1.5.4 - The Economy and Business Flashcards
1
Q
Level of demand
A
Refers to the spending that takes place in an economy
2
Q
What might change demand ?
A
- the level of economic activity
- interest rates
- changes in exchange
- consumer income
- changes in taxation
3
Q
What is the impact of high demand?
A
- consumer incomes rise
- inflation may rise
- unemployment may fall
- interest rates may rise
- the pound may become stronger
4
Q
What is the impact of low demand?
A
- consumer incomes fall
- inflation may fall
- unemployment may rise
- interest rates may fall
- the pound may become weaker
5
Q
Unemployment
A
Unemployment exists when people who want to find work cannot do so
6
Q
Impact of high levels of unemployment on business
A
- makes it easier for business to recruit new employees
- lower consumer demand
- economic activity falls
- business revenue will also fall
7
Q
Inflation
A
The change in the average level of prices in the economy, measured using the consumer price index
8
Q
Low levels of consumer income
A
- consumers are more restricted so they are more likely to buy lower priced products
- the number of products and services that are bought is likely to go down
- consumer confidence is likely to be low
9
Q
What is the impact of rising interest rates?
A
- business on a variable rate may struggle to repay loans
- small businesses are less likely to borrow money to start up or to expand
- customers are less likely to spend money as borrowed money costs more, so consumer spending falls.
10
Q
Exchange rates
A
The price of buying foreign currency
11
Q
If price of exports fall
A
Sales increase - good for UK exporters
12
Q
Price of exports rises
A
Sales fall - bad for UK exporters
13
Q
Prices cheap
A
