External Environment

Question 1

What are interest rates

Answer 1

Refers to the cost of borrowing money or the reward for saving money expressed as a percentage

Question 2

What is gdp

Answer 2

Measures the value of a country’s total output of goods and services over a period of time, typically a year

Question 3

what are real incomes

Answer 3

Incomes that are adjusted for the rate of inflation to show changes in purchasing power

Question 4

How will demand for necessities increase or decrease

Answer 4

Small Increase demand: increase in real income
Small decrease in demand: decrease in real income

Question 5

How will demand for luxuries increase or decrease

Answer 5

Large Increase demand: increase in real income
Large decrease in demand: decrease in real income

Question 6

How will demand for inferior products increase or decrease

Answer 6

Decrease in demand: increase in real income
Increase in demand: decrease in real income

Question 7

An increase in income is good unless

Answer 7

• businesses sell inferior goods
• high labour costs

Question 8

Increase in income is good unless

Answer 8

• business sells inferior goods
• high labour costs

Question 9

Decrease in income is bad unless

Answer 9

• sell inferior goods
• high labour costs and negotiate pay