2.5.1 Economic Influences

    Cards (85)

    • Economic forecasting uses both qualitative and quantitative methods.
    • Steps in the risk management process:
      1️⃣ Risk Identification
      2️⃣ Risk Assessment
      3️⃣ Risk Mitigation
      4️⃣ Monitoring and Evaluation
    • Economic Influences refer to factors that affect the economy and, in turn, impact businesses.
    • A rise in interest rates can increase borrowing costs for businesses.
    • What is the effect of interest rates on businesses and consumers?
      Affects borrowing costs
    • Higher inflation can increase production costs for businesses.
    • Exchange rates affect export competitiveness and import costs.
    • What are macroeconomic factors that affect the entire economy?
      GDP growth, inflation
    • Match the macroeconomic factor with its description:
      GDP Growth ↔️ Increase in goods and services produced
      Unemployment Rate ↔️ Percentage of workforce without a job
      Inflation Rate ↔️ Rate at which prices increase
      Interest Rates ↔️ Cost of borrowing money
    • GDP Growth measures the increase in a country's total goods and services produced as a percentage change from the previous period.
    • Higher GDP growth can lead to increased consumer demand and business profitability.
    • What are economic influences that affect businesses?
      Interest rates, inflation, exchange rates
    • Interest rates affect business investment and consumer spending
    • Inflation is the rate of price increase in an economy.
    • How do exchange rates affect export competitiveness?
      Fluctuations affect export costs
    • A rise in interest rates can increase borrowing costs
    • What are macroeconomic factors that influence businesses?
      GDP growth, unemployment rate, inflation
    • Higher GDP growth typically increases consumer demand and business profitability.
    • High unemployment reduces consumer spending and labor costs
    • What is the impact of higher inflation on businesses?
      Increases costs, reduces purchasing power
    • Higher interest rates increase borrowing costs for businesses and consumers.
    • Order the macroeconomic factors based on their primary effect on businesses:
      1️⃣ GDP Growth
      2️⃣ Unemployment Rate
      3️⃣ Inflation Rate
      4️⃣ Interest Rates
      5️⃣ Exchange Rates
    • GDP Growth measures the increase in a country's total goods and services produced, leading to higher consumer demand
    • What does the unemployment rate measure?
      Workforce without a job
    • Higher interest rates increase the cost of borrowing
    • What do exchange rates affect for businesses?
      Export and import costs
    • The formula for GDP growth calculates the percentage change from the previous period.
    • Higher GDP growth leads to increased consumer demand
    • What may businesses do during lower GDP growth periods?
      Cut costs and delay expansion
    • During economic downturns, retailers might need to close stores to maintain profitability.
    • Inflation is the sustained increase in the general price level of goods and services
    • What are two ways inflation affects costs for businesses?
      Increases raw material prices and labor costs
    • Businesses might raise prices during inflation to maintain profitability.
    • Rising labor costs due to inflation lead to higher wages
    • How does inflation affect energy expenses for businesses?
      Increases electricity and fuel bills
    • Match the type of unemployment with its cause:
      Frictional Unemployment ↔️ Job transition
      Structural Unemployment ↔️ Skills mismatch
      Cyclical Unemployment ↔️ Economic downturn
    • What type of unemployment does a construction worker laid off during a recession experience?
      Cyclical
    • Economic Influences are external factors that affect the economy and impact business operations
    • A rise in interest rates can reduce consumer spending.
    • How does inflation affect consumer purchasing power?
      Reduces it