1.5.3 The economy and business

Question 1

Name 6 things that Impact the business and the economy

Answer 1

• Interest rates
• Consumers Spending
• Unemployment
• Inflation
• Taxation
• Exchange rates

Question 2

If Unemployment rises and gets worse what could happen to the economy and the business

Answer 2

• if it rises the economy will get worse as no one is working no one can pay tax and if unemployment is high business could fail as there is less people working

Question 3

If Taxation rises and gets worse what could happen to the economy and the business

Answer 3

• Business could fail as they have to pay lots of tax and wont have any cah left to pay suppiers,employees,and mangers

Question 4

Explain The Impact Of Inflation On A Business (3 Marker)

Answer 4

Staff may ask for pay rises above the rate of inflation (S) This is because the costs of goods and services have increased (S)This would lead to higher costs for businesses (S) Therefore businesses may decide to increase prices further, adding to inflation (S)

Question 5

Explain The Impact Of Interest Rates On A Business (3 Marker)

Answer 5

Low interest rates will discourage saving (P) This is because the rewards are limited (S) As a result both businesses and customers will be encouraged to spend (S) Businesses are therefore likely to see and increase in demand for luxury products/services (S)

Question 6

Explain The Impact Of Exchange Rates On A Business (3 Marker)

Answer 6

A depreciation is good for business that exports (P) This is because the goods will be cheaper in the country the business sells to (S) This may lead to an increase in demand for the export (S) As a result the business should see an increase in sales revenue (S)

Question 7

Explain The Impact Of Advantage On High Employment Rates On A Business (3 Marker)

Answer 7

High employment rates mean Incomes will be higher (P) This is because a large number of people are in work (S) As a result spending on goods and services will increase, particularly on non-essential items (S) This will mean businesses will see an increase in sales revenue for their products (S)

Question 8

Explain The Impact Of Disadvantage Of Low Employment Rates On A Business (3 Marker)

Answer 8

Higher employment levels means fewer workers will be available (P) This is because potential workers are already employed (S) This will result in job vacancies being difficult to fill (S) As a result businesses may fail to meet customer demand (S) This can negatively affect a businesses reputation (S)

Question 9

Explain The Impact Of Changing Consumer Rates On A Business (3 Marker)

Answer 9

Increased consumer incomes mean most businesses will make more sales (P) This is because consumers have more disposable income to spend (S) As a result they may also be able to increase their prices (S), Therefore leading to revenue and profits increasing (S)

Question 10

Explain the impact of changing consumer tax rates on a business (3 Marker)

Answer 10

If VAT increases it will mean that the prices of some goods and services will increase (P) As a result some business sales are likely to decrease (S) As a result a businesses profit margins will be lower (S)