2.1 - Raising Finance Flashcards
Business cycle
A cycle or series of cycles of economic expansion and contraction
Growth (business cycle)
A period of improving economic circumstances. Business profits are improving, consumer confidence is improving, jobs created
Boom
A period of rapid growth
- Wealth quickly increases
- Business profits leap upwards
- Living standards across the economy make rapid improvements
Recession
A period of slow/no economic growth
- Increased failure
- Interest rates reduced
- Lower spending
Interest rates
The cost of borrowing money or the return for investing money
Inflation
A sustainable increase in the general level of prices for goods/services. Measured as an annual % increase
2 ways government calculates inflation
- consumer price index (CPI)
- retail price index (RPI)
Causes of inflation
- Demand pull (buyers want more than sellers can produce, so prices rise)
- Cost push (business costs /wages rise so sellers increase prices to compensate)
Why is some inflation a good thing?
Shows that economy is growing, if there is little to no inflation, a sign the economy is weakening
Fiscal policy
The use of government mechanisms in revenue collection (taxes)
- Raise direct taxes, leading to a reduction in real disposable income
- The govt can reduce its own spending on public and merit goods or welfare payments
How is inflation controlled
- Fiscal policy
- Monetary policies
Monetary policies
The actions of bank of england to control size and rate of growth
Exchange rates
The value of one currency expressed in terms of another
How might changes in exchange rates affect a business
- Increase or lower the price of a product sold abroad
- Change the price of imported raw materials
- Change price of competitors’ products may change in the home market
Importers and exporters and how high inflation affects them
Importers - businesses that buy goods from overseas
Exporters - Businesses that sell goods overseas
(SPICED)
Strong currency - good for imports, bad for imports
Weak currency - bad for imports, good for exports
What causes exchange rate fluctuations
- Government finances (GDP etc)
- Interest rate differentials between countries
- Perceptions of currency traders in the market (political stability etc)
- Fluctuations in imports/exports
Direct tax
Collected by the inland revenue
- Income tax
- Business & corporation tax
- Council tax
- Inheritance tax
Indirect tax
Collected by the customs and excise
- VAT
- Fuel duties
- Tobacco duties
- Wine, spirit, beer duties
Consumer Protection Law
This protects the public by:
- prohibiting the manufacture and supply of unsafe goods
- making the manufacturer or seller of a defective
product responsible for damage it causes
- prohibiting misleading price indications
3 basic legal rights consumer has relating to the product
if the product is;
- given a misleading description
- of an unsatisfactory quality
- not fit for its intended purpose
Unfair Trading Regulations
Makes it an offence for a trader to make false or misleading statements about goods/services
If;
- Apply a false trade description to any goods
- Use aggressive door sales techniques
Data Protection Act
Law that controls use of consumers information
- Businesses must store data securely and avoid any theft or loss
- Prevents consumers details being sold
Consumer Rights Act
Designed to provide a modern framework for consumer protection.
Regulates that covers goods, services and digital content and protects consumers from unfair trading, even including some regulation on re-selling tickets
Statutory rights
Legal rights based on laws passed by parliament
