Theme 2.5 Flashcards
Inflation
The general rise in prices over a period of time or a fall in purchasing
Effects of inflation
Business is really experienced increased costs if inflation rises,
Exchange rate
The value of one currency in terms of another currency
Effects of exchange rates
If the pound is strong firms that import will be able to buy cheaper raw materials
Effects of interest rates
If interest rates are high saving is more attractive
Interest rates will affect customers willingness to spend on credit
Taxation
Imposing financial charges on businesses and individuals by the government
Government spending
The annual expenditure by the government on supplying goods and services to achieve economic and political objectives
Effects on businesses of government spending
Spending on infrastructure
Pay rates to public sector workers affects disposable income
Business cycle
Fluctuations in the level of economic up to Vitti have a time measured by GDP
Impacts during a boom
High economic growth
Demand more price inelastic
Business impact during recession
Value for money equals important
Demanded more price elastic
Business impact during Slump
Many firms will go out of business
Less competition = monopoly
Business impact During recovery
Phones or take on more workers
Capacity utilisation increases
Economic uncertainty
The inability to predict exactly what will happen in the economic environment in the future
What does economic uncertainty affect
Attitude to risk
Share prices
Confidence levels
