, Bank of England
The government’s inflation target is? 0%, 1%, 2%, 5%
Demand Pull inflation is when prices rise? As demand for goods exceeds supply, Businesses put up prices to cover costs
Cost push inflation occurs when prices rise? As demand for goods exceeds supply, Businesses put up prices to cover costs
When inflation rises rapidly it is known as? Rapid inflation, gross-inflation, sustained inflation, hyperinflation
Which two of the following go up at the same level as inflation? Wages, salaries, state benefits, state pension
What does the government use to control inflation? Interest rates, government spending, exchange rate
Interest rates are set by the? the Monetary Policy Committee (MPC), Treasury
An increase in interest rates? Will increase saving, reduce consumption & slow down the economy or boost the economy
Increasing the interest rate will? Increase the value of the pound or decrease the value of the pound