The economic climate on businesses

Question 1

what happens when interest rate goes up

Answer 1

borrowing become expensive

and firms might be paying high interest on money already borrowed

saving become popular for high returns, reduce in demands so less sales and profits drop

firms cannot pay employees so unemployment levels go up

Question 2

what happens when interest rate drops

Answer 2

• cheaper to borrow so more spending hence demand goes up more profits

when interest is low firms have smaller repayments so more finance to invest in business and can borrow more for growth

Question 3

analyse one impact of unemployment

Answer 3

• less income so less money to spend hence descrease in demand so decrease in sales
• lose skills

Question 4

analyse one benefit of unemployment

Answer 4

• lower wages as high demand for jobs

- grants in areas of high unemployment

Question 5

analyse the impact of higher prices on consumer spending

Answer 5

consumers spend more on requirements such as bills food rent
less money to spend on luxuries and wants so demand for these businesses fall
hence sales fall and lower profits

business that sell cheaper products / discounted face high demand and sales rise greater profits as cheaper alternative to save money