Topic 1.5 Business Flashcards
What is an interest rate?
The price you pay to borrow money, and the reward for saving it.
How do interest rates impact a business?
Rise in interest rate - Costs more to borrow money e.g.loans, and customers may have less disposable income.
Fall in interest rate - Costs less to borrow money, and customers will have more disposable income.
What is inflation?
Inflation is what happens when prices go up and therefore the purchasing power of money goes down.
How can inflation impact a business?
Rise in inflation rates mean that the business will receive higher costs. Fall in inflation rates vice versa. Can affect consumer behaviour too, e.g. higher inflation = lower disposable income for customers.
What are exchange rates?
An exchange rate is the rate at which the money of one country can be exchanged for the money of another country.
How can exchange rates impact a business?
S P I C E D - Stronger pound imports cheaper exports dearer (more expensive)
What is a recession? How does it impact a business?
If economic growth is decreasing: higher levels of unemployment. people will have less money to spend of goods and services. this is known as a recession.
What is a boom? How does it impact businesses?
A boom in economics is a period of rapid economic expansion that involves low unemployment and rising prices, as well as a higher gross domestic product or GDP.
What are exports? How do they impact businesses?
Exporting refers to a country selling products and services to other countries around the world. These bring money into the country, and products out.
What is an economic climate? How does it impact businesses?
The economic climate refers to the overall state of the economy, including various factors such as GDP growth, inflation, interest rates, consumer confidence, and business sentiment. This can impact businesses in many ways, one example of which being the interest rates. High interest rates cost more to borrow money and less to save it in accounts. Vice versa for low interest rates.
What are imports? How do they impact businesses?
Importing refers to the process of purchasing goods or services from overseas and bringing them into another country. Money leaves the country, and products enter.
What is unemployment? How does it impact businesses?
People who are unemployed are those who are actively seeking employment but are unable to find work.
Businesses may hire unemployed members of the public, or lower prices as higher unemployment rates means less people have a great amount of disposable income.
What are changing levels of consumer income? How does that impact businesses?
As consumers’ incomes increase, people have more money to spend. This means that demand. for many goods and services will increase as consumers look to spend their extra money. It’s vice versa if consumers’ incomes decrease.
What is government taxation? How does it impact a business?
Some taxes, eg income tax, are paid directly to the government. Others, eg VAT, are collected on behalf of the government by businesses. The impact that taxation has on a business will depend upon whether the tax is paid directly to the government or indirectly through businesses.
