2.5.1 Economic Influences Flashcards
(12 cards)
What is Inflation?
A general increase in price of goods and services within an economy
What is the effect of inflation on businesses?
A decrease in inflation will likely result in less products or services and an increase in demand
What are exchange rates?
The value of one currency expressed in another currency
What is the effect of exchange rates on businesses?
A depreciation of the domestic currency will result in decrease in price of imports and increase in price of exports.
What is interest rate?
The rewards for saving and cost of borrowing
What is the effect of interest rate on businesses?
Lower interest rate will decrease the cost of borrowing but also decrease reward of saving
What is Taxation and government spending and what is the main tax business pay?
Taxation is money paid to the government on various forms of income (the main type affecting business is corporation tax)
What is the effect of Taxation and government spending on businesses?
An increase in corporation tax will result in less profit for the business
What is the business cycle?
The measurement of the fluctuations in real GDP in an economy
What is the effect of the business cycle on businesses?
During a BOOM period there will be higher demand for products and services resulting in more profits.
What is the effect of economic uncertainty on the business environment?
It can have a big impact on businesses behaviour (contingency planning can also reduce the risk of uncertainty)
What is contingency planning?
The process of preparing a backup plan
