9609 · 6.1.2
Economic flashcards
Revision flashcards for Cambridge 9609 Economic (syllabus 6.1.2). Flip, recall, then mark a real past-paper question.
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Recession impact on business?
Falling demand, unemployment rises, consumers trade down, B2B orders fall.
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Inflation impact?
Higher input costs; need to raise prices or accept lower margin; wage pressure.
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Interest rate rise impact?
Higher cost of borrowing; reduced consumer credit purchases; mortgage pressure reduces discretionary spend.
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Strong home currency for exporter?
Exports more expensive abroad — volume may fall unless quality dominates.
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Weak home currency for importer?
Imported raw materials cost more — margin squeeze or price rises.
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Link to 5.2 finance?
Interest rates affect choice and cost of debt; recession affects cash flow.
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Recession
A period of declining economic performance across an economy, officially defined as at least two consecutive quarters of negative GDP growth. Key business impacts include falling demand, pressure on cash flow, and increased risk of redundancies.
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Cost-Push Inflation
A type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available. For a business, this means rising costs for raw materials, components, or wages, which can squeeze profit margins.
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Impact of a rise in interest rates
For a business, higher interest rates increase the cost of borrowing, making new investment less attractive. It also increases the cost of servicing existing variable-rate debt. For consumers, it reduces disposable income, leading to lower demand.
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Exchange Rate Appreciation (SPICED)
When the value of a currency increases relative to another. This follows the SPICED principle: Strong Pound, Imports Cheaper, Exports Dearer. This harms the price competitiveness of a country's exporting businesses.
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Exchange Rate Depreciation (WIDEC)
When the value of a currency falls relative to another. This follows the WIDEC principle: Weak Pound, Imports Dearer, Exports Cheaper. This can benefit exporters but increases costs for businesses that import raw materials.