15 - Economic influences

Question 1

GDP

Answer 1

a measure of the countrys total output of oods and services over a period of time

Question 2

economic boom

Answer 2

high rates of ecenomic growth and production
* low unemployment
* high profits
* high inflation
* shortages of supply

Question 3

impact on busines decisions : ecenomic boom

Answer 3

frims may want to expand into new markets
incrtease recruitment
cost reductions may be sougth after

Question 4

ecenomic recession

Answer 4

output starts to fall and growth declines
prodcution and demand falls
government will use strats to stimulate grwoth
consumer/business confidence will fall

Question 5

impact on business decisions: recession

Answer 5

market penetration srats becoem attractive due to low risk
businesses stock pile products
may try to increase efficiency and reduce costs such as introducing flexible hours

Question 6

slump

Answer 6

• prolonged period of ecenomic decline
• high levels of unemployment
• low interest rates
• low investment and spendings
• high rates of business failure

Question 7

effect on business decisions : slump

Answer 7

• mat begin to adopt rationalsiation (sell assets or redundnacies)
• may redcue prices and focus on more profitable prodcuts
• may decide to stop trading in certain markets

Question 8

ecenomic recovery

Answer 8

eceonomy starts to pick up after a period of decline
increased consumer confidence
business’ start to invest or take on emplooyees
spare cpacity is used up

Question 9

effects on business deicisons :recovery

Answer 9

business’ take on new employees
investments rise
new start up businesses
decisions focused on increasing prodcutivity

Question 10

the exchange rate

Answer 10

the price of one currency in relation to another

Question 11

effect of exchange rates on deciison making

Answer 11

• businesses may choose to target markest when exchange rates to their country are favoruable
• businesses will try to avoid uncertainty when exchangerates are volatile

Question 12

effect of interest rates on importers

Answer 12

• may switch international suppliers when exchange rates are unfavoruable
• may stockpile raw materials when currency is strong

Question 13

effect of interest rates on exporters

Answer 13

• may lower prices to limit the impact of a strong currency
• may increase promotion in foriegn amrkets when currency is weak

Question 14

inflation

Answer 14

the gernal rise in prices over time

Question 15

effects of high inflation

Answer 15

• businesses may increase pridces to pass costs on to consumers or may decide to absorb the costs
• businesses wil look toreduce internal costs to protect profits
• prices rising may fuel further inflation

Question 16

effects of low inflation

Answer 16

• businesses feel confident in a stable economy
• businesses may look to invest and grow

Question 17

effects of delfation

Answer 17

• businesses may sturggle to pay debts
• low sales may lead to redundnacies and rationalisation

Question 18

interest rates

Answer 18

a governemnt policy to adjust teh amount of money in circulation. the interest rate is the cost of borrowing and thr reward for saving

Question 19

impact of high interest rates on business activity

Answer 19

• infaltion falls
• consumer and business spendings fall
• stronger £

Question 20

impact of low interest rates on buiness activity

Answer 20

• weaker £
• inflation may rise
• consumer and business spending rises

Question 21

use of governemnt spending and taxation

Answer 21

intends to control economic activity

Question 22

taxation

Answer 22

icnome tax
NI
VAT
corporate tax
customs

Question 23

governemtn expenditure

Answer 23

gov may spend on infrasturcture, human capitakl and phsycial capital

Question 24

expansionary government policy

Answer 24

reduced direct and indirect tax to inxrease disposable income
this increases spedning in areas such as education and health
stimulated demand for businesses and created jobs
may caause a deficit in budgets thought

Question 25

contractionary polciy

Answer 25

increases diect and indirect taxeas to slow down growth and reduce teh deficit in a budget.
this reduces spenidng in health care and education and demand falls for business.