2.3 The Economic Climate of Business Flashcards
What is meant by the term “economic climate”?
The state of key factors within country such as level of goods and services produced and the number of jobs available.
What is meant by the term “economy”?
Made up of millions of individual consumers, many thousands of businesses and governments that all take decisions on what to buy and produce.
What may a rise in interest rates cause?
> consumers to save more as the ‘extra’ payment on savings is increased.
spending less as borrowing to buy major items will be more expensive.
What is meant by the term “interest rates”?
The price of borrowed money, expressed as a percentage.
What is meant by the term “overdraft”?
A flexible loan which a business can use whenever necessary up to an agreed limit.
What is meant by the term “consumer spending”?
Refers to the value of goods and services bought by consumers over period of time, usually a month or a year.
What is an improving economic climate?
When production by businesses is rising along with consumers’ incomes. Consumer spending is also rising and more jobs are being created.
What is a declining economic climate?
When production is failing along with the consumers’ incomes and the amount they spend. The number of jobs may be falling.
What would happen to the levels of employment if the economic climate is improving?
> higher levels of employments in businesses.
> higher wages.
What would happen to the levels of employment if the economic climate is declining?
Lower levels of employments
↳ businesses will produce fewer goods and services
therefore requiring less employees.
How could rising levels of employment effect a business?
> higher costs
↳ workers availability will reduce so to attract extra
workers businesses may have to pay higher wages increasing production costs.
› higher sales.
