Cover of the textbook Outcomes Pre-Intermediate - Student's Book

The key answer of exercise 1

The key to exercise solutions in chapter 15 - Cost of living for the textbook Outcomes Pre-Intermediate - Student's Book with authors Hugh Dellar and Andrew Walkley from National Geographic Learning

Question

Work in pairs. Check you understand the situation in bold. Then think of one more consequence (good or bad) of each situation.

Answer

  1. A currency is strong when it is worth more relative to other currencies. When a currency is strong, you can exchange it for more money in weaker currencies, so you can go abroad more cheaply. However, goods that are exported are more expensive for other countries to buy, so it can be bad for businesses that mainly export goods. Costs for tourists from other countries are higher, so it is bad for tourism.
  2. A currency is weak when it is worth less relative to other currencies. Exported goods from that country are cheaper for other countries to buy, but imported goods are more expensive. It can be good for businesses that export goods, but bad for companies that rely on imports or imported materials. More tourists might come from other countries. 
  3. If the cost of living is high, basic things like food are expensive to buy. Real incomes may fall, there may be more poverty, people might have to work longer hours, there might be social unrest.
  4. Inflation is low when prices don’t increase much over time. The cost of living stays the same, but wages don’t increase either, which is bad for the economy. It might encourage saving, as savings keep their value, though interest rates are also likely to be low. Borrowing can be cheaper, which is good for new businesses. 
  5. If there’s a lot of unemployment, a lot of people don’t have jobs, which can lead to social unrest, high costs of social benefits, and more government debt. Emigration might increase as people look for work in other countries.
  6. If unemployment has fallen, people will spend more and the economy should improve. There will be more money to pay for services.
  7. If the average salary is higher, then the cost of living is also likely to be higher. High salaries might encourage immigration, which can be good for the economy.