Lesson 2.5.1

2.5.1 Economic influences on business Quiz: Pearson Edexcel Business, Unit 2

20 questions

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Lesson 2.5.1, Economic influences on business: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 2: Managing business activities, written with Revision Ninja.

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The 20 questions

  1. Which UK index is most commonly used to track the rate of inflation?

    • Producer Price Index
    • Consumer Prices Index
    • Gross Domestic Product
    • Retail Prices Index

  2. What does an appreciation of a country's currency mean?

    • Value rises
    • Inflation drops
    • Value falls
    • Interest rises

  3. How is a depreciation of the pound best described?

    • Imports cheaper
    • Value rises
    • Value falls
    • Deflation occurs

  4. Which phase of the business cycle is characterised by falling output and rising unemployment?

    • Recovery
    • Peak inflation
    • Boom
    • Recession

  5. What is the most likely effect of a rise in interest rates on a business?

    • Lower loan costs
    • Higher dividends
    • Higher loan costs
    • Increased borrowing

  6. What is the primary effect of an increase in corporation tax on a firm?

    • Lower VAT
    • Increased wages
    • Higher turnover
    • Lower profit

  7. What action is economic uncertainty most likely to prompt a firm to take?

    • Increase borrowing
    • Delay investment
    • Lower prices
    • Expand rapidly

  8. Prices rise from an index of 110 to 115.5 over a year. What is the annual rate of inflation?

    • 3%
    • 5.5%
    • 5%
    • 15.5%

  9. A UK firm sells a product for 200 pounds. At an exchange rate of 1 pound = 1.25 dollars, what is the dollar price for an overseas buyer?

    • 300 dollars
    • 160 dollars
    • 250 dollars
    • 200 dollars

  10. Using the previous exchange rate, the pound appreciates to 1 pound = 1.50 dollars. What is the dollar price of the same 200 pound product now?

    • 300 dollars
    • 266.67 dollars
    • 250 dollars
    • 333.33 dollars

  11. What happens to a heavily indebted firm with variable rates when interest rates rise?

    • Squeezed cash flow
    • Increased profit
    • Higher liquidity
    • Lower expenses

  12. What is the short-term effect on a construction firm when government infrastructure spending increases?

    • Lower demand
    • Fewer tenders
    • Higher taxes
    • More contracts

  13. Which type of firm suffers most from a rise in inflation?

    • Cash-rich firms
    • Sole traders
    • Fixed-price contracts
    • Flexible pricing

  14. How does a stronger pound affect UK importers?

    • Lower revenue
    • Higher exports
    • Dearer imports
    • Cheaper imports

  15. A firm's sales fall during a downturn in the business cycle, but its costs stay high. Which term best describes this effect on its profit?

    • Operational gearing
    • Price discrimination
    • Negative externality
    • Fiscal drag

  16. Which tax change is most likely to reduce consumer spending on a firm's goods?

    • Cut income tax
    • Raise VAT
    • Lower VAT
    • Cut corporation tax

  17. Which economic factor causes a firm's board to delay a major expansion due to unclear forecasts?

    • Deflation
    • Economic growth
    • High inflation
    • Economic uncertainty

  18. Which type of firm is most likely to benefit from higher interest rates?

    • Heavy borrower
    • Start-up firm
    • Indebted retailer
    • Cash-rich firm

  19. Which business sector experiences the most sensitive demand to falls in incomes during a recession?

    • Basic foods
    • Utility providers
    • Luxury goods
    • Discount stores

  20. Which exchange rate movement most directly raises fuel costs for a UK airline buying in dollars?

    • Appreciation of pound
    • Stronger sterling
    • Depreciation of pound
    • Fixed exchange rate

All Pearson Edexcel Business quizzes