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year 13 business > PESTEL factors > Flashcards

PESTEL factors Flashcards

(48 cards)

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1
Q

Economic

What is meant by changes in the economic environment

A

Economic change refers to the fluctuations in national and international macroeconomic variables, such as economic growth (GDP), unemployment, inflation and exchange rates

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2
Q

Economic

All economic variables can ….

A

Have a significant impact on businesses strategic and functional decisions. This impact can include opportunities and threats

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3
Q

Economic

The 5 economic factors

A
  • Economic growth
  • Unemployment
  • Inflation
  • Exchange rates
  • Government economic policy
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4
Q

Economic

What is economic growth

A

The total value of all goods and services an economy (country) can produce

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5
Q

Economic

What is GDP

A

The total output of an economy over a period of time

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6
Q

Economy

Define The economic cycle

A

A phenomenon whereby GDP fluctuates around its underlying trend, following a regular pattern. Rises and falls may over time follow a regular pattern

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7
Q

Economy- The economic cycle

What are the 4 stages to the cycle

A
  • Recession
  • Recovery
  • Boom
  • Slowdown
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8
Q

Economy-key terms

Define The recovery

A

When ecominc growth becomes positive after a recession

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9
Q

Economy- key terms

Define The boom

A

When the rate of economic growth exceeds the potential growth of GDP (the output gap is narrowed)

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10
Q

Economy- key terms

Define The slowdown

A

When economic growth begins to fall and approach 0

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11
Q

Economy- key terms

Define The recession

A

When the rate of economic growth becomes negative and real GDP actually falls (real GDP falls in 2 consecutive quarters)

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12
Q

Economy

Define the output gap

A

The difference between actual and potential (trend) GDP growth

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13
Q

Economy- output gap

What is a positive output gap

A

If actual exceeds potential growth

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14
Q

Economy- output gap

4 facts about output gap

A
  • If actual exceeds potential growth- a positive output gap
  • If actual output is below potential output then the country has capacity- a negative output gap
  • Indicates little of no capacity
  • Likely to generate inflationary pressures
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15
Q

Economy- output gap

When is there a negative output gap

A

-If actual output is below potential output then the country has capacity- a negative output gap

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16
Q

Economy- Fiscal policy

Define the fiscal policy

A

The use of taxation and public spending to achieve macro economic targets

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17
Q

Economy- Fiscal policy

4 facts about the fiscal policy

A
  • Usually in each year the government spends more than its tax income
  • This is referred to as a budget or fiscal deficit
  • the government has to borrow to pay for this deficit
  • Each year this additional borrowing is added to the national debt
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18
Q

Economy

What are the 4 types of taces in the UK

A
  • Income tax
  • National insurance
  • VAT
  • Excise duties
  • Corportaion tax
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19
Q

Economic

What is a freely floating exchange system

  • how does the value of the currency find its way around
  • what will the value of the currency be determined by
A
  • The value of a currency is allowed to find its own way to equilibrium without any Government intervention
  • The value of the currency will be determined by market forces of demand and supply
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20
Q

What determines an exchange rate in a ‘freely floating’ exchange rate system?

Study These Flashcards
A

Supply and demand

21
Q

A strong pound is is …

Study These Flashcards
A

Good for importers, bad for exporters

22
Q

A weaker pound is …

Study These Flashcards
A

Good for exporters, bad for importers

23
Q

2 advantages of inflation for a business

Study These Flashcards
A

1) Real assets become worth more

2) The real value of money owed is eroded

24
Q

advantages of inflation for a business

1) Real assets become worth more (3)

Study These Flashcards
A
  • e.g. the value of property and stock that a firm owns will increase
  • this will improve a firms balance sheet
  • as a result firms may find it easier to raise finance from banks and shareholders
25
advantages of inflation for a business 2) The real value of money owed is eroded (2)
- Firms with large borrowings benefit as fixed terms repayments become more easily covered by inflationary rises in income and profit - This can mean that periods of high inflation could be a good time for a business to expand
26
Inflation- 2 other impacts for a business
- Businesses may increase prices to pass costs onto consumers or may decide to absorb cost rises - May decide to reduce internal costs to protect profits
27
4 Disadvantages of inflation for a business - it is harder for a business to plan ... - companies producing premium goods... - inflation can damage ... - damage to ...
1) It is harder for a business to plan when inflation is high- they need stable prices to make accurate sales forecasts 2) Companies producing premium goods may experience lower sales as consumers switch to cheaper alternatives 3) Inflation can damage profitability- especially for firms with fixed price contracts that take a long time to complete e.g. house building 4) Damage to industrial relations
28
2 Benefits of low stable inflation
- Business feels more confident- planning/ long term strategic decisions easier to make - May look to invest and grow
29
What is deflation
A fall in the average price level measured by the CPI
30
What will happen in a period of deflation
-In a period of deflation low demand (consumers will put off purchases) may lead to redundancies and rationalism
31
Define unemployment
The number of people able, available and willing to find work and actively seeking work- but not employed
32
What is the unemployment rate | Define and formula
The % of the labour force who are out of work The unemployed __________________ X100 Labour force
33
What are the 4 main types of unemployment
- Seasonal - Structural - Frictional - Cyclical
34
What is seasonal unemployment
Regular seasonal changes in employment/ labour demand
35
What is structural unemployment
Arises from the mismatch of skills and job opportunities as the pattern of labour demand in the economy changes
36
What is frictional unemployment
Transitional unemployment due to people moving between jobs
37
What is cyclical unemployment
Caused by a fall in aggregate demand leading to a decline in GDP and employment
38
Business implications of rising/ high unemployment (4 problems) - spending - staff insecurity - skills - social problems
- Lower consumer spending = lower demand for income elastic - Unemployment creates insecurity in the workforce; potentially a cause of lower morale and de-motivation - Danger of lost skills for industries as a whole - Business may be impacted by social problems associated with high unemployment
39
Business implications of rising/ high unemployment (4 advantages) - demand - supply of labour - recruitment - staff turnover
- Demand for inferior goods (lower price, quality) may increase - Greater supply of labour- potentially lower wage/ salary levels - Recruitment becomes easier- there should be more applicants for each vacancy - Lower staff turnover- employees less likely to be able to find other jobs, or want to move in an uncertain economic climate
40
What does monetary policy involve
Altering the base (policy) interest rate or the supply of money in the economy
41
Monetary policy What do many economists consider
They consider that the manipulation of exchange rates is a form of monetary policy, given that exchange rates are affected by changes in interest rates
42
Monetary policy Since 2009 what has been used
Quantitative easing has been used to increase the money supply
43
What does Monetary policy aim to influence
The growth of output (GDP), and jobs (unemployment)
44
The base rate of interest is set by ...
The Bank of England’s monetary policy committee (MPC)
45
Why is the bank of england independent (3)
- it increases the credibility of policies - firms and consumers will have more confidence in the Governments actions - therefore more likely to invest
46
How many members does the MPC consist of
9 members- 5 from the Bank of England and 4 external members appointed by the Chancellor -it is chaired by the Governor of the bank of england
47
What are interest rates
The reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed
48
What are the 5 different types of interest rates operating within the external environment
-Interest rates on savings in bank and other accounts -borrowing interest rates -mortgage interest rates -credit card interest rates and pay day loans -

year 13 business (3 decks)

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