2.5- External Infouences Flashcards
1
Q
How is a business affected by inflation?
A
- As inflation rises, so dies the cost of products and services.
- Costs of suppliers, ingredients and raw materials will go up
2
Q
What are interest rates?
A
- Interest rates means the cost of borrowing money.
- The Bank of England determines the interest rate in the UK.
- If inflation is high, interest rates will rise, consumer and business spending will fall.
- If inflation if not a problem in society, interest rates will drop encouraging economic growth and a fall in unemployment rates.
3
Q
How is a business affected by taxation?
A
- Low taxes will result in more demand in the economy and lead to higher output and employment.
- If taxes are high, then UK businesses will have higher costs which means less profit, also making them less competitive in the global market.
- Businesses may also have to lay off extra staff due to a reduction in demand, increase unemployment rates.
4
Q
What are the 4 types of tax a small business will have to pay in the UK?
A
- Income tax (taken off the owners salary)
- VAT (directly put on goods and services) but only if the business earns above £82,000
- Business rates (not if they work from home)
- National Insurance (payed by the employee and the employer)
5
Q
What are the 4 types of tax a larger business will have to pay (PLC’s and Ltd’s)?
A
- Cooperation tax at 20%
- VAT at 20%
- Business rates on business premises
- National insurance contributions to employees
6
Q
What is excise duties (tax)?
A
- Type of tax that has to be paid by customers on products which are considered to have negative effects on society (e.g fuel, to tobacco, beer, wine and spirits).
7
Q
How is a business affected by changes in government spending (tax)?
A
- If the government decides to cut government spending to reduce the deficit (amount it owes) this can have an impact on businesses which supply goods or services to public organisations (e.g the NHS).
8
Q
What is the business cycle/ trade cycle?
A
- Demand and output in the UK changes, it goes up and down in a cycle pattern.
- 4 stages: Boom, Recession, Slump, Recovery
9
Q
What is the ‘Boom’ stage in the business cycle?
A
- In boom times a country may enjoy a period of high consumer spending.
- There is an increase in demand for goods and services
- Lower unemployment rates
10
Q
What is the ‘Recession’ stage of the business cycle?
A
- Falling levels of demand.
- Consumers demand less goods and services as they seek to save their money rather than spend
- Businesses will typically have to make redundancies to lower costs and will have lower profits as demand falls.
11
Q
What is the ‘Slump’ stage of the business cycle?
A
- A slump is the bottom of the business cycle where consumer confidence and spending is at its lowest.
- There is usually very little investment in businesses and high levels of unemployment as demand for goods and services falls to its lowest.
12
Q
What is the ‘recovery’ stage of the business cycle?
A
- Demand levels for goods and services start to improve.
- Unemployment rates will start to fall as businesses are taking on more staff to meet demand levels.
- Consumer confidence starts to return and consumers start to buy larger items again.
13
Q
What is economic uncertainty?
A
- A series of financial shocks since the recession in the UK in 2008 has meant that there has been macroeconomic uncertainty.
- This means that with a risk of unemployment that consumers are delaying the purchase of goods.
- This means that demand falls for goods and services.
- As a result of uncertainty manufactures are reluctant to expand and to grow which affects and reduces supply of goods and services.
14
Q
What is the national living wage?
A
The NLW is higher that’s the national minimum wage and workers get it if they’re over 25.
15
Q
What is a national minimum wage?
A
- Applies to nearly all workers and sets hourly rates below which pay must not be allowed to fall.
- Paying the minimum wage will raise the costs for a business.
