The economy and business (paper 1)

Question 1

What is the ECONOMY?

Answer 1

the state of a country or region in terms of production and consumption of goods and services and the supply of money

Question 2

What is UNEMPLOYMENT?

Answer 2

Is the number of people looking for work but who cant find a job at a point in time

Question 3

How can the economic climate have an impact on businesses?

Answer 3

>unemployment
>business may have to shut down
>increase costs
>inflation
>manufacturing costs
>changes in exchange rate
>government taxation
>changing levels of consumer income

Question 4

What is ECONOMIC CLIMATE?

Answer 4

the level of demand and spending within the economy measured in gross domestic product

Question 5

Impact of HIGH demand/ economic activity

Answer 5

>conusmer income rises
>inflation may rise
>unemployment may fall
>interest rates may rise
>the pound may become stronger

Question 6

Impact of LOW demand/ economic activtity

Answer 6

>consumer incomes fall
>inflation may fall
>unemployment may rise
>interest rates may fall
>the pound may become weaker

Question 7

If employment levels are falling how will this impact the business

Answer 7

> recieve less money
more motivated start
pay less salaries

Question 8

If employment levels are rising…

Answer 8

> 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

Question 9

What is CONSUMER INCOME?

Answer 9

is about the amount of money people are paid

Question 10

High levels of consumer income…

Answer 10

> 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

Question 11

Low levels of consumer income…

Answer 11

> 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

Question 12

What is INFLATION?

Answer 12

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

Question 13

Impact of INFLATION on businesses

Answer 13

> 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

Question 14

What is INTEREST RATES?

Answer 14

cost of borrowing or the reward of saving

Question 15

RISING interest rates

Answer 15

> 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

Question 16

FALLING interest rates

Answer 16

> 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

Question 17

LOWER interest rates…

Answer 17

> borrowing more
lower costs, higher levels of profit
higher demand due to lower prices and higher sales revenue

Question 18

What is EXCHANGE RATES?

Answer 18

The price of one currency in terms of another

Question 19

What is APPRECIATION?

Answer 19

an increase in the value of a currency - currrency is worth more

Question 20

What is DEPRECIATION?

Answer 20

a decrease in the value of a currency- currency is worth less

Question 21

What are IMPORTS?

Answer 21

the flow of goods and services into a country from another

Question 22

What are EXPORTS?

Answer 22

the flow of goods and services out of a country from another country

Question 23

What is STRONG POUND?

Answer 23

> more expensive in international market
less competetion
less sales
less revenue

Question 24

What is WEAK POUND?

Answer 24

> appear cheaper with international market
more competetion
more sales and reveune

Question 25

The effect of a fall in the value of the pound

Answer 25

> good for uk exporters of goods - price of exports fall
good for tourism- prices cheaper to foreginers
good for uk businesses- imports more expensive
bad for uk importers of materials as it costs more

Question 26

The effect of a RISE in the value of the pound

Answer 26

> bad for uk exporters- price of exports rises- sales fall
bad for uk tourism- prices more expensive to foreigners
bad for uk businesses- imports cheaper- people buy fewer uk goods
good for uk imports of materials- imports or cheaper

Question 27

What is an ECONOMIC BOOM?

Answer 27

when the economy is growing significantly and the businesses in it are generally doing well

Question 28

What is an ECONOMIC RESSIONS ?

Answer 28

economic output falls and because of this businesses usally experience a fall in demand for their products