6.2 The economic climate

• What does the economic climate refer to?

  The overall state of economy
• Exchange rates impact businesses involved in international trade
• What is a recession characterized by?

  Falling GDP and high unemployment
• How do higher interest rates affect businesses?

  Reduced investment
• In response to higher interest rates, businesses may delay major capital investments
• How do businesses typically respond to inflation?

  Raise prices and cut costs
• What are interest rates?

  The cost of borrowing money
• Economic growth is measured by GDP.


  True
• Inflation leads to higher input costs
• What happens to labor costs when unemployment rises?

  They decrease
• Match the macroeconomic indicator with its impact on businesses:

  Inflation ↔️ Higher input costs

  Interest Rates ↔️ Higher borrowing costs

  Exchange Rates ↔️ Affect export competitiveness
• Why do higher interest rates reduce investment?

  Higher borrowing costs
• Inflation reduces the purchasing power of money.

  True
• Inflation leads to higher input costs
• Higher interest rates increase borrowing costs for businesses.


  True
• What does unemployment reflect about the economy?

  Its overall health
• Increased consumer spending and more business opportunities are effects of economic growth
• What are the key characteristics of an economic recession?

  Decreased consumer spending
• Inflation reduces the purchasing power of money.


  True
• Exchange rate fluctuations affect export competitiveness.


  True
• A recession is characterized by falling GDP
• Economic growth leads to increased consumer spending and business opportunities.

  True
• An economic recession is characterized by high unemployment
• Responding to changes in the economic climate is crucial for businesses to remain competitive.


  True
• The economic climate is influenced by macroeconomic indicators such as inflation, interest rates, and unemployment.


  True
• High unemployment leads to decreased labor costs
• How do exchange rate fluctuations affect export competitiveness?

  By making exports cheaper or more expensive
• Order the phases of an economic cycle

  1️⃣ Boom

  2️⃣ Recession

  3️⃣ Recovery
• Match the economic condition with its impact on businesses:

  Economic Boom ↔️ Higher sales and profits

  Economic Recession ↔️ Layoffs and cost-cutting
• Which macroeconomic indicator reflects the cost of borrowing money?

  Interest rates
• Economic growth is measured by changes in a country's GDP
• Inflation reduces consumer purchasing power.


  True
• Order the phases of an economic cycle:

  1️⃣ Economic Boom

  2️⃣ Economic Recession
• Match the economic condition with its impact on businesses:

  Economic Boom ↔️ Higher sales and profits

  Economic Recession ↔️ Reduced investment and downsizing
• Match the type of economic policy with its definition:

  Fiscal Policy ↔️ Government spending and taxation

  Monetary Policy ↔️ Central bank actions to influence interest rates
• During economic growth, business opportunities increase
• Inflation reduces consumer purchasing power
• Order the macroeconomic indicators based on their direct impact on business costs or consumer demand:

  1️⃣ Inflation

  2️⃣ Interest Rates

  3️⃣ Exchange Rates

  4️⃣ Unemployment
• What do macroeconomic indicators reflect about a country's economy?

  Overall health
• Low unemployment and rising incomes are characteristics of an economic boom.


  True