How does Economic Change affect Business? (CH7)

Question 1

Interest Rate Meaning

Answer 1

The cost of borrowing money

Question 2

Exchange Rate Meaning

Answer 2

The price of one currency in exchange to another

Question 3

Taxation Meaning

Answer 3

The compulsory charge by the government on goods, services, income or capital

Question 4

Unemployment Meaning

Answer 4

Someone who does not have a job

Question 5

Inflation Meaning

Answer 5

The sustained increase in prices of a good/service in an economy in a period of time

Question 6

What happens if there is an increase in interest rates for firms and consumers?

Answer 6

Makes it more expensive to take out a loan and borrow money which results in a fall in spending and investment, aswell as for firms in decrease profits made as saving is encouraged.

Question 7

Impact of a depreciation of the pound on the UK?

Answer 7

UK goods and services cheaper for foreign buyers and foreign goods and services more expensive for UK consumers

Question 8

Effect of High rates of Unemployment on firms?

Answer 8

Firms will have a large supply of labour to choose from. Causing wages to fall, helping firms reduce their costs. Due to less disposable income consumer spending falls, so firms may lose profit

Question 9

Effect of High inflation rate on interest rates?

Answer 9

Interest rates are likely to be high, so costs are more expensive so firms are less likely to invest.