How Governments Affect Business Activity

Question 1

How does infrastructure provision affect businesses?

Answer 1

Good infrastructure (roads, electricity, internet) reduces costs and improves efficiency.

Question 2

How does legislation affect businesses?

Answer 2

Governments create laws on wages, working conditions, consumer protection, and environmental impact.

Question 3

How does trade policy impact businesses?

Answer 3

✅ Membership in trade blocs (e.g., EU) allows tariff-free trade.

❌ Tariffs on imports/exports increase business costs and reduce competitiveness.

Question 4

How do high interest rates affect businesses?

Answer 4

❌ Higher loan costs – Harder to invest or expand.

❌ Lower consumer demand – People save more and spend less.

Question 5

How do low interest rates affect businesses?

Answer 5

✅ Cheaper loans – Easier to invest and grow.

✅ Higher consumer spending – More demand for goods and services.

Question 6

How do high interest rates affect consumer spending?

Answer 6

❌ More expensive borrowing – Fewer loans for cars, houses, and businesses.

❌ More saving – People keep money in banks instead of spending.

Question 7

How do low interest rates affect consumer spending?

Answer 7

✅ Cheaper loans – Encourages borrowing for houses, cars, and businesses.

✅ Less reason to save – People spend more.