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6 External Influences on Business Activity Flashcards

1
Q

What is Gross Domestic Product (GDP)?

A

the total value of output of goods and services in a country in a year.

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2
Q

What are the main stages of the business/ trade cycle?

A
  • Growth
  • Boom
  • Recession
  • Slump
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2
Q

What is Slump in the business cycle?

A
  • long drawn-out recession
  • increased unemployment
  • decreased prices
  • many businesses will fail to survive this period
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2
Q

What is Boom in the business cycle?

A
  • caused by too much spending.
  • inflation
  • shortages of skilled workers
  • increased business costs
  • uncertain futures
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3
Q

What is Growth in the business cycle?

A
  • GDP rises
  • decreased unemployment
  • increased living standards
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4
Q

What is Recession in the business cycle?

A
  • caused by too little spending
  • GDP falls
  • businesses experience falling demand and profits
  • increased unemployment
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5
Q

What are government economic objectives?

A
  • low inflation
  • low unemployment
  • economic growth
  • balance of payments (imports and exports)
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6
Q

What is inflation?

A

the increase in average price levels of goods and services over time.
- real income falls
- price of goods are higher
- business unlikely to expand/ create jobs

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6
Q

What is unemployment?

A

when people who are willing and able to work cannot find a job.
- GDP falls
- government pays unemployment benefits (the money could be used in other areas)

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6
Q

What is real income?

A

the value of income and it falls when prices rise faster than money income.

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7
Q

What is the balance of payments?

A

records the difference between a country’s exports and imports.

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7
Q

What is economic growth?

A

when a country’s GDP increase (more goods and services are produced than the previous year)

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8
Q

What are imports?

A

goods and services bought in by one country from other countries.

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8
Q

What are exports?

A

goods and services sold from one country to other countries.

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9
Q

What is an exchange rate?

A

the price of one currency in terms of another.
exp:
€1 : $1.5

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10
Q

What is depreciation?

A

the fall in value of a currency compared with other currencies.

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11
Q

What is appreciation?

A

the rise in value of a currency compared with other currencies.

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12
Q

What is the fiscal policy?

A

any change by the government in tax rates/ public sector spending.

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12
Q

What are direct taxes?

A

paid directly from incomes.
exp: income tax, profit tax

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13
Q

What is disposable income?

A

the level of income a taxpayer has after paying income tax.

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14
Q

What are indirect taxes?

A

added to the price of goods and taxpayers pay the tax as they purchase the goods.
exp: VAT (value added tax)

15
Q

What are import tarrifs?

A

a tax on an imported product.

15
Q

What are import quotas?

A

a physical limit on the quantity of a product that can be imported.

16
Q

What do governments spend money on?

A
  • education
  • health
  • defence
  • law and order
  • transport (roads, railways)
17
What is the monetary policy?
a change in interest rates by the government/ central bank.
17
What are supply side policies?
increasing the competitiveness of industries in an economy against those from other countries. exp: - privatisation: using profit motive to improve business efficiency. - improve training and education - increase competition in all industries
18
What is a chain of analysis you can use?
Increase tax rates → less disposable income → less money to spend → business sales falling → business produces fewer goods → unemployment
19
What are pressure groups?
made up of people who want to change business decisions by taking action. exp: consumer boycotts
19
What is social responsibility?
when a business decision benefits stakeholders other than shareholders.
19
What is global warming?
a gradual increase in the overall temperature of the Earth's atmosphere.
20
What is the environment?
our natural world.
21
What are private costs?
costs paid for by a business/ consumer of the product.
22
What are private benefits?
gains to a business/ consumer of the product.
23
What are external costs?
costs paid for by the rest of society as a result of business activity.
24
What are external benefits?
gains to the rest of society as a result of business activity.
25
What are social costs?
external costs + private costs = social cost
26
what are social benefits?
external benefits + private benefits = social benefits
27
What is sustainable development?
development which does not put the living standards of future generations at risk.
28
What can businesses do to be sustainably developing?
- use renewable energy - recycle waste - use fewer resources - develop 'environmentally friendly' products/ production methods
28
What is a consumer boycott?
when consumers decide not to buy products from businesses that do not act in a socially responsible way.
28
Why do businesses respond to environmental pressures and opportunites?
- consumers - pressure groups - government legal controls
29
How can businesses respond to pressures?
- justifying themselves - arguing that the benefits of their products outweigh the environmental cost - completely ignoring the pressure
30
When is a pressure group unlikely to succeed?
- firm is doing something unpopular but not illegal - cost to the business of changing its ways are higher than the cost of losing sales from bad publicity - business sells to other businesses rather than consumers
31
When is a pressure group likely to succeed?
- a lot of public support - boycotts reduce sales for the business - well organized and financed group
32
What is globalization?
the increase in worldwide trade and movement of people and capital between countries.
32
What are ethical decisions?
based on a moral code / doing the right thing.
32
What are free trade agreements?
when countries agree to trade imports/exports with no barriers such as tariffs and quotas.
33
What is protectionism?
when a government protects domestic businesses from foreign competition using tariffs and quotas.
34
What are multinational businesses?
businesses with factories, production or service operations in more than one country.
35
What are the potential opportunities for businesses?
- selling exports to other countries: increases potential sales, but it can be expensive to sell abroad and will foreign consumers buy products - opening factories/ operations in other countries: could be cheaper to make some goods in other countries than ‘at home’ - import products form other countries to sell to customers in 'home' country: no trade restrictions so could be profitable. - import materials and components form other countries but still produce final goods in 'home' country: could be cheaper to purchase these supplies from other countries now that there is free trade, reducing costs, supplies can also be bought online. - increase imports from 'home' market from foreign competitors: competitors offer cheaper products sales of local businesses may fall but the increased competition could force the local businesses to be more efficient. - increase investment: create more competition, economies of scale, increase sales - employees may leave businesses that cannot pay the same/ more than international competitors: employees have a choice about where they work, beneficial to local businesses

Business Studies (6 decks)

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