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1.5 - The economic context

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Raw materials such as coal, oil, copper, iron ore, wheat and soya.
Commodity markets
Where buyers and sellers meet to exchange commodities - often these are international, organised markets, for example the London Metal Exchange and the New York Mercantile Exchange.
The amount consumers are willing and able to buy at any given price.
The amount sellers are willing to offer for sale at any given price.
When the demand for a good or service is greater than the supply. When a shortage exists, prices will tend to rise.
When the demand for a good or service is less than the available supply. When a surplus exists, prices will tend to fall.
Goods markets
The market for everyday products such as clothes, food, petrol, going to the cinema, a DVD etc.
Interest rate
The percentage reward or payment over a period of time that is given to savers or paid by borrowers on savings or loans.
Bank of England
The central bank for the UK. Its role is to monitor the banking system and to be a banker to the banks. It is responsible for setting interest rates in the UK.
Variable interest rates
Interest rates that can change over the lifetime of a loan depending on what is happening to other interest rates in the economy.
Fixed interest rates
Interest rates that stay the same over an agreed period of a loan.
Exchange rate
The exchange rate is the price of buying a foreign currency. It tells you how much of the foreign currency you will get for every pound or how many pounds you have to give up to acquire a foreign currency.
An export is the sale of a good or service to a foreign buyer that leads to a flow of money into the UK. The foreign buyer will have to change their currency into pounds to complete the purchase.
An import is the purchase of a good or service from a foreign business that leads to a flow of money out of the UK. The UK buyer will have to change pounds into the seller's currency to make the transaction.
Economic activity
The amount of buying and selling that takes place in a period of time.
The economy
The economic activity carried out by people and businesses in a country.
Economic growth
Rises in the rate of economic activity in an economy. It is measured by calculating the value of sales in an economy over a period of time.
Business cycle
Fluctuations in the level of economic activity over a periodo of time. Most economies experience times when economic activity is rising and others when economic activity is slowing.
A situation when the level of economic growth is negative for two successive quarters.
An individual or group which has an interest in and is affected by the activities of a business; stakeholders have an interest in how the business operates and whether or not it is successful.