6.2 The economic climate

• Higher interest rates make borrowing more expensive, which can impact investment and expansion plans.


  True
• High unemployment reduces consumer demand but may also provide a larger pool of potential employees for businesses.


  True
• High inflation reduces consumer demand and makes planning and budgeting difficult for businesses.


  True
• What are the key indicators of the economic climate for businesses?

  GDP growth, inflation, interest rates, unemployment
• How do higher interest rates affect investment and expansion plans for businesses?

  Make borrowing more expensive
• High inflation drives up the costs of raw materials and labor.


  True
• Businesses can maintain profitability during high inflation by finding cost savings or raising prices.


  True
• What are some of the main government policies that shape the economic climate?

  Fiscal, monetary, trade, labor
• What must businesses monitor to adapt to changing economic climates?

  Key indicators of the economy
• What are some strategies businesses use to adapt to changing economic climates?

  Adjust prices, find cost savings
• High inflation can increase costs for businesses and reduce consumer spending
• GDP growth measures the rate at which a country's economy is expanding
• Inflation drives up the costs of raw materials, labor, and other business inputs
• Match the economic indicator with its impact on businesses:

  GDP growth ↔️ Increases demand and sales for businesses.

  Inflation ↔️ Reduces consumer spending power.

  Interest rates ↔️ Affect borrowing costs for businesses.

  Unemployment ↔️ Provides a larger pool of potential employees.
• High inflation reduces consumer spending power.


  True
• How does economic growth, as measured by GDP growth, impact businesses?

  Increases consumer demand and sales
• What are the effects of high inflation on businesses, as summarized in the table?

  Higher operating costs, reduced demand
• High interest rates reduce consumer demand due to higher costs of loans and mortgages
• Adjustments to interest rates by the central bank are part of monetary policy
• Higher interest rates make borrowing more expensive, limiting investment and expansion
• The economic climate refers to the overall state of the economy and how it affects businesses
• Match the key indicator with its description:

  GDP growth ↔️ Measures the rate at which a country's economy is expanding.

  Inflation ↔️ Indicates the rate at which prices are increasing over time.

  Interest rates ↔️ Affect the cost of borrowing money.

  Unemployment ↔️ Shows the percentage of the workforce without jobs.
• Steps for businesses to capitalize on economic growth:

  1️⃣ Increase production

  2️⃣ Invest in new projects

  3️⃣ Monitor inflation

  4️⃣ Monitor interest rates
• The economic climate is influenced by GDP growth, inflation, interest rates, and unemployment.


  True
• Higher GDP growth indicates a stronger economy, which can increase demand and sales for businesses
• High unemployment can reduce consumer demand but may provide a larger pool of potential employees
• Inflation increases the costs of raw materials, labor, and other business inputs
• Match the interest rate level with its impact on businesses:

  High Interest Rates ↔️ Increased cost of borrowing

  Low Interest Rates ↔️ Lower cost of borrowing
• Changes in taxes, part of fiscal policy, can affect consumer demand and business costs.

  True
• High inflation may require businesses to raise prices or reduce expenses.


  True