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1.5.4 The economy and business GapFill
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The economic climate is important to small business because different economic factors will have different impacts on consumer , and this might change the goods and services that customers buy.
One economic indicator that has a large impact on business is GDP (gross domestic product) growth, and the rate of GDP growth measures how well the economy of a country is . GDP adds up the total value of goods and services produced by a country in one year. If GDP growth is increasing, then the economy is expanding, which is good for business. GDP growth means that companies will hire more staff and be able to afford to pay higher wages, which in turn increases consumer .
Another important economic indicator is . If levels are high in a country, then there are a lot of people out of work, and this will mean lower consumer income levels, which will reduce spending on goods and services in businesses and, therefore, have an impact on sales.
Changes in can also impact business. This is the cost of , and if it increases, then customers will be unable to spend on more expensive goods and services which require loans and mortgages, e.g. holidays, houses and cars.
If the UK government changes levels of , e.g. VAT, then this will also have an impact on business. High levels of taxation will mean increasing costs to a business and an impact on profits.
If fluctuate, then businesses will be impacted in different ways if they are importers or exporters. When the pound gets stronger against other currencies, imports become cheaper but goods from the UK become more expensive for foreign customers to buy, which may have an impact on sales, revenues and profits.