The economy and business (paper 1) Flashcards
What is the ECONOMY?
the state of a country or region in terms of production and consumption of goods and services and the supply of money
What is UNEMPLOYMENT?
Is the number of people looking for work but who cant find a job at a point in time
How can the economic climate have an impact on businesses?
>unemployment >business may have to shut down >increase costs >inflation >manufacturing costs >changes in exchange rate >government taxation >changing levels of consumer income
What is ECONOMIC CLIMATE?
the level of demand and spending within the economy measured in gross domestic product
Impact of HIGH demand/ economic activity
>conusmer income rises >inflation may rise >unemployment may fall >interest rates may rise >the pound may become stronger
Impact of LOW demand/ economic activtity
>consumer incomes fall >inflation may fall >unemployment may rise >interest rates may fall >the pound may become weaker
If employment levels are falling how will this impact the business
> recieve less money
more motivated start
pay less salaries
If employment levels are rising…
> fewer potential employees
wages increase in order to attract potential customers
peoples incomes higher, more money to spend on products and services
happier staff as feel safe
What is CONSUMER INCOME?
is about the amount of money people are paid
High levels of consumer income…
> more money to spend therefore more likely to buy luxury goods
number of products or services purchased will rise
consumer confidence high meaning big purchases made
Low levels of consumer income…
> more restricted therefore will buy lower priced products
number of products or services bought will go down
consumer confidence low therefore less likely to buy luxury goods
What is INFLATION?
the change in the average level of prices in the economy
measured using consumer price index measuring changes in the price of food, housing and clothing
Impact of INFLATION on businesses
> businesses costs will rise unexpectdedly
consumer costs rise when inflation rises
less disposable income for conusmers so will buy fewer goods and services from businesses
What is INTEREST RATES?
cost of borrowing or the reward of saving
RISING interest rates
> increase the cost of borrowing
businesses may struggle to pay back loans
small businesses are less likely to borrow money
customers are less likely to spend money as borrowed money costs more, so consumer spending falls
FALLING interest rates
> lower the cost of borrowing
businesses will have more money to spend and cash flow may improve
customers are more likely to borrow and to spend their money, consumer spending rises
LOWER interest rates…
> borrowing more
lower costs, higher levels of profit
higher demand due to lower prices and higher sales revenue
What is EXCHANGE RATES?
The price of one currency in terms of another
What is APPRECIATION?
an increase in the value of a currency - currrency is worth more
What is DEPRECIATION?
a decrease in the value of a currency- currency is worth less
What are IMPORTS?
the flow of goods and services into a country from another
What are EXPORTS?
the flow of goods and services out of a country from another country
What is STRONG POUND?
> more expensive in international market
less competetion
less sales
less revenue
What is WEAK POUND?
> appear cheaper with international market
more competetion
more sales and reveune
