5.4a Impact of unemployment & interest Flashcards
What is unemployment?
Unemployment is the situation of actively looking for employment but not currently employed.
What is employment rate?
Employment rate is a measure of the prevalence of unemployment and is calculated as a percentage.
How is business affected by unemployment?
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
What are the results of low level consumer income?
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
What are the results of higher level consumer income?
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
When were the highest levels of unemployment in the UK?
1984 - around 12% of the workforce was unemployed
What is inflation?
Inflation is the increase of prices over time
What happens if inflation rates increase?
The cost of everyday items increases
How often does the rate of inflation’s change?
Inflation rates change every month
What are the results of a negative inflation?
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.
What do Interest Rate Changes Mean?
When short-term interest rates drop, it becomes cheaper to borrow money to fix up your house or buy a car.
What does Increased Spending Do?
Extra spending spurred by lower interest rates helps companies hire more employees to handle the growth in business.
What are the Effects of Stronger Demand?
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.
What does growth increase mean?
Growth increase leads to Unemployment decrease which further leads to Inflation Increasee
How Does the Unemployment Rate Affect the Economy?
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.