Flashcards · 7115 · Topic 6

External influences on business activity flashcards

17 cards on Topic 6, subtopics 6.1 to 6.3. Pick a subtopic or study them all.

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The business cycle: four stages: Growth (GDP rising steadily), boom (GDP rising fast, very low unemployment), recession (GDP falling), slump (GDP very low, weak demand).
Gross Domestic Product (GDP) and economic growth: GDP: the value of all output of goods and services made within a country over a set time. Economic growth: a rise in GDP over time.
Government economic objectives: Increasing GDP (economic growth), low unemployment, and low, stable inflation.
Effects of a rise in interest rates: Dearer loans, so less borrowing and spending by businesses and customers. Firms with large variable-rate loans see profit hit directly.
A $100,000 loan’s interest rate rises from 6% to 9%. What is the change in interest?: $6,000 rises to $9,000: up $3,000, or 50%. The rate rose by 3 percentage points, not 50%.
Effects of a rise in income tax and in sales tax: Income tax up: households have less to spend, so demand falls. Sales tax up: prices rise, so demand may fall.
Business responses to a recession: Cut costs, run promotions, add cheaper lines, look for new markets, hold less stock and delay investment. Each has a cost.

Externality, external cost and external benefit: Externality: a cost or benefit of a business decision that falls on people outside the business and its customers. External cost: pollution harming local health. External benefit: jobs and better roads in the area.
Sustainable development: Meeting the needs of today without reducing the ability of future generations to meet theirs.
Ways a business can contribute to sustainable development: Switch to renewable energy, cut waste and recycle, use resources from managed sources, design products to be repaired, and reduce transport distances.
Pressure group, and its methods: A group that tries to influence business or government decisions on a cause. Methods: publicity, petitions, protests, calls for boycotts and lobbying government.
Legal duty and ethical choice: A legal duty is something a business must do. An ethical choice is something it ought to do, beyond the law, such as auditing suppliers for child labour or paying suppliers a fair price.

Globalisation: causes, opportunities and threats: Causes: cheaper transport, faster communication, lower trade barriers, growth of MNCs. Opportunities: bigger markets, cheaper inputs, spread of risk. Threats: more competition, lost home sales to cheap imports.
Import tariff and import quota: Tariff: a tax on imported goods; raises tax revenue. Quota: a limit on the quantity that may be imported; raises no revenue directly.
A 25% tariff is placed on a Rs 800 imported item. What is the new price?: 800 × 1.25 = Rs 1,000
Multinational company (MNC): host country gains and losses: An MNC is a business that operates in more than one country. Gains: jobs, exports, more choice, investment. Losses: local businesses lose sales, profits are repatriated, possible pollution, jobs can leave quickly.
Home currency appreciates: effects on exporters and importers: Exporter: the foreign price rises, so it is less competitive. Importer: inputs are cheaper, so costs fall. Depreciation has the reverse effects.