the economy and business

level of demand in the economy

refers to spending that takes place in economy

demand rises - sales may benefit - risks may reduce

demand falls - sales may suffer - risk may increase

what might change demand - level of economic activity

if theres a recession demand will fall

what might change demand - interest rates

if they fall borrowing and demand will increase

what might change demand - changed in exchange rates

if the pound gets weaker foreign demand will rise

what might change demand - consumer income

when the economy is doing well people have more disposable income

what might change demand - changes in taxation

an increase in most forms of taxation reduces customers disposable income

impact of high demand

• consumer incomes rise

• inflation may rise

• unemployment may fall

• interest rates may rise

• the pound may become stronger

impact of low demand

• consumer incomes fall

• inflation may decrease

• unemployment may rise

• interest rates may fall

• the pound may weaken

impact of unemployment on business

• high levels may make it easier for businesses to recruit new employees - however number of employees with needed skills may decrease

• lower consumer demand for most businesses products and services

• economic activity falls when unemployment is high - this means sales revenue will fall

inflation

the change in the average level of prices in the economy

measures the change in the prices of food, clothing and other products