2.5 - External Influences

Question 1

What is the business cycle?

Answer 1

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

Question 2

What is GDP?

Answer 2

Gross Domestic Product

Value of goods/services produced by UK businesses within a time period (usually 3 months)

Question 3

What is growth?

Answer 3

Period of improving economics circumstances
- Business profits improve
- Increase consumer confidence
- More jobs

Question 4

What is a boom?

Answer 4

When unemployment is very low and more disposable income

Rapid and significant growth

Question 5

Recession?

Answer 5

When national output declines over 2 successful quartets

Question 6

Slump?

Answer 6

Opposite to growth
- Profits fall
- Jobs lost
- Less wealth

Question 7

Recovery?

Answer 7

First sign of growth

Question 8

Interest rates?

Answer 8

Cost of borrowing money or the return for investing money

Question 9

Inflation?

Answer 9

Sustained increase in level of prices for goods and services

Question 10

Consumer protection legislation ?

Answer 10

Selection of laws that protect individual consumers against unfair selling practices for goods, services and digital content

Question 11

Employee protection legislation ?

Answer 11

Regulates relationship between employees and employers

Question 12

Contract of employment ?

Answer 12

Agreement made between employer and employee

Question 13

Employment right act ?

Answer 13

States the duties and rights of the employee and employers

Question 14

Exchange rates?

Answer 14

The value of one currency expressed in terms of another

Question 15

Importers?

Answer 15

Businesses that buy goods from overseas

Question 16

Exporters?

Answer 16

Businesses that sell goods overseas

Question 17

Working time directive ?

Answer 17

• Limit on number of hours
• How long breaks should be

Question 18

National minimum wage ?

Answer 18

Right to be paid a certain amount of money for worked performance

Question 19

Income tax?

Answer 19

Workers pay income tax and national insurance contribution
Both affect ‘take-home’ pay

Question 20

Corporation tax?

Answer 20

Businesses pay corporation tax on their profits

Question 21

Value added tax (VAT) ?

Answer 21

Tax placed on all the goods we buy except food and children’s clothing

Question 22

Exercise duties?

Answer 22

Specific taxes charged on certain products

Question 23

Demand pull?

Answer 23

Buyers want to buy more than sellers can actually produce so sellers increase ptoces

Question 24

Cost push?

Answer 24

Means businesses costs will start to rise and sellers need to put prices up to compensate

Question 25

Fiscal policy?

Answer 25

Gov raise taxes, reduces disposable income Gov reduce own spending

Question 26

Monetary policy ?

Answer 26

Actions of BoE to control size and rate of growth

Question 27

Statutory rights ?

Answer 27

Legal rights based on laws passed by parliament

Question 28

Perfect competition?

Answer 28

Rare Many competitors offering same product Gives customer bargaining power

Question 29

Monopolistic competition?

Answer 29

Many small firms offering differentiated products Each has small market share

Question 30

Oligopoly?

Answer 30

Dominated by small number of firms Often use non-strategies to compete

Question 31

Monopoly?

Answer 31

Only 1 provider for the service/good They have control over price

Question 32

Environmental protection act?

Answer 32

Act defines fundamental structure and authority for waste management and control of emissions into the environment

Question 33

Competition act?

Answer 33

Addresses 2 key areas of anti- competitive behaviour

Question 34

Health and safety at work act?

Answer 34

Wide ranging duties on employment. Employers must protect health and safety welfare at work on all employees.

Question 35

Uncertainty?

Answer 35

When a business is unsure of what is coming for a business and consumers

Question 36

Independent shop ?

Answer 36

Not part of a multinational chain or corporation

Question 37

What is competition?

Answer 37

Ability to compete is yea ily influenced by structure of market in which a business operates. More competitive market is, harder task becomes

Question 38

Impact of increase in interest rates on customers?

Answer 38

Borrowing more expensive, mortgage & loan payments increase, more interest earned

Question 39

Impact of increase in interest rates on businesses?

Answer 39

Cost of borrowing increases, loans and payments increase, reduced customers spending, less profit

Question 40

Impact of inflation on customers?

Answer 40

- Spend less - Save more - Higher pay possibly

Question 41

Impact if inflation on businesses?

Answer 41

- lower sales - supplies more expensive - won’t borrow - won’t expand - may increase staff wages

Question 42

Why is inflation good ?

Answer 42

Shows economy is growing

Question 43

How do exchange rate fluctuations affect businesses?

Answer 43

Exchange rate will affect what business can afford Materials/goods from overseas more expensive

Question 44

4 types of tax?

Answer 44

Income tax Corporation tax VAT Excise duties

Question 45

Basic legal rights of consumers?

Answer 45

- no misleading descriptions - needs satisfactory quality - has to be fit for purpose

Question 46

Why is uncertainty dangerous for a business?

Answer 46

- more people want to save than spend - risk closing due to drop in sales - less investment - can’t plan for future