economic environment

Topics: Economics, Unemployment, Macroeconomics Pages: 5 (1619 words) Published: October 31, 2013
Impact on business changes in the economic environment
In this report I will describe and then explain how the GDP, inflation, interest rates and employment rates are affected by the growth and recession stage of the business cycle. I will also explain how the balance of payments is and how Tesco’s contributes to trade surpluses/deficits. I will also be stating what the conflicting objectives are of Tesco’s and how they affect them as a business whilst describing, the ripple effects and providing an example of the industries it affects. This report will also contain a description of structural adjustments and explain the business sector Tesco’s fits in. what the welfare considerations are and how Tesco’s contributes to the welfare state. GDP (Gross Domestic Product)-

GDP is the value of everything the country makes in the economy. The indicator is used to measure how much is being made in the UK is known and Gross Domestic Product. Changes in the GDP indicate which stage of the business cycle the UK economy is in. GDP is the measure of the business activity in the country as a whole for a particular quarter. GDP would be affected by the growth of a business cycle as if businesses within the country are doing well the country will be making more growth and money to invest within the UK spending budget without having to borrow from banks as people will have enough money to be paying there taxes, VAT etc. If the UK GDP is high in the UK within 2013, Tesco super market will gain more profit, as businesses will be doing good and people will have more money to spend on within the super market store. Inflation-

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. Inflation is affected by the growth of a business cycle as if inflation rates are high prices of petrol etc. inflation effects the business cycle in various ways both positive and negative. Negative affects could be that there would be no uncertainty of the future as rates will be high, also inflation will discourage investments and saving that people will have saved up for starting up businesses. Customers at Tesco will also be hoarding out of concerns that prices will increase within the future and will want to stop spending money. Inflation effects the business cycle in a positive way as well as it ensure banks that they can adjust to real interest rates to mitigate recession and encourage investments in non-monetary capital projects. Interest rates-

The interest rate is the percentage charged, or paid, for the use of money. It is charged when the money is being borrowed, and paid when it is being loaned. This will affect the business cycle as for those who want to borrow a loan from the bank will have to pay interest on top when they will pay the bank back therefore this will effect the growth of the business cycle as people will be paying a percentage on top of what they borrowed, meaning the money coming in from their businesses will be not only used to repay the bank but a interest rate will also be taken. This will effect Tesco as a business as if they where to borrow a loan they will have to pay interest on top. Employment rates-

The employment rate is an important indicator of the health of the economy. A very high positive relation exists between the variation in amount of goods and services produced in the economy during any given time period and the variability in the employment level shortly after that time period and. In essence, the greater the level economic production, the greater business cycle and recession stage as if there is unemployment within the UK and the employment rates are low there will be a lot of people unemployed and people that are unemployed will have no money to spend, this means that businesses will not be generating enough money to pay their staff wages therefore, it does affect the business cycle and recession stage as, the UK recession will be in...

Bibliography: Business B-Tech Level 3 Book 2
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