1. What can affect a budget?
Unit 2 Topic 5
Kahoot

2. 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]

3. 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

4. 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

5. 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

6. 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.

7. GCSE IFS Finance – Unit 2 Topic 5
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GCSE IFS Finance – Unit 2 Topic 5