2.6 Economic Conditions

Question 1

Economic Conditions

Answer 1

Economic conditions refer to the present state of the economy in a country or region

Question 2

Repeating Pattern of Economy

Answer 2

Boom -> Contraction -> Bust -> Expansion -> Boom

Question 3

Boom

Answer 3

This is when the economy is operating at its best level. Consumer confidence is up so they are spending. Business confidence is up so they will spend on expanding and employing more staff due to an expected increase in sales.

Question 4

Bust

Answer 4

This is when customers feel that their employment is under threat they will spend less with lower consumer confidence. Business confidence will then fall they will reduce employees and their spending to expand operations.

Question 5

How Would Lower Interest Rates affect Business Planning

Answer 5

If interest rates become lower it means that the cost of borrowing money is also lower. If consumers have lower borrowing costs they are likely to spend more. This means that the business should plan for extra sales by purchasing more items to sell and employing more staff. As the costs for a business to borrow funds is now cheaper it may plan to spend money on expanding its operations so that it can better meet its customers expectations and make more sales.