economic influences

Question 1

inflation

Answer 1

cost of living goes up
leads to uncertainty
less consumer spending
international compet
itiveness

Question 2

exchange rates

Answer 2

price of one currency in terms of another
SPICED (strong pound imports cheap exports dear)
appreciation of the pound leads to lower costs and higher PM’s
WPIDEC (weak pound imports dear exports cheap)
depreciation of the pound

Question 3

interest rates

Answer 3

cost for borrowing or reward for saving
low rates means higher spending
high rates causes higher costs when repaying loans
lead to internal finance being used

Question 4

taxation

Answer 4

governments finance their expenditure by imposing charges on citizens and corporate entities
encourage or discourage economic decisions
some businesses relocate to avoid taxes
high tax causes lower disposable income
VAT (comp adv. without)

Question 5

business cycle

Answer 5

fluctuation in economic activity that an economy experiences over a period of time
booms lead to higher levels of consumer spending
recessions cause low spending

Question 6

government spending

Answer 6

expenditure includes all investments and transfer payments

Question 7

government current spending

Answer 7

expenditure on wages and raw materials

short term and is renewed each year

Question 8

government capital spending

Answer 8

spent on physical assets like roads, housing
long term and isn’t renewed every year
more roads allows efficient distribution
some businesses rely on public sector e.g construction