Unemployment and consumer spending

Question 1

Define unemployment

Answer 1

• Unemployment is wan people are willing to work but cant find a job

Question 2

Define consumer spending

Answer 2

• consumer spending Is the amount of money that individuals spend on gods and services in a given period of time

Question 3

describe the impact on falling unemployment on businesses

Answer 3

Consumers

• Consumer spending may rise
• as they have more income to spend on goods and services
• sales revenue and profit may rise in the business

businesses

• busineesses will find less people willing to work as they are already employed
• leading to them offering higher wages to attract customers
• buriness costs may rise and prices may need to rise if demand is high

Question 4

what happens when prices rise at a faster rate than income

Answer 4

• Consumer spending may fall
• People will have to spend more on necessities and bills
• less money to spend on luxury so demand will fall for businesses selling wants
• businesses sales will fall meaning they get less profit
• however businesses selling necessities/ discount see sales increase as people want to bur cheap things

Question 5

What happens if prices rise at a slower rate

Answer 5

• People will be spending less of their income on necessities
• this means they have more money to spend on luxuries so the demand will rise
• stores selling necessities or discounted goods may see profits falling as people worry less about getting items as cheap as possible

Question 6

describe the impact on rising unemployment on businesses

Answer 6

Consumer

• Consumer spending may fall
• as they have less income to spend on goods and services
• sales revenue and profit may fall in the business

Business

• the job may be able to pay lower wages as people are desperate for a job
• businesses selling luxuries may see a fall in demand and less sales, revenue and profit as people have to spend more on nececities

Question 7

What causes real incomes to rise

Answer 7

• Real incomes rise when workers wages are rising at a faster rate than prices
• this means that consumer spending is likely to increase
• they are morel likely to buy more luxury goods and services and spend a lower proportion on necessity

Question 8

What is interest

Answer 8

• When you borrow money you pay interest back which means you have to pay back more than borrowed
• when you save money you earn interest which means over time your money saved will increase

Question 9

What are the effect of low interest ?

Answer 9

• Low interest leads to increased spending
• because its cheaper to borrow money - less intrest in saving
• consumers + firms borrow more and save less
• Leading to Consumers have more money to spend so demand for goods and services increases
• Therefor firms may make more profit
• firms that borrow have less intrest to repay so spent more on investment and expanding

Question 10

What are the effects of high interest

Answer 10

• Borrowing money becomes more expensive but returns on saving is better
• firms nad consumers will have less money to spend and also trying to spend more
• this reduces demand for products so firms sales and profits decrease
• some firms may have to make workers redundant as they don’t have enough to pay them