The Effects on Businesses of Changing Economic Variables
- The economic climate refers to the broad performance of the UK economy, as measured by changes to GDP growth
- When GDP growth is increasing, incomes may increase, spending on goods/services increases, inflation may rise and unemployment may fall
- When GDP growth is decreasing, incomes may fall, spending on goods/services falls, inflation may fall and unemployment may rise
A growing economy leads to more spending on business goods/services - and vice versa
- Economic changes can present significant opportunities and threats to business activities
- Businesses need to anticipate and respond to changing economic variables to maximise their chance of success
- The following economic variables need to be considered
- Changes to inflation, unemployment, exchange rates, household income, interest rates, and government taxation