External Influences Flashcards
What are interest rates?
The cost of borrowing money and the reward for saving money
What are inflation rates?
The rise in cost of goods and services to buy
What is tax?
Monies demanded from the government so they have money to spend elsewhere e.g. on the NHS and in schools
What are exchange rates?
The rate at which one currency can buy another
What is a boom?
A period when the economy is growing strongly and is operating around its productive potential
What is a recession?
A period when growth or output become negative for at least two quarters
What is recovery?
The movement back from when the economy is operating below its productive potential to a point where it is at its productive potential
What is a slump?
A period where there is a particularly deep and long fall in output
What is a base rate?
A rate encouraged to banks to charge based on the current economy
-current base rate is 5.25%
What does it mean when a currency appreciates?
It is getting stronger and goes up in value
What does it mean when a currency depreciates?
It is getting weaker and decreases in value
How do exchange rates affect business?
-Increase or decrease the price of a product sold abroad
-Change the price of imported raw materials
What does CPI mean?
Consumer Price Index
What does RPI mean?
Retail Price Index
What is demand pull?
Buyers want to buy more than sellers can actually produce, therefore sellers increase the price
-demand pulls the price up
What is cost push?
Business costs rise and sellers must increase prices
-costs push the prices higher
Why can inflation be good?
-A sign that the economy is growing
-A lack of inflation indicates that the economy is weakening which could lead to a recession
What is the fiscal policy?
The use of government mechanisms in revenue collections
-the government can raise direct taxes leading to a reduction in disposable income
-the government can reduce its own spending on the public
What is the monetary policy?
Actions from the Bank of England to control the size and rate of growth
What does fiscal mean?
Tax
What is direct tax?
Collected by inland revenue
e.g council tax, income tax, business and corporation tax
What is indirect tax?
Collected by the customs and excise
e.g vat, fuel, wine, spirits and beer
What are the types of tax?
-Income tax = workers pay income tax and national insurance contributions, this affects how much pay workers take home
-Corporation tax = businesses pay corporation tax on their profits
-VAT = a tax placed on all goods we buy except food and children’s clothing, this is 20%
-Excise duties = these are specific taxes charged on certain goods e.g alcohol, fuel, tobacco
What is the consumer protection act?
Protects the public by:
-prohibiting the manufacturer to supply unsafe goods
-making the manufacturer responsible for the damage it has caused
-prohibiting misleading price indications
What are unfair trading regulations?
-Makes it an offence for a trader to make false or misleading statements about goods
-Cannot use aggressive door to door selling
-Covers a false trading description on any goods
What is the data protection act?
Controls the use of consumers information
-businesses must store data securely and avoid theft
-prevents customers details being sold
What are statutory rights?
Legal rights based on laws passed by parliament
What is a contract of employment?
The agreement made between the employer and the employee
-it includes ‘custom and practise agreements’ which is how things are done in the workplace
What is the employment rights act?
-States the duties and rights of the employer and the employee
-Includes the right to maternity and paternity leave
-Includes details about the termination of employment
What is a working time directive?
Overall puts a limit on the number of hours which should be worked in a week
-Limit of 48 hours per week, unless workers choose to work more
-Night workers receive free health assessments, 11 hours of rest
-At least one day off a week
-Right to 4 weeks paid time off
What is national minimum wage?
A statutory right to be paid a certain amount of pay for the work performed
What is uncertainty?
A future that we have little to no knowledge of including potential outcomes and risks
How can we reduce uncertainty?
-Research = provides information which can reduce uncertainty by providing up to date information
-Contracts = makes sure that potential fluctuating factors in the business are controlled to keep them predictable for a period of time
-Diversification = diverse the product portfolio for when uncertainty happens within a market
What is the environmental protection act?
The act defines the fundamental structure and authority for waste management and control emissions into the environment
-businesses must recycle, have a duty of care when dealing with waste
What is the competition act?
It makes sure there are anti competitive agreements and abuse of dominant market position
-aims to prevent price fixing
-investigates competitive mergers
-aims to promote competition which benefits the customers
What is the health and safety at work act?
Employers must protect the health, safety and welfare of all their employees while at work
-gives the employers responsibility about the employees
-aims to raise the standard of safety and health for all the individuals at work
-can be taken to court if businesses fail to comply
