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Business: Theme 2 > 2.1 External influences > Flashcards

2.1 External influences Flashcards

1
Q

What is the business cycle?

A

A cycle or series of cycles of economic expansion and contraction.

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2
Q

A Recession is when…

A

The level of real national output declines over the two successive quarters. But often a sharp slowdown in the rate of growth of output, spending and income like a recession.

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3
Q

A Boom is when…

A

There is a rapid and significant growth.

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4
Q

What are some of the advantages of a boom?

A

-Rapid and significant grow.
-People are spending more.
-Businesses are expanding.

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5
Q

A slump is when…

A

Profits begin to fall, job losses, fewer jobs are created, less wealth is being earned and tax revenues fall, which impact public services. The opposite to growth.

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6
Q

A recovery is when…

A

Businesses see orders improving, profits to pick up, employment prospects starts to improve, but not immediately. The first signs of growth.

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7
Q

What is GDP?

A

(Growth Domestic Product) value of all goods and services produced by UK businesses within the time period (typically 3 months).

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8
Q

What are interest rates?

A

An interest rate is the cost of borrowing money or the return for investing money.

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9
Q

What are the impacts on customers of an increase in interest rates?

A

-Borrowing is more expensive.
-Mortgage and other loan payments increase.
-More interest earned on savings.
-Usually balances out to mean reduced consumer spending.

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10
Q

Impact on businesses of an increase in interest rates.

A

-Cost of borrowing increases.
-Loan and other credit payments increase.
-Reduced consumer spending.
-Reduced revenues, increased costs, reduced profits.

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11
Q

What is inflation?

A

A sustained increase in the general level of prices of goods and services. It is measured as an annual percentage increase.

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12
Q

What are the impacts on customers due to inflation?

A

They might have the same amount of money now as they did 20 years ago but now they can buy less with this same amount of money.

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13
Q

What are the impacts on businesses due to inflation?

A

-A decrease in sales if inflation is high.
-Businesses might have to increase in there staff’s wages.

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14
Q

What is demand pull?

A

This means buyers want to buy more than sellers can actually produce, so sellers start to put prices up.

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15
Q

What is cost push?

A

This means businesses costs start to rise (e.g. oil prices rise, or wages start to rise) and sellers need to put prices up to compensate. So costs to the businesses push the prices higher.

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16
Q

Why can inflation be a good thing?

A

Inflation is a sign that the economy is growing. In some situations little inflation (or even deflation) can be just as bad as high inflation. The lack of inflation may be an indication that the economy is weakening.

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17
Q

What is the ‘fiscal policy’?

A

This is the use of government mechanisms in revenue collection (taxes):
-Raise direct taxes, leading to a reduction in real disposable income.
-The government can reduce its own spending on public and merit goods or welfare payments.

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18
Q

What is the ‘monetary policy’

A

This is the action of central bank to control the size of rate of growth.

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19
Q

What is an exchange rate?

A

Is the value of one currency expressed in terms of another.

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20
Q

When a currency appreciates it…

A

Gets stronger and goes up in value against another currency.

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21
Q

When a currency depreciates it…

A

Gets weaker and is going down in value against another.

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22
Q

What are the potential impacts of a stronger GBP?

A

-This means that you can buy more currency form overseas.
-This means that the pound is stronger when compared to other currency’s.

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23
Q

How might exchange rate fluctuations affect businesses?

A

If the pound is stronger than normal then they can buy more from overseas and if the pound weakens then they can’t buy as much from overseas for the same price.

24
Q

What is an importer?

A

Businesses that buy goods from overseas.

25
Q

What is an exporter?

A

Businesses that sell goods overseas.

26
Q

What are the affects on importers and exporters if the
£1 = $1.76
increases to:
£1 = $1.90

A

Imports (from USA)
This will mean that imports from the USA are cheaper.

Exports (to USA)
This means that exports to the USA will make less money.

27
Q

What are the affects on importers and exporters if the
£1 = $2.02 Canadian Dollar
decreases to:
£1 = $1.80 Canadian Dollar

A

Imports (from Canada)
This means that imports form Canada are more expensive.

Exports (to Canada)
This means that exports to Canada will make more money.

28
Q

Explain the effects of the fluctuations in the exchange rates for importers.

A

If the value of the £ rises they will benefit because the supplier because cheaper.
If the value of the £ falls they will lose money because they need to spend more for the same amount of product.

29
Q

Explain the effects of the fluctuations in the exchange rates for exporters.

A

If the value of the £ rises they will not benefit as UK goods become more expensive to buy overseas.
If the value of the £ falls it will benefit them because buyers need to buy more pounds. Then demand for UK goods rises.

30
Q

Give examples of direct forms of tax.

A

-Income tax
-Corporation tax
-VAT
-Excise duties

31
Q

Give examples of indirect forms of taxes.

A

-VAT
-Fuel duties
-Tobacco duties
-Wine, spirits and beer duties

32
Q

What is income tax?

A

This is when workers pay income tax and national insurance contributions. Both of which affects works “take-home” pay.

33
Q

What is corporation tax?

A

Businesses pay corporation tax on their profits.

34
Q

What is Value added tax (VAT)?

A

This is tax placed on all the goods we buy except food and children’s clothing. This is 20%.

35
Q

What are excise duties?

A

These are specific taxes charged on certain products e.g alcohol tobacco and fuel.

36
Q

What is the consumer protection act?

A

Prohibits the manufacturing or supply of unsafe goods.

37
Q

What are the unfair trading regulations?

A

Makes it an offence for a trader to make false or misleading statements about goods or services.

38
Q

What is the data protection act?

A

Businesses must store any data securely and avoid theft or loss.

39
Q

What is the consumer rights act?

A

Gives the consumer rights when they are buying goods.

40
Q

What rights do you have at work?

A

-Statutory rights
-Contract of employment

41
Q

What is the statutory right?

A

They are legal rights based on laws passed by parliment.

42
Q

What is the contract of employment?

A

Is the agreement made between the employer and employee.

43
Q

What is the employment legislation?

A

These are acts that stop the exploitation of workers.

44
Q

What are some of the legal rights given to employees?

A

-Employment rights act
-Working time regulation act
-National minimum wage act

45
Q

What does the employment rights act include?

A

-Employees rights to maternity and paternity leave
-Details regarding termination of contract
-Right to a written pay slip

46
Q

What is included in the working time regualtions act?

A

-A limit to an average of of 48 hours work per week(workers can choose to do more)
-Right for night wokrers to recieve free health assessment
-Right to 11 hours rest a day
-Right to 4 weeks paid leave per year

47
Q

What is the enviromental protection act?

A

The fundamental strucure and authority for waste managemnet an control of emmisions into the enviroment.

48
Q

What is the competition act?

A

The act addresses to key areas of anti-competitive behaviour
-Anti-competitive agreements
-Abuse of dominant market position

49
Q

What is the health & safety act?

A

The employers must protect the health, safety and welfare of all their employees at work.

50
Q

What is uncertainty?

A

Unknowing to what will happen in the future.

51
Q

How might uncertainty impact spending?

A

-If there is a change in government in a country where a business exports to they will be unsure as to the amount of orders they will recieve and may lower production.
-Households faced with uncertainty may save rather than spend.

52
Q

How do you reduce uncertainty?

A

-Research: Can provide the business with much needed information.
-Contracts: Ensuring prices, costs and other fluctuating factors are contracted to the predictable.
-Diversifacation: Selling multiple products to increase likelyhood of surviving during uncertain periods.

53
Q

What is perfect competition?

A

There is intense competition and competitiors have to accept the same price.

54
Q

What is monopolistic competition?

A

When small firms offer differentiated products. E.g. restaurants and small local businesses

55
Q

What is a oligopoly?

A

These markets are dominated by a small number of firms. They will use non-price strategies to compete.

56
Q

What is a monopoly?

A

This is when there is only one provider of a good or service in a market. They have control over the price of the market.

57
Q

What is market size?

A

Market size is the measurement of the total volume of a given market.

Business: Theme 2 (5 decks)

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