Section 6 - External influences on businesses (Chap 27 - 29) Flashcards
define GDP
-Gross domestic products
-amount of goods & services produced by a country in a year
define per capita income & formula
-income of 1 person in a year
-GDP/ population
Business life cycle
-growth
-boom - (people spend too much money, prices increase, inflation), (less workers, more business cost)
-recession - less workers, more unemployment
-slump - lowest point
-recovery
how can a business recovery
gov stimulates the economy
objectives of a gov
-low inflation
-low unemployment
-economic growth
-balance of payment
define inflation
increase in prices over a period of time
what does inflation do
-demand> supply = increased prices = lower value of currency
-countries won’t buy from you
-businesses don’t like to invest when inflation is high
define unemployment
people who are looking for jobs but can’t find them
what does unemployment do
-less production, lower GDP
-gov. needs to support unemployed people eg. social security
-people become lazy
-people do crimes to support themselves
what does economic growth do
-more goods & services, higher GDP, better standard of living
-less income, less businesses open, less people spend money, bad economy
what does balance of payment do
-export> import = favorable
-export< import = adverse
-need to protect foreign currency so it is controlled by gov.
-countries export stuff they have & import stuff they don’t have
types of exports
-visible - physical goods
-invisible - services
gov. main source of income
-taxes
eg. business tax, individual tax, foreign goods tax, property tax, vehicle tax
main reason for gov spending
to improve the standard of living for its people
Gov. economies policies
-fiscal policy
-monetary policy
-supply side policies
-directed towards taxes & gov. spending
types of fiscal policy
-direct tax
-indirect tax
fiscal policy - direct tax
-progressive tax - not everyone has to pay
-income tax - higher the salary, higher the tax;
-cooperate tax - tax on the profits of limited companies
formula for disposable income
income - income tax
fiscal policy - indirect tax
-regressive tax - everyone has to pay equally
-Value Added Tax (VAT) - tax on goods & services
-import tariffs - tax on imported goods; quota
-gov. spending - eg. transpiration, development, healthcare
define quota
restrictions on number of goods that can be imported without paying tax
define interest rates
cost of borrowing money
monetary policy
-interest rates:
-business rely on borrowed funds
-if interest rates increase, borrowing is discouraged, saving is encouraged
-if interest rates decrease, borrowing is encourages, saving is discouraged, spend more money, better economy
define supply side policy
-acts that the gov can do to increase competitiveness in the economy against foreign goods to make the economy more efficient
methods of supply side policy
-improve training & education: more skills, easier for people to find jobs, lower unemployment
-increase competition: open up more businesses
-privatization: gov. controlled business are handed over to other business/ more businesses are allowed to open up, less unemployment
social responsibilities of businesses
-need to care for the environment
-need be socially ethical
-look at the impacts before making a decision
define pressure groups
-groups of people with an agenda who take actions against businesses ho break their rules
externalities from a decision
-internal cost
-private cost - cost for business
-external cost - cost for society
-private benefits - benefits for business
-external benefits - benefits for society
benefits of being ethical
-can charge higher prices
-good reputation
-investors are more willing to invest
disadvantages of being ethical
-increased cost
define globalisation
spread of a business across the globe
key factors of globalisation
-communication
-transport
define free trade agreement
-free trade between countries without tax & restrictions
-so goods will be the same price in all countries
benefits of globalisation
-sell world wide
-new markets
-opening factory in a new country, less tax payment than imports, lower selling prices
-good for the country’s economy
disadvantages of globalization
-more competition
-have to cater to local market
-multinationals dominate & kill local businesses
slogan for globalization
Think global, act local
need to recheck with book
