Economic Factors - PESTLE Flashcards
What is the Macro-Economy?
The economy as a whole.
What are the 5 Economic Factors?
Interest Rates
Exchange Rates
Changes in Disposable Income
Business Cycles
Inflation
What is the Interest Rate?
The price at which a business, or individual, can borrow money, or get a return on money saved.
What does a high Interest Rate mean?
(For Businesses)
Businesses are less likely to take out borrowing, and will invest less.
What does a high Interest Rate mean?
(For Consumers)
Consumers will save more money and spend less on goods and services.
What is the Exchange Rate?
The value of one currency for the purpose of conversion to another.
What is a Weak Pound?
(Exchange Rates)
Anything that is produced in the UK and sold abroad will be cheaper for the buyer.
What does a Weak Pound mean for businesses in the UK buying raw materials from abroad?
(Exchange Rates)
They will get less for their money and so will have to pay more for it.
This will increase production costs and potentially increase customer prices.
What is a Strong Pound?
(Exchange Rates)
Anything produced in the UK and sold abroad will be more expensive for the buyer.
What does a Strong Pound mean for businesses in the UK buying raw materials from abroad?
(Exchange Rates)
It will cost a UK business less as it gets more for its money.
What is Disposable Income?
(Changes in Disposable Income)
The money that people have to spend after taxes and essential living costs have been deducted.
What are Business Cycles?
(Business Cycles)
A regular rise or fall, or cycle of change in a business activity.
What are the 4 elements of the Business Cycle?
(Business Cycles)
Boom
Downturn
Recession
Recovery
What is a Boom?
(Business Cycles)
This is when the economy is growing, unemployment is low and consumer demand is high.
What is a Downturn?
(Business Cycles)
This is when the economy begins to slow down, inflation begins to rise, along with interest rates.
What is a Recession?
(Business Cycles)
The economy slows so much that it begins to shrink.
What is a Recovery?
(Business Cycles)
Interest rates are lowered to stimulate the economy, prompting businesses to make investments.
What is Inflation?
(Inflation)
The percentage rise in prices over time.
What does it mean if there is inflation?
(Inflation)
Money does not buy as much as it did previously.
What are the 2 causes of Inflation?
(Inflation)
Demand-Pull Inflation
Cost-Push InflationW
What is Demand-Pull Inflation?
(Inflation)
When demand for products and services increases, and businesses cannot meet demand, this drives the price up.
What is Cost-Push Inflation?
(Inflation)
When the supply of goods and services decreases, due to an increase in production costs.
What might cause the increase in Production Costs?
(Inflation)
Scarcity of raw materials, or an increase in taxes by the Government.
