2.5 - External Influences

Question 1

Inflation

Answer 1

A sustained increase in the general price level

Question 2

Factors in PESTLE analysis

Answer 2

1. Political
2. Economic
3. Social
4. Technological
5. Legal
6. Environmental

Question 3

Examples of political factors in PESTLE

Answer 3

1. Competition policy
2. Industry regulation
3. Business policy and incentives
4. Government spending and policies

Question 4

Examples of economic factors in PESTLE

Answer 4

1. Interest rates
2. Consumer spending and income
3. Exchange rates
4. Business cycle

Question 5

Examples of social factors in PESTLE

Answer 5

1. Demographic change
2. Impact of pressure groups
3. Consumer tastes and fashions
4. Changing lifestyles

Question 6

Examples of technological factors in PESTLE

Answer 6

1. Disruptive technologies
2. Adoption of mobile technology
3. New production processes
4. Big data and dynamic pricing

Question 7

Examples of legal factors in PESTLE

Answer 7

1. Employment law
2. Minimum wage
3. Health and safety laws
4. Environmental legislation

Question 8

Examples of ethical factors in PESTLE

Answer 8

1. Sustainability
2. Tax practices
3. Ethical sourcing
4. Pollution and carbon emissions

Question 9

Business cycle

Answer 9

Natural fluctuations in economic activity over time, which reflects changes in output, employment, investment, and consumer spending

Question 10

Phases of the business cycle

Answer 10

1. Boom
2. Recession
3. Slump
4. Recovery

Question 11

Characteristics of a boom

Answer 11

1. High levels of consumer spending and business investment
2. Low unemployment rates
3. Rising inflation due to strong demand

Question 12

Characteristics of a recession

Answer 12

1. Falling consumer spending and business investment
2. Rising unemployment
3. Declining confidence in the economy

Question 13

Characteristics of a slump

Answer 13

1. Economic activity at its lowest point
2. High unemployment rates
3. Very little investment and spending

Question 14

Characteristics of a recovery

Answer 14

1. Increasing consumer spending and business investment
2. Improving confidence in the economy
3. Falling unemployment rates

Question 15

Real income

Answer 15

Measure the amount of disposable income available to consumers

Question 15

Factors affecting real incomes

Answer 15

1. Inflation
2. Wage growth
3. Employment levels
4. Interest rates
5. Tax policies

Question 16

Interest rates

Answer 16

Reward for saving and cost of borrowing expressed as a percentage of the money saved or borrowed

Question 17

Exchange rates

Answer 17

Price of one currency expressed in terms of another currency

Question 18

Impacts of a decreased interest rate

Answer 18

1. Cost of loans and debt is reduced, boosting consumer spending
2. Consumer confidence likely to rise
3. Business investment should be boosted

Question 19

Effect of a stronger pound

Answer 19

Stronger Pound makes Imports Cheaper and Exports Dearer

Question 20

Demand pull inflation

Answer 20

When aggregate demand (total spending in an economy) exceeds aggregate supply (the economy’s ability to produce goods and services), leading to rising prices

Question 21

Causes of demand pull inflation

Answer 21

1. Depreciation of the exchange rate
2. Reduction in direct or indirect taxation
3. Rising consumer confidence
4. Faster rates of economic growth in other countries

Question 22

Cost push inflation

Answer 22

When rising production costs (e.g., wages, raw materials, energy) force businesses to increase prices, leading to overall inflation in the economy

Question 23

Consequences of inflation

Answer 23

1. Reduced purchasing power
2. Uncertainty and reduced investment
3. Loss of international competitiveness
4. Higher interest rates

Question 24

Fiscal policy

Answer 24

Use of government spending, taxation and borrowing to influence the level and growth of aggregate demand, output and jobs

Question 25

Direct tax

Answer 25

Tax that is paid directly to the government by individuals or businesses on income, wealth, or property rather than being passed on to another party

Question 26

Indirect tax

Answer 26

Tax levied on goods and services rather than directly on income or profits. It is collected by businesses and passed on to the government. Consumers pay the tax when they purchase a product or service

Question 27

Transfer payments

Answer 27

Payments made by the government to individuals or groups without receiving any goods or services in return, such as state pension and job seeker's allowance

Question 28

Current spending

Answer 28

Day-to-day expenses of the government on public services and the running of the economy. These are short-term, recurring costs that ensure essential services function properly, such as education and health

Question 29

Capital spending

Answer 29

Government investment in long-term assets and infrastructure that helps improve economic growth and public services over time, such as new roads or hospitals

Question 30

Key areas of employment legislation

Answer 30

1. Minimum wage 2. Anti discrimination 3. Health and safety requirements 4. Maternity and paternity leave 5. Fair working hours and breaks

Question 31

Advantages of employment legislation

Answer 31

1. Protects workers' rights 2. Improves workplace safety 3. Encourages fair pay 4. Boosts employee morale and productivity

Question 32

Disadvantages of employment legislation

Answer 32

1. Increases business costs 2. Reduces flexibility for employers 3. Can discourage business investment

Question 33

Key areas of consumer protection legislation

Answer 33

1. Consumer rights 2. Product safety 3. Fair trading and advertising

Question 34

Advantages of consumer protection legislation

Answer 34

1. Prevents exploitation 2. Improves consumer confidence 3. Ensures product safety

Question 35

Disadvantages of consumer protection legislation

Answer 35

1. Increases business costs 2. Strict regulations can limit innovation 3. Legal disputes

Question 36

Key areas of environmental legislation

Answer 36

1. Waste management and recycling 2. Pollution control 3. Carbon emissions and climate change regulations 4. Sustainable resource use 5. Protection of natural habitats and biodiversity

Question 37

Advantages of environmental legislation

Answer 37

1. Reduces pollution and protects nature 2. Encourages sustainable business practices 3. Improves brand image and customer loyalty

Question 38

Disadvantages of environmental legislation

Answer 38

1. Potential fines and legal issues 2. Competitiveness issues 3. Increases business costs

Question 39

Key areas of competition policy legislation

Answer 39

1. Preventing anti-competitive agreements 2. Preventing abuse of market power 3. Regulating mergers and takeovers 4. Promoting consumer choice and fair pricing 5. Encouraging market entry and innovation

Question 40

Advantages of competition policy legislation

Answer 40

1. Prevents exploitation 2. Encourages innovation 3. Protects consumer choice

Question 41

Disadvantages of competition policy legislation

Answer 41

1. Can slow business growth 2. Difficult to enforce 3. Increased regulation costs

Question 42

Key areas of health and safety legislation

Answer 42

1. Employer responsibilities 2. Employee responsibilities 3. Risk assessments and hazard control 4. Workplace conditions and safety equipment 5. Training and emergency procedures

Question 43

Advantages of health and safety legislation

Answer 43

1. Reduces workplace accidents 2. Improves productivity 3. Avoids legal fines and lawsuits 4. Enhances business reputation

Question 44

Disadvantages of health and safety legislation

Answer 44

1. Increases business costs 2. Time-consuming compliance 3. Can limit business flexibility