Change: Definition: Impact:
Economic
Consumer Price Index (CPI) = calculates rate of inflation -
Sustained increase in influences
measures monthly changes in price range of goods. Price
Inflation the average price level
stability = low level of inflation. High or fluctuating levels of Consequences of
of an economy.
inflation can be problematic. inflation:
Forces of demand and supply determine the rate – the price Increased costs
of a currency will reflect the amount of currency that
Staff demand for higher
consumers want to buy (demand) and sell (supply).
Price of one currency wages to compensate.
Exchang Appreciation (increasing): Cheaper to import goods and
expressed in terms of
e rates costs likely to fall. More expensive to export goods, so sales Suppliers increase cost of
another currency.
are likely to fall. Depreciation (decreasing): More expensive raw materials and
to import goods and costs are likely to increase. Cheaper to components.
export goods so sales are likely to rise.
Utilities (electricity and
If interest rates rise: Business pays more on new/variable gas) become more
Cost of borrowing
Interest rate borrowing – increased costs. Customers less likely to expensive.
money and the reward
rates purchase goods on credit – fall in sales. Exporting businesses
for saving. Higher loan repayments -
may see demand overseas fall
Interest rates usually rise
Recession – two Falling levels of consumer spending, resulting in lower profits because Bank of England
consecutive quarters of which may lead to cuts in investments. Unemployment rises. use base rate to control
negative economic inflation, making new and
Business
growth. Boom - High levels of consumer spending, profit and investment. variable rate borrowing
cycle
economy experiences Prices and costs tend to rise faster. Unemployment tends to more expensive.
increasing rates of be lower.
economic growth. Where domestic inflation
rates are higher than other
Spending – increase in income tax would reduce disposable countries: UK businesses
Direct taxes - levied income, vice versa. This can affect the demand for are less likely to be
on income. Indirect products/services. Costs – increase in VAT could lead to a rise competitive and lose
Taxation
taxes - levied on in business costs. Prices – rise in VAT leads to an increase in sales. Importing overseas
spending. prices. Business may need to pass this on to consumers or is likely to be cheaper than
absorb it.
Economic
Consumer Price Index (CPI) = calculates rate of inflation -
Sustained increase in influences
measures monthly changes in price range of goods. Price
Inflation the average price level
stability = low level of inflation. High or fluctuating levels of Consequences of
of an economy.
inflation can be problematic. inflation:
Forces of demand and supply determine the rate – the price Increased costs
of a currency will reflect the amount of currency that
Staff demand for higher
consumers want to buy (demand) and sell (supply).
Price of one currency wages to compensate.
Exchang Appreciation (increasing): Cheaper to import goods and
expressed in terms of
e rates costs likely to fall. More expensive to export goods, so sales Suppliers increase cost of
another currency.
are likely to fall. Depreciation (decreasing): More expensive raw materials and
to import goods and costs are likely to increase. Cheaper to components.
export goods so sales are likely to rise.
Utilities (electricity and
If interest rates rise: Business pays more on new/variable gas) become more
Cost of borrowing
Interest rate borrowing – increased costs. Customers less likely to expensive.
money and the reward
rates purchase goods on credit – fall in sales. Exporting businesses
for saving. Higher loan repayments -
may see demand overseas fall
Interest rates usually rise
Recession – two Falling levels of consumer spending, resulting in lower profits because Bank of England
consecutive quarters of which may lead to cuts in investments. Unemployment rises. use base rate to control
negative economic inflation, making new and
Business
growth. Boom - High levels of consumer spending, profit and investment. variable rate borrowing
cycle
economy experiences Prices and costs tend to rise faster. Unemployment tends to more expensive.
increasing rates of be lower.
economic growth. Where domestic inflation
rates are higher than other
Spending – increase in income tax would reduce disposable countries: UK businesses
Direct taxes - levied income, vice versa. This can affect the demand for are less likely to be
on income. Indirect products/services. Costs – increase in VAT could lead to a rise competitive and lose
Taxation
taxes - levied on in business costs. Prices – rise in VAT leads to an increase in sales. Importing overseas
spending. prices. Business may need to pass this on to consumers or is likely to be cheaper than
absorb it.
