2.5.1 Economic influences

Question 1

What impact will a change in inflation have on the cost of supplies?

Answer 1

• Cost of products and resources rise.
• This is due to suppliers having increased costs.
• Businesses may have to increases their prices.

Question 2

What impact will a change in inflation have on labour wages?

Answer 2

• High inflation increases the demand for labour and lowers unemployment.
• As inflation lowers wages increase, which reduces the demand for labour and decreases unemployment.

Question 3

What do changes in exchange rates do?

Answer 3

Appreciation- SPICED

Depreciation- WPIDEC

Question 4

What impact does the cost of borrowing (interest) have on businesses?

Answer 4

• Cost of supplies will increase.

Question 5

How may a business protect itself from uncertainty?

Answer 5

• Long term loan
• Fixed interest rate