Economic Considerations

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When is unemployment?
The number of people able and willing to work but not able to find a paying job.
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What is the unemployment claiment count?
Based on the numer of people claiming unemployment related benefit.
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How does the International Labour Organisation record unemployment?
Covers people who are looking for work and are available for work.
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Hw does rising umemployment affect businesses?
People have less income so sales of luxury goods and non-essentials fall. Some businessses will benefit as people swap to cheaper substitutes. Wages less likely to increase from more competition, larger labour pool, skilled people more easy to find.
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How does falling unemployment affect businesses?
Increased income increases sales, particulalry luxury non essentials. Cheaper substitutes will fall in sales. Wages more likely to increase to attract best people, harder to recruit from smaller labour pool, harder to find the right skill.
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What is inflation?
The general rise in prices over time, it is the fall in the value of currency .
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What is CPI?
Consumer Price Index which measures inflation on internationally agreed standards throughout Europe.
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What is RPI?
Retail Price Index. Includes mortgage interest payments and council tax.
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How is CPI measured?
A selection of over 600 goods and services whch are measured in 146 places across the UK.
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What is the Monetary policy?
How the government uses the supply of money in the economy to control the level of demand and spending.
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What is the governments target for inflation?
2%
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What is meant by real values?
When the change in inflation is taken into account eg when calculating the real value of a pay rise
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How does inflation impact future planning forbusinesses?
Makes it harder to plan because there is uncertianty regarding future costs. Businesses are less likely to invest.
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How does inflation affect profitability?
Cost of supplies and wages increase, may ncrease price but this can reduce demand. If UK has higher inflation than other countries costs will rise faster so they will face more competition, lose sales and exports.
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How does inflation impact consumers?
Those in fixed incomes lose out because real income falls. Some pensions and investment income don't rise with inflation. May not be able to negotiate a pay rise so will spend less on goods and services.
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What is the main may to reduce inflation and why?
Increase interest rates. It increases the cost of borrowing so businesses are less likely to invest and grow, consumers face increased interest charges so they are less likely to borrow and spend, which may reduce sales.
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What are interest rates?
The price of borrowing money or the reward for saving it.
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What will happen if interest rates increase?
People and businesses will borrow less money, this leads to less spending and level of demand.
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What does the Monetary Policy Committee do?
They meet once a month to decide if interest rates should increase or deacrease, or stay the same.
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How does an increase in interest rates effect businesses?
Less likely to borrow money to expand. Investment may slow which may lead to fewer new businesses starting and less growth in existing ones.
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How do increaseing interest rates effect consumers?
Less likely to borrow for larger items like cars, holidays. Credit card spending may reduce. Mortgage repayments may increase resulting in less disposable income. Businesses will face falling demand.
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How do falling interest rates effect businesses?
Investment may increase and businesses may exapand, new businesses may be enocouraged to start up due to lower cost of borrowing.
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How do falling interest rates effect consumers?
Spending may increase as it is cheaper to borrow money, mortgage repayments may decrease resulting in more disposable income. Buinsesses will have more demand.
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What is an exchange rate?
The price of one currenct expressed in terms of another.
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What is meant by exchange rates floating?
Their price is determined by the market forces of demand and supply.
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What happens when the exchange rate of the £ rises?
The pound is said to be stronger or risen. Appreciation. Each pound can buy more eg.dollars than before.
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What happens when the exchange rate of the £ falls?
The pound is said to be weaker or has fallen. The correct term is deprecisation. Each pound can now buy few eg dollars.
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Will exporting businesses want a weaker or stronger pound, and why?
A weaker pound because it will be more competitive.
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Will importing businesses want a weaker or stronger pound, and why?
An appreciating or stronger pound because as their costs fall thay can reduce prices or make more profit.
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What happens to exports when the pound gets stronger?
Exports become more expensive as foreign countries have to give up more of their money for the same number of pounds.
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How does a stronger pound effect imports?
Our imports become cheaper as we have to give up less of their money for the same number of pounds.
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How does a weaker pound effect exports?
Exports become cheaper as foreign countries have to give up less of their money for the same number of pounds.
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How does a stronger pound effect imports?
Imports become more expensive as we have to give up more pounds to buy the same amount of foreign currency.
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What does the acronym SPICED stand for?
Strong Pound Imports Cheap Exports Dear
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Which two main variables does the governement decide that effect businesses?
Governement spending and levels of taxation.
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How does government spending affect businesses?
The government employs 6 million people who will all spend money of businesses, some businesses rely on government contracts to supply places like schools and health services they to employ people who spend money with businesses.
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How does an increase or decrease in government spending affect business or people?
A increase or decrease in income and businesses activity will be affected.
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What is direct taxation?
This includes income tax, national insurance and corperation tax direct taxes aare charged on earnings.
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What is indirect taxation?
This includes VAT, excise duties(on petrol or alcohol), car tax, insurance tax
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How does direct taxtion affect businesses?
Direct taxation places on incomes will change levels of disposable income so demand will be effected.
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How does indirect taxtion affect businesses?
An increase in VAT will increase prices so consumers will spend less. Businesses producing goods carrying excise taxes may see a fall in demand if taxes increase.
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Card 2

Front

What is the unemployment claiment count?

Back

Based on the numer of people claiming unemployment related benefit.

Card 3

Front

How does the International Labour Organisation record unemployment?

Back

Preview of the front of card 3

Card 4

Front

Hw does rising umemployment affect businesses?

Back

Preview of the front of card 4

Card 5

Front

How does falling unemployment affect businesses?

Back

Preview of the front of card 5
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