Economic Climate on business

Question 1

what happens if interest rates go up

Answer 1

borrowing becomes expensive so more saving better return

less available to spend more saving so demand reduces and less sales

cannot afford to pay wages unemployment increase

Question 2

what happens if interest rates go down

Answer 2

• cheaper to borrow due to less interest hence save less

more money to spend and demand goes up more profit

businesses borrow more

Question 3

what happens if prices rise faster than income

Answer 3

people will spend more on needs than wants so demand of luxuries will go down and sales and profits decrease

discounted businesses benefit