5.4a Impact of unemployment & interest

Question 1

What is unemployment?

Answer 1

Unemployment is the situation of actively looking for employment but not currently employed.

Question 2

What is employment rate?

Answer 2

Employment rate is a measure of the prevalence of unemployment and is calculated as a percentage.

Question 3

How is business affected by unemployment?

Answer 3

There are fewer potential employees that can hire
They need to increase wages to attract potential employees
People have a higher disposable income that they can spend on products and services

Question 4

What are the results of low level consumer income?

Answer 4

Consumers are more restricted to what they can buy so are more likely to go to budget shops and supermarkets for the lowest prices
The number of products and services bought will decrease in number

Question 5

What are the results of higher level consumer income?

Answer 5

Consumers have more money to spend so are likely to buy more expensive goods
Consumer confidence will rise because people are more comfortable making larger purchases

Question 6

When were the highest levels of unemployment in the UK?

Answer 6

1984 - around 12% of the workforce was unemployed

Question 7

What is inflation?

Answer 7

Inflation is the increase of prices over time

Question 8

What happens if inflation rates increase?

Answer 8

The cost of everyday items increases

Question 9

How often does the rate of inflation’s change?

Answer 9

Inflation rates change every month

Question 10

What are the results of a negative inflation?

Answer 10

It encourages consumers not to buy a product or service immediately and to hold off for a cheaper price.
Businesses will hold off investing or cut their costs.

Question 11

What do Interest Rate Changes Mean?

Answer 11

When short-term interest rates drop, it becomes cheaper to borrow money to fix up your house or buy a car.

Question 12

What does Increased Spending Do?

Answer 12

Extra spending spurred by lower interest rates helps companies hire more employees to handle the growth in business.

Question 13

What are the Effects of Stronger Demand?

Answer 13

With lower unemployment and businesses feeling confident enough to expand, this stronger demand for goods and services helps to push wages and other costs higher.

Question 14

What does growth increase mean?

Answer 14

Growth increase leads to Unemployment decrease which further leads to Inflation Increasee

Question 15

How Does the Unemployment Rate Affect the Economy?

Answer 15

The unemployment rate affects the economy’s debt, taxes and overall growth. When a person loses a job, he is no longer able to pay his debts or taxes, and he spends less. All of these things can be devastating to the economy.

Question 16

How do you set the Set the Benchmark

Answer 16

The three core principles that the Fed sticks to when it decides to change that benchmark rate are: inflation rate, unemployment rate and changes in gross domestic product, or GDP.

Question 17

What does Increased Spending Do?

Answer 17

Extra spending spurred by lower interest rates helps companies hire more employees to handle the growth in business.

Question 18

What are the risks of too much debt?

Answer 18

Too much debt also makes interest rates go up. High interest rates prevent people from borrowing, which prevents the economy from thriving.

Question 19

What happens if people stop paying Tax?

Answer 19

When the number of citizens paying taxes decreases as unemployment increases, this creates a financial deficit for the government in many ways.

Question 20

What is unemployment?

Answer 20

Unemployment is the situation of actively looking for employment but not currently employed.