Flashcards in 2.5 external influences Deck (33)
what s an external influence?
- factors which are beyond the control of the business
what is GDP (gross domestic product)?
- measures of the value of output (activity) in the economy
what is demand?
- how much of a good or service a consumer wants and is able to pay for
what are the 6 external influences?
how is the anagram for the 6 external influences?
what is real incomes?
- measures the amount of disposable income available to consumers
what factors affect real incomes?
- price inflation
- wage growth
- employment levels
what factors affect consumer spending?
- real disposable incomes
- employment and job security
- household wealth
- expectations and sentiments
- marker interest rates
what is an interest rate?
- the reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed
what is inflation?
- a sustained increase in the cost of living or the general price level leading to a fall in the purchasing power of money
what is the Y and X axis on the business cycle?
- Y= GDP
- X= time
what is the business cycle?
what is the economy like during a peak/boom?
- high investments
- high confidence
- high levels of spending
- higher incomes
- low unemployment
- higher inflation
what is the economy like in a recession?
- lower levels of spending
- falling confidence
- falling income
- rising unemployment
- inflation falls
what is the economy like in a recovery/expansion?
- increased confidence
- increased level of spending
- increasing income
- declining unemployment
what is deflation?
- a sustained fall in the general price level
what are 2 causes of inflation?
- demand pull (excess demand)
- cost push (costs rise)
what are consequences of inflation?
- money loses its value
- value of saving is reduced
- lack of competitiveness
what is an exchange rate?
- the price of one currency expressed in terms of another
what is SPICED?
what is a monetary policy?
- using changes in the interest rate and money supply to manage the economy
what happens when interest rates fall?
- cost of borrowing is reduced
- greater consumer confidence
- effective disposable income rises
- boost in business investments
what is fiscal policy?
- involves the use of government spending, taxation and borrowing to affect the level of growth of aggregate demand, output and jobs
why does the government tax?
- raise revenue
- manage aggregate demand
- change distribution of wealth
what's direct tax?
- tax on income
what's indirect tax?
- tax on consumptions
what are 3 main areas if government spending?
- transfer payments
- current spending
- capital employed
what is a legislations?
- rules and regulations with which a business has to comply
what are the main roles of legislations?
- protect consumers
- fair treatment of employees
- ensure a level playing field