2.5 - External influences

Question 1

Name economic factors that effect businesses

Answer 1

Inflation
Exchange rates
Interest rates
The business cycle
Government spending and taxation
Economic uncertanty

Question 2

Describe inflation

Answer 2

Measured using the consumer price index - a representative basket of goods and services over time

Question 3

Monatery policy

Answer 3

The use of interest rates to control the economy

Question 4

Stages in the economic cycle

Answer 4

Boom
Downturn
Recession/ depression
Recovery

A depression is a sustained recession

Question 5

Define indirect and direct taxes with examples

Answer 5

Indirect tax: A tax levied on goods or services as opposed to income or profit e.g. VAT, landfill tax, import duties
Direct tax: levied on income or profits e.g. income tax, capital gains tax

Question 6

Describe fiscal and monetary policy

Answer 6

Fiscal policy involves the use of government spending, direct and indirect taxation and government borrowing to affect the level and growth of aggregate demand in the economy, output and jobs.
Monetary policy involves the use of interest rates and changes to the money supply (e.g. quantative easing) to achieve relevant economic objectives.

Question 7

Desribe 5 types of legislation that affect businesses.

Answer 7

• consumer protection - product safety and quality, fit for purpose, money back in 30 days
• employee protection - contract of employment, non-discriminatory recruitment, unfair dismissal & employment tribunal, minimum wage
• environmental protection - waste disposal, pollution, rescource deplation (e.g. non-renewable rescourses used in packaging, traffic congestion)
• competition policy - monopoly, duopoly, ologopoly, anti-competitive/ restrictive practices, restricting mergers, raising barriers to entry
• health and safety - breaks, 48 hours max working week, adequate training and supervistion (increase labour costs), equipment

Question 8

Define a cartel

Answer 8

A group of businesses (or contries) which join together to agree of pricing and output in a market in an attempt to gain higher profits at the expense of customers.

Question 9

Define colluding

Answer 9

Where several businesses (or contries) make agreements amoung themselves which benifit them at the expense of rival businesses or consumers.