Economic Factors

• What is the economy made up of?

  Consumers, businesses, and governments
• What does the unemployment rate measure?

  Percentage of unemployed people in the workforce
• What is the employment rate?

  Percentage of working-age people in employment
• What characterizes the GIG economy?

  Use of mainly temporary workers without benefits
• What does consumer spending refer to?

  Value of goods and services bought by consumers
• What are income elastic products?

  Products whose sales change with income levels
• What does economic climate describe?

  State of key economic factors in a country
• What is unemployment?

  When someone is looking for a job but can't find one
• What problems does unemployment cause for consumers, businesses, and the government?

  • Consumers: Reduced income, lower living standards, stress
  • Businesses: Decreased demand, financial problems
  • Government: Lower tax revenue, increased welfare payments
• Who are producers?

  Suppliers of goods and services
• Who are consumers?

  Individuals who buy goods and services
• How do employment levels relate to economic activity?

  • Rise and fall with economic growth
  • High demand leads to more jobs
  • Low demand leads to unemployment
• What happens during economic growth?

  High consumer demand for goods and services
• What is a consequence of a recession?

  Low consumer demand and high unemployment
• How do interest rates affect spending?

  Low rates increase spending; high rates decrease it
• What is the impact of a fall in interest rates on businesses?

  Lower costs and increased profit potential
• How does lower interest affect consumer behavior?

  More disposable income leads to increased spending
• What are the positives and negatives of saving?

  Positives:

  • Incentive to spend and invest
  • Benefits the economy

  
  

  Negatives:

  • Uncertainty in the market
  • Financial hardship on workers
• What does inflation measure?

  Rate of change of prices over time
• What is a slow increase in prices beneficial for?

  Businesses and consumers can benefit
• What happens during high inflation?

  Businesses postpone investments due to uncertainty
• What is taxation?

  Payments required by governments from individuals
• What is income tax?

  Tax on a person's income deducted from wages
• What are the effects of an increase in income tax on customers and businesses?

  • Less disposable income for customers
  • Businesses may sell less and earn less profit
  • Some businesses may benefit by selling necessities
• What are direct taxes?

  Taxes paid on income or profit
• What are indirect taxes?

  Taxes paid on spending by individuals and businesses
• What is corporation tax?

  Tax on company profits before dividends
• What are the effects of an increase in corporation tax on businesses?

  • Retained profits may fall
  • Businesses may increase prices
  • Less money for investment or dividends
• What is national insurance?

  Contributions for state benefits like pensions
• What are the positive and negative effects of a business closure on local communities?

  Positive Effects:

  • Environmental benefits
  • Attraction of other businesses

  
  

  Negative Effects:

  • Job losses
  • Less footfall for existing businesses
• What is VAT?

  Tax on the purchase of goods and services
• What is the standard rate of VAT?

  20%
• What types of goods and services are subject to VAT?

  Most goods and services purchased by consumers