2. Submitted to:

3. Submitted by:

4. Economic Factors
Exchange
Rates
Balance of
Payments
UnemploymentUnemployment
Inflation
Economic
Growth
Businesses are affected by the economy
An economy describes how a country spends its money
This is determined by 5 factors
Economic
Growth
Economic
Factors
Economic
Factors
Exchange
Rates
Balance of
Payments
Inflation

5. Economic Growth
This measures how much extra an economy has
produced this year compared to last year
The total amount produced in an economy is called:
ross
omestic
roduct
This means the total value of products produced within
the UK

6. The growth of an economy will vary, but generally
increases
This is called the Business Cycle, and can be shown as:
The Business Cycle
Income
Recession
Trend is
increasing growth
Boom/peek

7. Inflation
Inflation is a general and sustained increase in prices
Inflation is a phenomenon that occurs when there is
too much supply of money in the economy that is not
supported by the output of goods and services

8. Frictional
People moving between jobs
Structural
Caused by major changes in the structure of the economy
Cyclical
Technological
Caused by automation, where machines take the place of workers
Caused by changes in the business cycle
Seasonal
Caused due to changes in the seasons, e.g. Alton Towers staff
Where people who want a job cannot get one
It can occur for a number of reasons:
Unemployment
s

9. Unemployment can have good and bad effects on
businesses:
More people looking for
work
• Business has greater
choice when recruiting
• Will be able to pay
lower wages
People have less
money to spend
• Demand will fall
• Profits may fall
Good Bad
Effects of Unemployment
Effects of Unemployment

10. Balance of = Revenue from - Spending on
Payments Exports Imports
The balance of payments (BoP) measures the level of
international trade that takes place.
It is calculated as:
Where:
Exports are goods and services made in the UK but sold in
Foreign countries
Imports are goods and services made in foreign countries but
sold in the UK
The Balance of Payments

11. Exports > Imports = Surplus
Exports < Imports = Deficit
If more money is spent on our exports than we
spend on imports then the BoP is in SURPLUS.
If we spend more money on imports than we
receive from exports the BoP is in DEFICIT
Deficit or Surplus

12. Exchange Rates
The exchange rate is:
"The price of one currency expressed
In terms of another currency"
When a company buys certain goods from a US-based organization, it will
have to convert its currency into US dollars for making the payment. If the
currency of the buyer is stronger than the US dollar, it will be beneficial for
the company. However, if it is weak, the company will have to shell out more
money.

13. Like most things, the value of a currency depends upon:
The number of people who want to buy it (DEMAND)
The number of people who want to sell it (SUPPLY)
Changes in the
exchange rate can
have very big
effects upon
businesses: PRICE = £20,000
PRICE = $30,000
New Exchange Rate
£1 = $2
British car sold in USA for:
$40,000 (£20,000 x 2)
American car sold in UK for:
£15,000 ($30,000 ÷ 2)
Original Exchange Rate
£1 = $1.50
British car sold in USA for:
$30,000 (£20,000 x 1.5)
American car sold in UK for:
£20,000 ($30,000 ÷ 1.5)
What Determines Exchange Rates?

15. QUESTIONS