2.3 The economic climate of business

• The economic climate influences how businesses operate by affecting consumer spending, borrowing costs, and market demand
• What does the unemployment rate measure?

  Percentage of workforce without jobs
• Order the impacts of economic growth on businesses:

  1️⃣ Increased Sales

  2️⃣ Increased Investment

  3️⃣ Expansion Opportunities
• What effect does low inflation have on consumer purchasing power?

  Maintained purchasing power
• Economic growth is typically measured as a percentage change in GDP


  True
• What do interest rates represent for businesses?

  Cost of borrowing money
• Economic growth leads to higher consumer spending due to improved income
• What is the effect of inflation on businesses' production expenses?

  Increased costs
• What does the unemployment rate measure?

  Percentage of jobless workforce
• Reduced consumer spending is a direct effect of high unemployment.


  True
• How do high interest rates affect businesses taking out loans?

  Increase borrowing costs
• What determines the value of one currency relative to another?

  Exchange rates
• When exchange rates are low, a country's exports become cheaper for foreign buyers.


  True
• During economic growth, businesses typically increase investment to meet higher demand.


  True
• Order the following economic indicators by their impact on business from most positive to most negative

  1️⃣ Economic Growth

  2️⃣ Low Inflation

  3️⃣ Low Unemployment

  4️⃣ High Interest Rates
• Inflation refers to the rise in the prices of goods and services
• What does the unemployment rate measure?

  Percentage of workforce unemployed
• Order the following strategies for businesses to manage unemployment from most immediate to long-term solutions

  1️⃣ Flexible contracts

  2️⃣ Staff training

  3️⃣ Strategic recruitment
• Low interest rates encourage businesses to invest and expand.


  True
• A weak currency makes exports cheaper and imports more costly.

  True
• Higher interest rates attract foreign investors
• Fiscal policy involves government decisions about spending and taxation
• What is the cost of borrowing money called under monetary policy?

  Interest rates
• Increased consumer spending during an economic expansion leads to higher sales
• Economic uncertainty makes planning and decision-making difficult for businesses
• Lower interest rates encourage borrowing and investment
• How is economic growth typically measured?

  Percentage change in GDP
• High inflation increases costs for businesses and reduces consumer purchasing power
• Match the economic indicator with its definition:

  Economic Growth ↔️ Increase in total output

  Inflation ↔️ Rise in prices

  Interest Rates ↔️ Cost of borrowing money

  Unemployment Rate ↔️ Jobless workforce percentage
• Inflation refers to the rise in prices of goods and services over time
• What is the typical measure of economic growth for a country?

  Change in GDP
• Retail sales often increase when a country's GDP grows.


  True
• A clothing retailer's profit margins may be squeezed by rising fabric costs and reduced consumer spending during inflation.


  True
• Match the type of unemployment with its description:

  Demand-deficient unemployment ↔️ Insufficient demand for goods

  Structural unemployment ↔️ Mismatch between skills and jobs

  Frictional unemployment ↔️ Temporary job transitions
• Businesses can manage unemployment by providing staff training
• Low interest rates lead to increased consumer spending.

  True
• What effect do higher interest rates have on a country's currency value?

  Strengthen its value
• Interest rates influence borrowing and investment
• The economic climate impacts businesses by affecting consumer spending, borrowing costs, and market demand
• What are two effects of economic growth on businesses?

  Increased sales and investment