Economic Variables Flashcards
What is inflation?
Inflation is the rate at which the general level of prices for goods and services rises, causing purchasing power to fall.
How does inflation impact sales?
High inflation can reduce consumers’ purchasing power, leading to lower sales as people can afford fewer goods and services.
What is the impact of interest rates on business sales?
Higher interest rates can reduce consumer spending on big-ticket items like houses and cars, leading to lower sales.
How do interest rates impact business costs?
Businesses with loans face higher interest expenses, increasing overall costs.
How does high employment impact business sales?
High employment levels typically lead to increased consumer spending and higher sales as more people have disposable income.
What happens to costs when unemployment is low?
Low unemployment can lead to higher wages as businesses compete for workers, increasing costs.
How do exchange rates affect business sales?
A strong domestic currency makes exports more expensive and imports cheaper, reducing sales for export-oriented businesses but benefiting those relying on imports.
What is the effect of fluctuating exchange rates on business costs?
Fluctuating exchange rates can affect the cost of imported goods and raw materials, impacting business costs.
How does taxation affect consumer confidence?
High taxes can reduce disposable income, leading to lower consumer confidence and spending.
What happens to sales when taxes are high?
Higher taxes can reduce disposable income for consumers, leading to lower sales.
