Economic Factors Flashcards
Explain the economic indicators which influence a business
Confidence
Inflation
Economic Growth
Unemployment
Interest Rates
Purpose of the main types of taxation in the UK
To either increase or decrease demand in the economy to control inflation and economic growth
Difference between direct and indirect taxation
Indirect taxation is tax on goods and services.
Direct taxation is tax on income and profits
Main types of purposes of UK government expenditure
Definition of a subsidy
A sum of money granted by the government
Benefits to a business of receiving a subsidy
Leads to more investment.
Difference between monetary, fiscal and supply side policy
Monetary policy - The use of Interest rates and exchange rates in order to influence the amount of money going around the economy.
Fiscal policy - The use of government spending and taxation in order to increase or decrease demand within the economy
Supply Side - How the government can encourage businesses to increase the amount they produce
Relationship between interest rates and exchange rates
Interest rates affect exchange rates, this is through hot money. For example if interest rates are high there would be more investment into the UK economy has there is a greater return on investment, Greater demand for the pound leads to the price rising which leads to the value of the pound rising and then the exchange rate getting stronger
What is meant by GDP
Also known as Gross Domestic Product. Is the amount that the country produces within the year
What is meant by the business cycle
Business cycles are a type of fluctuation found in the aggregate economic activity of a nation
Main phases of the Business Cycle
Boom, Recession, Slump, Recovery
Explain how a business can use the business cycle to its advantage
Planning for growth
Cost control during downturns
Anticipating changes
Timing investments
Adapting to market changes
Explain why some businesses are more affected than others by the business cycle
Industry type: Some industries, such as construction and consumer goods, are more sensitive to changes in the economy and can be significantly impacted by the business cycle. Other industries, such as healthcare and utilities, tend to be more stable and are less affected by the ups and downs of the economy.
Business size: Smaller businesses, in general, are more sensitive to changes in the economy than larger businesses, as they have fewer resources to weather economic downturns. Larger businesses, on the other hand, often have more resources, including access to capital, which can help them to weather economic downturns.
The impact and importance in changes in economic factors for a business and its stakeholders.
Sales and revenue: Changes in economic factors, such as changes in consumer spending, inflation, and interest rates, can impact a business’s sales and revenue.
Cost of goods and services: Changes in economic factors, such as changes in the cost of raw materials, energy costs, and labour costs, can impact a business’s cost of goods and services.
Access to capital: Changes in economic factors, such as changes in interest rates, can impact a business’s access to capital.
Competitiveness: Changes in economic factors, such as changes in exchange rates, can impact a business’s competitiveness in the global market.
