2.3 The Economy and Business

Question 1

What does it mean if someone is unemployeed?

Answer 1

Someone without a job but is actively seeking work

Question 2

What are the six main ways the economic climate affects a business?

Answer 2

Rate of Unemplyment
Changing levels of conumer income
Changes in interest rates
Inflation
Tax rate
Echange rate

Question 3

What are some reasons people are unemployeed?

Answer 3

Fired
Seeking work after finishing education
Really wealthy
Looking after somebody

Question 4

What is the impact of unemployment on economy!

Answer 4

Economy is not making full use of the workers that are availbale

Question 5

What is the impact of unemployment on a business?

Answer 5

Consumers will have less money to spend
Businesses may be able to offer lower pay

Question 6

What is income?

Answer 6

Money that is recieved from or work or investment

Question 7

How does increase of consumer income affect a business?

Answer 7

more the consumer can spend
More demand for goods/services

Question 8

How does decrease of consumer income affect a business?

Answer 8

Less money to spend
Less demand for goods and services

Question 9

If there is an increase in consumer income, what is the demand like for Luxury items and Basic items?

Answer 9

Luxury items: increase in demand
Basic items: Decrease in demand

Question 10

If there is a decrease in consumer income, what is the demand like for Luxury items and Basic items?

Answer 10

Luxury items: decrease in demand
Basic items: increase in demand

Question 11

What is interest rate?

Answer 11

The cost of borrowing money or the amount a saver recieves in interest

Question 12

How does an increase in interest rate effect a saver?

Answer 12

They will reveive more interest on their savings
Encouraged to spend less and save more

Question 13

How does an increase in interest rate effect a borrower?

Answer 13

They will have to pay back more money
Discouraged from borrowing

Question 14

How does a decrease in interest rate effect a saver?

Answer 14

They will receive less interest on their savings
Discouraged to save and encouraged to spend

Question 15

How does a decrease in interest rate effect a borrower?

Answer 15

They will have to pay back less money
Encouraged to borrow more money

Question 16

What type of business’ would be highly affected by changes in interest rates?

Answer 16

Businesses that sell expensive luxury goods

Question 17

What is inflation?

Answer 17

A general increase in prices over time

Question 18

What is the impact of inflation on consumer spending and a business’ sales?

Answer 18

Lower levels of consumer spending
Fall in sales for a business

Question 19

How would you find rhe percentage price change?

Answer 19

Current price - previous price
———————————————- X 100
Previous price

Question 20

What is the impact of inflation on a business overall?

Answer 20

Staff may ask for pay rises - higher costs
Fall in demand in UK good as its cheaper overseas

Question 21

What is income tax?

Answer 21

A charge on income that has been earned (like wages)

Question 22

What is Coporation tax?

Answer 22

A change on a company’s profit

Question 23

What is National Insurance contributions?

Answer 23

Charges paid by employers and employees to cover healthcare, pensions and employee benefits

Question 24

What is Value-added tax (VAT)?

Answer 24

A charge on sales of goods and services

Question 25

How is Value-added tax (VAT) collected?

Answer 25

Collected by the business which passes it on to the government

Question 26

What is council tax?

Answer 26

A charge on property based on the property’s value and the number of people in a household

Question 27

An increase in income tax means that workers have to pay more tax on their income.
How does this effect consumers and businesses?

Answer 27

Consumers have lss money to spend on goods/services
Businesses will reduce level of investment as they expect to sell less

Question 28

An increase in VAT will mean that consumers have to pay more for the goods and services this tax is charged on.
How does this effect consumers and businesses?

Answer 28

Consumers pay higher prices
Inflation occurs which affects business costs

Question 29

What is exchange rate?

Answer 29

The price of one currency against another currency

Question 30

What does the term ‘appreciation’ mean in currency?

Answer 30

Value of the currency gets stronger

Question 31

What does the term ‘depreciation’ mean in currency?

Answer 31

Value of the currency weakens

Question 32

What two acronyms are useful to determine whether imports/exports are good/worse when a pound appreciates/depreciates?

Answer 32

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