Business and the economy

Question 1

GDP =

Answer 1

Total Consumer + Business + Government + the value
Spending Investment Spending of exports

• value of export

Question 2

What is economic growth?

Answer 2

It is the increase in size of a nations economy

Question 3

What is GDP used to measure?

Answer 3

It is used to measure the economic performance of a country

Question 4

How can governments encourage short-term growth?

Answer 4

Cut taxes and interest rates.
Encouraging businesses to borrow and invest it
Encourages consumers to borrow money and spend it on goods.

Question 5

What does an increase in GDP result in?

Answer 5

Higher revenue and higher profitability
Potential for economies of scale
Confidence

Question 6

What is a negative of GDP growth?

Answer 6

It may cause shortages of raw materials and skilled labour

Question 7

What is growth followed by?

Answer 7

Recession

Question 8

What decisions do businesses make in a boom?

Answer 8

They raise prices, which increases profitability and it slows down demand
They invest in production facilities to increase capacity.

Question 9

What decisions do businesses make in a recession?

Answer 9

May make workers redundant to save wage costs and increase capacity utilisation

Question 10

What decisions to businesses make in a local recession

Answer 10

Market their products elsewhere in the country