What can affect a budget? Unit 2 Topic 5 #valleyifs @ Kahoot

What can affect a budget? No. Question A B C Ans 1 The official rate of inflation in the UK is called the: Consumer Prices Index Retail Price Index House Price Index 2 Currently, wages tend to increase at: a rate below inflation a rate above inflation the same rate as inflation 3 If the Monetary Policy Committee believes that inflation is too low then it will: keep interest rates unchanged lower interest rates raise interest rates 4 If the pound ‘falls’ against the euro, it means the tourists will be more likely to visit the UK True False 5 Which of the following will benefit from a weak pound? British tourists visiting overseas countries UK firms selling goods abroad British firms buying overseas goods 6 Define inflation. [1] 7 Explain what a CPI does. [3] 8 What is the UK’s inflation target? [1] 9 If the interest rate is 4.5% and inflation is 2.5%, the real rate of return is: [2] 10 Describe how the exchange rates are set. [2]

Answers No. Question A B C 1 The official rate of inflation in the UK is called the: Consumer Prices Index Retail Price Index House Price Index 2 Currently, wages tend to increase at: a rate below inflation a rate above inflation the same rate as inflation 3 If the Monetary Policy Committee believes that inflation is too low then it will: keep interest rates unchanged lower interest rates raise interest rates 4 If the pound ‘falls’ against the euro, it means the tourists will be more likely to visit the UK True False 5 Which of the following will benefit from a weak pound? British tourists visiting overseas countries UK firms selling goods abroad British firms buying overseas goods 6 Define inflation. [1] Marks awarded for the definition below ‘Inflation’ is the term used for general increases in the price of goods and services over time. [1] 7 Explain what a CPI does. [3] Marks awarded for the points stated below or valid alternatives CPI is how the government works out the official rate of inflation in the UK [1] The CPI starts by assessing the price of a wide range of items, commonly termed a ‘basket of goods’. [1] It then works out the increase in the price of the basket each month. From that, it can work out the average percentage increase over a month or a year. [1] 8 What is the UK’s inflation target? [1] 2% [1] 9 If the interest rate is 4.5% and inflation is 2.5%, the real rate of return is: [2] Marks awarded as stated below 4.5% – 2.5% [1] = 2% [1] 10 Describe how the exchange rates are set. [2] Exchange rates are set in the foreign exchange market, which is a global system for central banks, banks, large financial organisations and large investors to trade currencies. [1] They set the interbank exchange rate [1] Answers

Task Go to the IFS website and take a look at the topic test for topic 5 to further revision the main points. Make revision materials. 10 minutes

Key Terms for Topic 5 CLICK FOR TIMER Bank Rate Bureau de Change Central Bank Currency Deflation Foreign Exchange Market Monetary Policy Committee Real Rate of Return On your whiteboards or books, write down a definitions for these key terms. EXT: Can you give examples of each? 5 minutes CLICK FOR TIMER

Answers Monetary Policy Committee (MPC) – part of the Bank of England that is responsible for controlling UK inflation and setting interest rates. Currency – the money used in each country. For example, the UK currency is the pound and the US currency is the US dollar. Bank rate (or base rate) – the interest rate set by the Monetary Policy Committee (MPC) for the Bank of England to lend to UK banks. Bureau de change – a currency exchange business, where people go to exchange one currency for another. Deflation – prices fall over time Real rate of return – the savings interest rate minus inflation. Central bank – the institution responsible for managing a country’s currency, interest rates and the supply of money in circulation. Foreign exchange market – a global system for central banks, banks, large financial organisations and large investors to exchange currencies.

GCSE IFS Finance – Unit 2 Topic 5 Search for #valleyifs GCSE IFS Finance – Unit 2 Topic 5