Economic Influences

• What is a pro of Quality Control?

  Takes up less time of production process
• What is a con of Quality Control?

  Wastes materials and money if mistakes occur
• What is a pro of Quality Assurance?

  Ensures quality is consistent across production
• What is a con of Quality Assurance?

  It is time-consuming as it checks at each stage
• What is inflation?

  Sustained increase in general price levels
• What does inflation indicate about money's value?

  It causes a fall in the value of money
• How is the rate of inflation calculated?

  By measuring price changes in a basket of goods
• What types of goods are included in the inflation measure?

  Food, housing, apparel, transportation
• What effect does inflation have on businesses?

  Increased cost of supplies and reduced investment
• What are interest rates?

  Cost of borrowing or reward for saving money
• Who sets the interest rates in the UK?

  The Bank of England
• What happens when interest rates decrease?

  It becomes cheaper to borrow money
• What is the effect of increasing interest rates?

  It becomes more expensive to borrow money
• What is the ideal rate of inflation?

  2%
• What are injections in the circular flow of an economy?

  • Money coming into the economy from outside
  • Examples: money from exports, spending from foreign tourists
• What are leakages in the circular flow of an economy?

  • Money leaving the economy
  • Examples: spending on imports, spending abroad as tourists
• What does the economic cycle include?

  Boom, recession, recovery, slump
• What is GDP?

  Market value of all finished goods and services
• What characterizes a boom in the economic cycle?

  High employment, demand, investment, and confidence
• What characterizes a recession in the economic cycle?

  Decreasing employment, demand, investment, and confidence
• What characterizes a slump in the economic cycle?

  Low employment, demand, investment, and confidence
• What characterizes a recovery in the economic cycle?

  Increasing employment, demand, investment, and confidence
• What is the difference between price elastic and price inelastic goods?

  • Price Elastic: Affected more by price changes (e.g., jewellery, holidays)
  • Price Inelastic: Not affected much by price changes (e.g., cigarettes, milk)
• What is tax?

  Compulsory contribution to the government
• What is fiscal policy?

  Adjusting taxes to influence the economy
• What is VAT?

  Tax on value of sales
• What is Income Tax?

  Tax on income of workers and sole traders
• What is NIC?

  Tax on earnings linked to state benefits
• What is Corporation Tax?

  Tax on profits of limited companies
• What is the effect of increased taxes on businesses?

  Increased costs and less investment
• What are exchange rates?

  Value of one currency for conversion to another
• What is an import?

  Bringing goods/services into a country
• What is an export?

  Sending goods/services to another country
• What happens if the pound strengthens?

  Exports become more expensive for buyers
• What is the effect of a strengthening exchange rate?

  Reduced costs of imported stock
• What is the effect of a weakening exchange rate?

  Increased exports as goods become cheaper
• What happens to costs if the exchange rate weakens?

  Increased costs of imported stock