Economic climate

• How do increases in consumer income affect businesses?

  They lead to an increase in demand for many goods and services.
• What happens to consumer behavior when incomes fall?

  Consumers buy fewer goods and services and make do with what they already have.
• Why do not all businesses experience the same impact from changes in consumer income?

  The effect depends on what a business sells.
• What are the six main ways the economic climate affects businesses?

  • Unemployment
  • Changing levels of consumer income
  • Changes in interest rates
  • Inflation
  • Government taxation (including NICS and VAT)
  • Changes in exchange rates
• What does the economy encompass?

  All activities in a country related to manufacturing, distribution, and use of goods and services.
• How does consumer spending impact businesses?

  It affects prices, investment decisions, and the number of workers employed.
• What are some reasons people become unemployed?

  Being made redundant, dismissed, or being a school/college or university leaver.
• What is the impact of unemployment on the economy?

  It means the economy is not fully utilizing available workers, slowing growth.
• What can higher unemployment lead to for households?

  Many households will have less income.
• What types of taxes can influence the economic climate?

  • Income tax
  • Corporation tax
  • National insurance contributions (NICS)
  • Value-added tax (VAT)
  • Council tax
• How does government taxation impact businesses?

  It reduces consumers' disposable income, leading to lower sales expectations.
• What is the exchange rate?

  It is the price of one currency expressed in terms of another currency.
• Why are exchange rates important for businesses?

  They affect the transportation and sale of imported and exported goods.
• What happens if the value of the pound increases?

  More foreign currency can be purchased for the same number of pounds.
• What does depreciation of the pound mean?

  Less foreign currency can be obtained for the same amount of domestic currency.
• How do changes in interest rates affect businesses?

  They affect borrowing costs for businesses.
• What does the interest rate represent?

  The cost of borrowing money or the return on savings.
• What is inflation?

  A general and sustained increase in prices over time.
• How does inflation affect purchasing power?

  It reduces purchasing power as more money is needed to buy the same items.
• What happens if income does not increase at the same rate as inflation?

  People are worse off financially.
• What does redundancy mean in the context of employment?

  Being laid off work because one is no longer needed.
• What does misconduct refer to?

  Unacceptable behavior, especially by an employee or professional person.