Edexcel GCSE Business Studies: The Economic Context Quiz
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Which statement is true?
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When prices are low, demand is relatively high
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When demand is high, supply is low
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When supply is high, prices are high
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When prices are low, supply is high
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This Edexcel GCSE Business Studies quiz focuses on the economic context, assessing understanding of market dynamics, effects of interest rates, and commodity identification. It sharpens economic decision-making skills relevant for students.
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- 2.
Which of the following is NOT a commodity?
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Gold
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Wool
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Coffee
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Money
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Nike trainers
Correct Answer
A. Nike trainersExplanation
Nike trainers are not considered a commodity because they are a branded product that is not standardized or interchangeable. Commodities are typically raw materials or basic goods that are traded on exchanges and are uniform in quality and value. Gold, wool, coffee, and money are all examples of commodities as they can be traded and their value is determined by market forces.Rate this question:
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- 3.
If the price of petrol rises, which statement best describes the effect on a small delivery firm:
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The firm will go bankrupt
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The firm's prices will fall
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The firm's costs rise and so might prices
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The firm's costs rise, but prices will not
Correct Answer
A. The firm's costs rise and so might pricesExplanation
If the price of petrol rises, it will directly impact the small delivery firm as their costs will increase. As petrol is a major expense for delivery firms, the rise in its price will lead to higher costs for the firm. In order to cover these increased costs, the firm might consider increasing their prices. Therefore, the statement "The firm's costs rise and so might prices" best describes the effect on the small delivery firm.Rate this question:
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- 4.
The price of chocolate falls. Which statement best describes a likely reason why this has happened -
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Demand for chocolate has risen
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Supply of chocolate has fallen
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The cost of sugar has risen
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More manufacturers are making chocolate
Correct Answer
A. More manufacturers are making chocolateExplanation
The increase in the number of manufacturers making chocolate is likely the reason why the price of chocolate has fallen. When there are more manufacturers in the market, there is increased competition, which can lead to lower prices as companies try to attract customers. This increase in supply can result in a decrease in price, as there is more chocolate available to meet the demand.Rate this question:
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- 5.
If interest rates fall -
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It becomes cheaper for firms to borrow money
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A currency becomes stronger
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A firm's costs rise
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Consumers save more of their income
Correct Answer
A. It becomes cheaper for firms to borrow moneyExplanation
When interest rates fall, it becomes cheaper for firms to borrow money because they will have to pay lower interest rates on their loans. This means that firms can access more affordable financing options, allowing them to invest in new projects, expand their operations, or make necessary purchases. Lower borrowing costs can also incentivize firms to take on more debt, leading to increased spending and economic growth. Therefore, the statement that it becomes cheaper for firms to borrow money is a logical consequence of falling interest rates.Rate this question:
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- 6.
If the interest rate rises -
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Small firms can sell goods more cheaply
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Consumers will borrow more money
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Consumers will save more, and borrow and spend less
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Firms can borrow money more cheaply
Correct Answer
A. Consumers will save more, and borrow and spend lessExplanation
If the interest rate rises, consumers will save more and borrow and spend less. This is because higher interest rates make it more expensive to borrow money, so consumers are likely to be more cautious with their spending and opt to save instead. Higher interest rates also provide a greater incentive for consumers to save as they can earn more on their savings. Overall, the increase in interest rates encourages consumers to be more conservative with their finances, resulting in increased savings and reduced borrowing and spending.Rate this question:
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- 7.
Which statement best describes an export for a UK firm -
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Raw materials they purchase from Germany
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A good or service they sell overseas
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French cheese
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A service purchased from a local supplier
Correct Answer
A. A good or service they sell overseasExplanation
The correct answer is "A good or service they sell overseas." This statement accurately describes an export for a UK firm. When a UK firm sells a good or service to a foreign country, it is considered an export. This can include products like manufactured goods, technology, or even intangible services like consulting or software development.Rate this question:
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- 8.
If £1 = $1.80, then a £1,000 order of British cheese will sell in the USA for
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$180
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$100
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$1,000
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$1,800
Correct Answer
A. $1,800Explanation
If £1 is equivalent to $1.80, then a £1,000 order of British cheese will sell in the USA for $1,800. This is because the exchange rate states that for every £1, the equivalent value in USD is $1.80. Therefore, to calculate the value of a £1,000 order in USD, we need to multiply £1,000 by $1.80, resulting in $1,800.Rate this question:
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- 9.
If £1 = $1.50, then a $450 weekend break in New York will cost a UK customer -
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£600
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$600
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£2.25
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£300
Correct Answer
A. £300Explanation
If £1 is equal to $1.50, then to find the cost of a $450 weekend break in New York for a UK customer, we need to convert the dollars to pounds. Since £1 is equal to $1.50, we can divide $450 by 1.50 to get the cost in pounds. Therefore, the cost of the weekend break for a UK customer would be £300.Rate this question:
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- 10.
If the £ is weaker -
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Exports become cheaper, imports become cheaper
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Exports become cheaper, imports become more expensive
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Import and export prices are unaffected
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Exports and imports become more expensive
Correct Answer
A. Exports become cheaper, imports become more expensiveExplanation
When the £ (British pound) is weaker, it means that its value has decreased compared to other currencies. This leads to exports becoming cheaper because foreign buyers can now purchase more goods with their own currency. On the other hand, imports become more expensive because it takes more £ to buy the same amount of foreign goods. Therefore, the correct answer is "Exports become cheaper, imports become more expensive."Rate this question:
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- 11.
If the £ becomes stronger -
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UK manufacturers may experience a fall in overseas sales
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UK holiday makers may choose to holiday at home
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Importers to the UK will find it harder to generate UK sales
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Small UK firms will see costs of imported goods and raw materials rise
Correct Answer
A. UK manufacturers may experience a fall in overseas salesExplanation
If the £ becomes stronger, it means that the exchange rate of the British pound increases in value compared to other currencies. This would make UK products more expensive for overseas buyers, which could lead to a fall in overseas sales for UK manufacturers. As the prices of UK goods increase, foreign customers may choose to buy products from other countries instead. This could negatively impact UK manufacturers' ability to sell their products internationally.Rate this question:
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- 12.
Which TWO statements are correct? In a recession -
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Demand and unemployment both rise
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Bankruptcy rates fall
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Suppliers of luxury goods will often find that sales revenue falls
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Consumers will save all their disposable income
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Output falls, unemployment rises
Correct Answer(s)
A. Suppliers of luxury goods will often find that sales revenue falls
A. Output falls, unemployment risesExplanation
In a recession, suppliers of luxury goods will often find that sales revenue falls because consumers tend to cut back on discretionary spending during economic downturns. Additionally, output falls and unemployment rises as businesses reduce production and lay off workers in response to decreased demand. These two statements accurately reflect the impact of a recession on suppliers of luxury goods and the overall economy.Rate this question:
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- 13.
Which TWO statements are correct?In a boom -
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Most firms will need to borrow money
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Unemployment will be low
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Prices may begin to rise at a faster pace
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Cheaper goods and services will sell very well
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Import volumes will fall
Correct Answer(s)
A. Unemployment will be low
A. Prices may begin to rise at a faster paceExplanation
In a boom, unemployment will be low because economic growth typically leads to increased job opportunities and a higher demand for labor. Prices may begin to rise at a faster pace because increased demand for goods and services can lead to inflationary pressures. However, the other statements are not necessarily true in a boom. While some firms may need to borrow money to finance expansion, it is not true that most firms will need to do so. Cheaper goods and services may not necessarily sell well in a boom as consumers may have more disposable income and be willing to spend on higher-quality or luxury items. Import volumes may not necessarily fall in a boom as increased economic activity can lead to higher demand for imported goods.Rate this question:
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- 14.
Which ONE statement is false?If firms can correctly forecast future economic conditions -
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They are less likely to need to borrow money from a bank
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They are less likely to experience falling revenues when economic conditions become worse
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They are more likely anticipate and respond to changing market needs and wants
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They are more likely to survive a recession
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They are more likely to achieve growth over time
Correct Answer
A. They are less likely to need to borrow money from a bankExplanation
If firms can correctly forecast future economic conditions, they are more likely to need to borrow money from a bank. This is because they can anticipate and plan for potential financial challenges and take proactive measures to secure additional funding if needed.Rate this question:
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Current Version
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Mar 21, 2023Quiz Edited by
ProProfs Editorial Team -
Mar 03, 2010Quiz Created by
Kholloway
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