Economic issues 6.1 Flashcards
What are the main stages of the business cycle
Growth - When total value of output of goods and services rise and unemployment decreases
Boom - Prices rise quickly and a shortage of skilled workers and business costs rise quickly
Recession - When most businesses experience falling demand and profits. workers may lose their jobs
Slump - A serious version of recession, unemployment reaches a high level and many businesses fail to survive
What is GDP
Total value of output of goods and services in a country in one year
How does changes on employment levels affect businesses
Affect ability to employ new employees
An increase in unemployment levels will make it easier to recruit new employees
How does changes in inflation affect businesses
Prices of products may have to be increased leading to falling sales for business. Consumers will also have less income available to buy products
How does changes GDP affect businesses
Means that economy is growing. More people have jobs and more income to spend on products
What is the governments main objectives for economy
Low inflation
Low unemployment
Economic growth
What are the impacts of changes in taxes and government spending
Government raises money from tax to spend on schools, hospitals, roads and so on. This is very important for construction businesses and bus manufactures and so on.
What are the impact of changes in interest rates
Firms with existing loans will have to pay more in interest to banks. This will lead to a reduced profit
Managers who want to borrow money from the bank may delay their decision
How may a business react to increased government spending
Switch marketing strategy to gain more public sector contracts such as building or equipping schools
How may a business react to increased increased interest rate
Sell assets for cash to reduce exisiting loans
Develop cheaper products that consumers will be able to afford
How may a business react to increased income tax
Low prices on existing products to increase demand
Produce cheaper products to allow cheaper price
