7.5 Flashcards
external environment:Economic change
What are the Four stages in the business cycle ?
boom, recession, recovery and slump
what is the business cycle ?
the rate of change in the value of economic activity and the most common measure of they activity is the GDP.
what does GDP mean ?
total measure of economic value/activity in the economy over a period of time and see if it increases/decreases.
What drives economic growth?
higher demand ,better technology, more employees and the laws that’s stable the economy
What threatens economic growth ?
inflation, lower in demand and rise in unemployment and changes in the business cycle.
what happens in the recovery/upswing?
increase consumer expenditure, existing spare capital used and investment increases , business may have to increase prices and entrepreneurs might want to set up a business .
what happens in a boom ?
consumer expenditure increases as well as investment and production rises for the business this means that increased prices to reduce demands and enters new geographical markets
what happens in a recession ?
it is when two quarters of the year are neative this reduces interest rates and spare capacity increases and for the business they willl buy less and produce less and workers may be limited to shorter shifts
what happens in slump?
the number of bankruptcies increases and the government lower interest rates and high levels of unemployment , for the business this means more redundancies and a decreases in costs and move overseas which reduces in capacity in officers stores/factories.
What are exchange rates ?
an exchange rates is the price on one currency expressed as another , business use these in order to pay of foreign goods
what does SPICED?(APPRECIATION)
STRONG POUND IMPORTS CHEAPER AND EXPORTS DEARER -whne the value rises against another currency
what does WPIDEC mean ?(depreciation)
weaker pound imports dearer exports cheaper -when the value of the pound decreases against another currency
what are the other effects of interest rates
uncertainty over revenue-more rev for importing goods and strong pound imports cheaper and weaker pounds export less
uncertancity regarding quantities that are likely to be sold like cat predict prices and may be caper to buy in your own countries
uncertancity regarding competitors are gonna act
What does inflation mean ?
persistent rise in price levels and a fall in the value of money
how do we measure inflation ?
we measure inflation using the CPI the consumer price index in which the prices of goods and services bought by households rise or fall.
What are the effects on inflation on business ?
increased costs of wages and raw materials as well as discourage invetsments and increased pressure for wages which lose international competitiveness .
What does deflation ?*
where countries pricing are falling and the value of money increasing
what does taxation mean ?
payments made to the government/authority by a organisation .
what are direct taxes ?
they are taxes levied on income ,wealth and profits
what area indirect taxes ?
income taxes ,corporation tax AND NATIONAL INSURANCE TAX
What are some examples of direct taxes?
income - tax based your wage- reduces disposable income
national insurance - tax earning on self employment - discourages firms from hiring new people and reduce investments
corporation tax - tax levied on income/profit from corporations -reduce companies overall profit
What are some example of indirect taxes ?
vat -tax added at every production stage - charge a further 20% on price
customs duty -tax imposed on exports and imports and regulates trade and protects domestic industries.
council tax - tax levied on households by authority - if they own property they have to pay it.
what is the fiscal policy ?
this is the policy of government expenditure and taxation as a means of collecting the level of activity within the economy.
what are the two types of fiscal policy ?
expansionary and contractionary
