An upward movement of the Australian Dollar (or any currency) against another currency
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Define Depreciation
a downward movement of the Australian dollar (or any currency) against another currency
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What is the CPI
Consumer price index. This is Australia's main measure of Inflation.
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What is foreign exchange rate
the ratio of one currency to another
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What is inflation
a general rise in prices causing money to lose it's value
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Define Depression
a severe contraction in the level of economic activity resulting in many business failures, high and sustained levels of unemployment and sometimes falling prices
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What is a Recession
a relatively mild contraction in the level of economic activity resulting in reduced spending, rising unemployment and a slow rate of economic growth
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What is interest
The annual cost of borrowing credit or the annual return on invested savings the price of money
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What is a variable interest rate
A interest rate that can increase or fall. This can be changed by the reserve Bank of Australia.
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What is a fixed interest rate
A fixed interest rate stays the same through the loan period and isn't effected by rising or falling interest rates
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Who profits when interest rates increase
People with savings, Banks and people with superannuations
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Who loses when interest rates increase
People with variable interest loans, Banks, People looking for loans
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Who profits when interest rates decrease
People with variable interest loans, People looking for loans or mortgages
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What are some effects of falling interest rates
Saving is less attractive and people are more inclined to borrow
Inflation is measured by the CPI. it measures the prices of a wide range of goods and services considered to represent the normal spending patterns of an average household
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What are some effects of Inflation
Wage rates: real income decreases if workers main incomes don't keep up with rising prices. Fixed incomes: people of fixed incomes find their income increases slowly.
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What are some effects of Inflation
Business profits: Inflation creates uncertainty. Some business may sell less while others may sell more as people don't know whether to spend or save
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How are Savers and Investors effected by inflation.
Inflation makes it difficult to maintain financial security. Money in savings accounts, superannuation funds and managed funds may decrease in value
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What is the effect of appreciation
.each unit of foreign currency buys fewer Australian dollars. The result is that our exports become more expensive and the price of imports falls. So Aussie consumers are better off
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What is the effect of depreciation
lowers the value of the Australian dollar in terms of foreign currencies. This means that each unit of foreign currency buys more Australian dollars. This makes our exports cheaper on international markets but prices for imports will rise. Imported g
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Balance of Trade
It is usually better for our economy when export sales are greater than the amount of imports purchased. If imports are greater than exports, this creates a negative balance of trade, which can lead to foreign debt
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Other cards in this set
Card 2
Front
Define Depreciation
Back
a downward movement of the Australian dollar (or any currency) against another currency
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