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Business Chapter 27: Economic Issues - Coggle Diagram
Business Chapter 27: Economic Issues
the wider economy and its effect
affect businesses
directly
by customers
factors
business cycle
result of government policy
changes in interestrates
main stages of business cycle
growth
GDP rising
unemployment rate falling
higher living standards in the country
businesses are doing well
boom
too much spending
prices rise quickly
shortages of skilled workers
customer demand falls
business costs rise
recession
too little spending
GDP falls
falling demand and profits
workers may lose their jobs
slump
unemployment reaches high levels
prices fall
business could fail to survive
impact of changes in economic indicators
changing employment levels
affect ability to recruit new employees
incomes of customers may fall
reduced sales
business selling cheaper products may have sales increase
customers buy cheaper alternative
rising inflation
business consts increasing
products prices have to be increased
falling sales
consumers may have less income
depends on type of product sold
increased GDP
economy growing
people are employed and more income
sales increase
difficult to recruit new employees if unemployment falls
government economic objectives
low inflation
sales decrease
incomes fall
prices in country increase, people buy foreign goods instead
jobs can be lost
unlikely expansion and create more jobs
low unemployment
total output in country decrease
cost government a lot of money
economic growth
fewer workers needed, unemployment rate increase
standard of living decline
business will not expand
people have less to spend
balance of payments between imports and exports
may have to borrow from abroad
exchange rate may fall (exchange rate depreciation)
government economic policies
fiscal policy (taxes and government spending)
income tax
profits tax (corporation tax)
lower profits after tax
indirect tax
prices rise
import tariff and quotas
changes in government spending
education
health
defence
law and order
transport - roads and railways
monetary policy (interest rates)
higher cost of interest on loans
business less willing to borrow to pay for investment/expansion
consumer incomes available to spend fall
higher exchange rate
less consumer borrowing
supply side policies
privatisation
improve training and education
increased competition in all industries
how businesses might react to changes in economic policy
increase income tax
increase tariffs on imports
increase interest rates
increase government spending