Finance notes you need to know

Consumer spending

Spending by ordinary people

Non-essential spending

Spending on items that we want, but which are not essential to surviving. Examples would include holidays and luxury items such as an iPad.

Unexpected spending

When a need to spend arises that was not expected; not emergencies, but times when there is a need to buy or pay for something that wasn't planned for in advance

Bank rate

(or base rate) The interest rate s icy committee (MPC) for the Bank of England to lend to UK banks

Central bank

The institution responsible for managing a country's currency, interest rates and the supply of money in circulation

Consumer Prices Index (CPI)

The official government measure of UK inflation

Currency

money used in each country. for example, the UK currency is the pound and the US currency is the US dollar

Currency falls (or weakens)

The currency will buy less of another currency than before

currency rises (or strengthens)

The currency will buy more of another currency than before

Deflation

Prices fall over time

Exchange rate

The amount of one currency needed to buy another currency or to pay for something in another currency

Fixed rate

The provider fixes the interest rate at the start, either for the whole term of a loan or for an agreed period

Foreign exchange market

A global system for central banks, banks, large financial organisations and large investors to exchange currencies

Inflation

general increases in the price of goods and services over time

Interbank exchange rate

The rate at which banks will exchange currencies with each other

Monetary policy committee (MPC)

Part of the Bank of England that is responsible for controlling UK inflation and setting interest rates

Real rate of return

The savings interest rate minus inflation

Tourist exchange rate

The rate offered to people wishing to exchange currency at a bank or bureau de change. It will be lower than the inter bank exchange rate.

infrastructure

The important physical systems of a nation - for example, transport, communication, water, sewage and power.