6.2 The Economic Climate Flashcards
Define ‘economic climate’
This is how well the country is doing in terms of levels of income and employment.
Define ‘income’
The amount of money that people receive from work and from assets they own, such as shares and property.
Define ‘level of employment’
The number of people in work in a country.
Define ‘level of unemployment’
The number of people out of work in a country.
Define Gross Domestic Product (GP)
A measure of how much a country produces in a year. It influences the level of income and employment.
What is economic growth?
A period when GDP is rising, causing income and employment to rise.
What is a recession?
A period when GDP is falling, causing income and employment to fall. There must be two consecutive quarters of decline.
Define ‘distribution of income’
How income if shared out amongst different people in the community. The distribution of income can become more unequal if the incomes of the rich are rising faster than the incomes of the lower earners. `
Does an improvement in the economic climate affect all businesses positively?
No, it depends on the kind of goods you sell e.g. a value brand might suffer when the economy improves, whereas a luxury brand will do better.
What happens to incomes in a recession?
Incomes will fall, as more people lose their jobs or have their hours reduced.
What happens to consumer confidence in a recession?
Consumers are more likely to save as they worry about their job security. Their confidence in spending falls.
State two responses to a recession the production department might make.
Reduce costs through lowering waste or producing abroad.
Improve productivity.
State two responses to a recession the human resource department might make.
Motivate workers better.
Reconsider the number of hours staff work.
State two responses to a recession the finance department might make.
Improve cash flow.
Switch loans to lower interest loans.
State two responses to a recession the marketing department might make.
Promote more to target new markets.
Change the price to entice customers.
Change the product to appeal to different people.
