econ mcq

• standard of living


  Reflects productivity and growth.
• collective bargaining


  A process by which unions establish higher wages and better working conditions.
• freedom


  Special quality of a competitive economic system.
• Capital


  Economic system characterised by private ownership of capital goods.
• Communism


  Economy where the government has central control.
• production


  Making goods and providing services for human consumption.
• Profits


  Amount left over after the costs of running the business have been paid.
• free enterprise


  Economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference
• regulation


  Rules enforceable by law.
• tax


  Money that is collected from businesses and individuals to fund a government's budget.
• competition


  Rivalry among sellers for the customer's money.
• Consumer


  Someone who uses goods and services.
• Economics


  Study of production, distribution and consumption.
• GDP


  Value of all goods and services produced in the country within a year.
• consumption


  The use of goods/services for the production of capital goods or for the satisfaction of

  personal needs and wants.
• Bank of England founded


  July 1694
• nickname for the bank of england

  The Old Lady of Threadneedle Street
• what are the main function and roles of the bank of England


  - Maintaining monetary stability

  - Overseeing financial stability of the UK financial system

  - Acting as the lender of last resort

  - Being the custodian of the official gold reserves in the United Kingdom

  - Ensuring secure banknotes, stable prices, a safe banking sector, and a resilient financial system
• The present governor of the Bank of England.

  andrew bailey
• What happened to the Bank of England in 1997?


  Made independent

  In 1997, the Bank of England was made independent by the new Labour government, transferring its authority over United Kingdom monetary policy to the bank
• The number of gold bars currently held in the vaults at the Bank of England.


  The Bank of England currently holds around 400,000 bars of gold, with a total value over £100 billion123. This amounts to approximately 8,675 tonnes of gold
• exchange rate


  The measure of how much one currency is worth in relation to another.
• exchange rate between the pound and euro


  1 pound is 1.19 euros
• exchange rate between the pound and dollar


  1 pound is 1.31 usd
• The current government target for inflation


  2%
• How inflation is measured in the UK


  In the UK, inflation is measured by the ONS, which produces three main estimates of inflation: the CPI; the Consumer Price Index Including Housing Costs (CPIH); and the Retail Price Index (RPI)1. The official method of measuring inflation is the CPI, which measures the annual % change in price level
• What has been put into this year's basket of goods and what has been taken out

  In 2024, 16 items have been added to the basket for the Consumer Prices Index including owner occupiers' housing costs (CPIH) and 15 items have been removed out of a total of 744 items.

  The same changes have been made to the Consumer Prices Index (CPI) and Retail Prices Index (RPI) baskets.

  Additions include air fryers, vinyl music, gluten free bread, and edible sunflower seeds.

  Removals include hand hygiene gel, hot rotisserie cooked chicken, and bakeware.
• The difference between CPI and RPI


  - CPI and RPI both aim to measure the cost of living and how it is increasing over time. The key differences between the two is the goods and services that are included in their shopping baskets, the representative population they cover, and how they are calculated.

  - RPI uses an arithmetic mean based on adding up all the values and dividing them by the number of values. This is the most commonly used type of mean.

  - CPI is more complicated and uses a geometric mean which multiplies and finds the root of values. It's considered the more statistically accurate of the two measures. Fancy stuff.
• Reasons for inflation


  demand side factors and supply side factors
• Reasons why it is important for inflation to remain stable


  - Predictability: A clear inflation target provides an idea of how much prices are likely to change.

  - Safety margin: Stable inflation helps guard against the risks of deflation.

  - Transparency: It makes it easier for consumers and companies to recognize price changes.

  - Economic stability: Low and stable inflation avoids economic cycles and encourages investment.

  - Resource efficiency: People save and invest with confidence when the value of money is stable.
• How the Bank of England can control inflation


  The Bank of England controls inflation by increasing the UK's official interest rate. The Monetary Policy Committee of the Bank of England meets every month to decide whether the interest rate should be changed. They have an inflation target of CPI - 2%+/-1, which means they try to keep inflation close to 2% (between 1% and 3%)
• current interest base rate


  5%
• Reasons why it is important for inflation to not be too low or even negative (deflation)


  - Economic activity: When prices are falling (deflation), consumers delay making purchases, leading to less economic activity and lower growth.

  - Safety margin: A moderate level of inflation provides a safety margin against the risks of deflation.

  - Economic problems: Low inflation may signal economic weakness, affecting consumer spending and business investments.

  - Deflationary spiral: Deflation can lead to a cycle of reduced spending, lower prices, and economic stagnation.