2.3 The economic climate of business

• What does the term 'economic climate' refer to?

  The overall state of the economy
• What is the impact of high inflation on businesses?

  Increases costs and reduces demand
• Match the economic indicator with its impact on businesses:

  GDP Growth ↔️ Increases demand and sales

  Inflation ↔️ Reduces consumer purchasing power

  Interest Rates ↔️ Affect borrowing costs
• Inflation refers to the rate at which the general price level of goods and services in an economy increases
• Match the unemployment level with its impact on businesses:

  Low Unemployment ↔️ Increased consumer spending power

  High Unemployment ↔️ Reduced demand and sales
• How do high interest rates affect businesses?

  Increase borrowing costs
• Higher GDP growth increases demand and sales
• Higher GDP growth indicates a weaker economy.

  False
• Businesses need to monitor the economic climate to remain competitive.


  True
• Higher GDP growth leads to greater opportunities for businesses to expand.

  True
• Order the steps a business should take to adapt to the economic climate:

  1️⃣ Monitor key economic indicators

  2️⃣ Understand the impact of each indicator

  3️⃣ Adjust strategies accordingly
• Higher GDP growth indicates a stronger economy
• A higher GDP Growth rate indicates a weaker economy.

  False
• High inflation reduces consumer purchasing power.


  True
• Low unemployment increases consumer spending.

  True
• Low interest rates stimulate consumer spending.


  True
• Match the economic cycle phase with its characteristics:

  Expansion ↔️ Rising GDP, low unemployment

  Peak ↔️ Highest GDP, fully employed workforce

  Contraction ↔️ Declining GDP, rising unemployment

  Trough ↔️ Lowest GDP, high unemployment
• What should businesses prioritize during a trough?

  Survival and cash flow
• The economic climate is influenced by factors such as GDP growth, inflation, interest rates, and the unemployment rate
• Higher interest rates make borrowing more expensive
• How is GDP growth calculated?

  Difference between current and previous GDP
• What is the impact of low inflation on businesses?

  Predictable costs and stable demand
• What are interest rates set by?

  Central banks and financial institutions
• What does GDP Growth measure?

  Percentage change in GDP
• What does inflation measure?

  Rate of price increases
• What does the unemployment rate measure?

  Jobless labor force percentage
• High interest rates increase the cost of borrowing
• Order the phases of the economic cycle:

  1️⃣ Expansion

  2️⃣ Peak

  3️⃣ Contraction

  4️⃣ Trough
• During a peak, businesses should focus on cost control
• Match the inflation level with its impact on businesses:

  High Inflation ↔️ Increases costs, reduces demand

  Low Inflation ↔️ Maintains stable costs, preserves spending
• What do interest rates represent?

  Cost of borrowing money
• What are economic cycles commonly referred to as?

  Business cycles
• What does the economic climate refer to?

  Overall state of the economy
• By monitoring the economic climate, businesses can adapt their strategies and remain competitive.


  True