A Level Section 1: Business and its environm 0 The economic environment Chapter overview In this chapter we examine: «the government’ economic objectives ‘¢ economic growth and the business cycle inflation ¢¢ unemployment « exchange rates {6 redistrbuting income and weatth {¢ the government's economic policies ~ fiscal, monetary and supply side policies ‘¢ market faiur. Economic growth isan increase inthe value of goods and services produced by a nation’ economy over a period of time. Inflation is a sustained rise inthe general price level and a corresponding fall inthe value of money ‘Unemployment s the number of people who are seeking ajob but unable to find ana The balance of paymentsis a record of @ county’ nancial ‘ransactons with the rst ofthe world over a peti of time Produetivity isthe relationship betncen inputs into the production process (such as labour and machine) and the resultant outputs of ‘9004s and services. The level of economic activity refers tothe amount of spending {and production in an economy. Governments zim to have smooth Increases in the level of economic activity overtime, 20.1 The government's economic objectives Every business is affected to some degree by the national Gr global) economy in which it operates. An economy is an Immensely complex entity. It comprises millions of buyers (or consumers) and hundreds of thousands of businesses all making decisions to spend, hire labour, use certain machinery, produce more of less, lead money or borrow it to produce goods and services. ‘This scenario Is then complicated further by the actions of ‘governments that intervene in-the-warking-of the-economy-in——— ‘order to achieve their social and economic objectives. Most ‘governments zim to manage economies so as to maximise the standard of living of the country's inhabitants while pursuing ‘other goals such as protecting the environment. The UIC goverment aims to achieve economic stabiliy in its management ‘of the economy by avoiding, whenever possible, sudden and dramatic changes in the performance of the economy. It has a number of economic objectives as set out ia Figure 20.1 ‘The key objectives for the UK are: ‘¢ Sustainable economic growth This means that the value of the economy's entire production of goods and services should inerease over time, However, this should be at a rate which is Steady and low tation Figure 20.1 The UX governments economic objectives 2EB the economic environment sustainable ~ this means that it can be maintained over time ‘while minimising the damage to the environment. ‘A steady and low rate of inflation The UK government's inflation target at the time of writing is 2.0 per cent meaning that it aims to have prices rising in the UK at this race annually. This isa major economic objective which the Bank of England pursues on behalf of the government. Tow levels of unemployment tis not possible to eliminate all unemployment in an economy. The UK government (along ‘with many others) wants to achieve full employment whereby those who are able and willing to work have a job. Stable exchange rates Significant fluctuations in exchange rates pose problems for many businesses and especially those ‘which compete with foreign firms as relative prices can change quickly, affecting sales. Redistributing income and wealth to reduce relative poverty Many governments aim to reduce relative poverty among vulnerable groups in society such as children and the elderly. ‘This may entail a range of policies including increasing ‘pensions to ensure that the standard of living of these groups ‘does not fall behind that of other groups in society Governments do pursue other economic targets such as “achieving a balance between the outflows of money from is ‘economy (caused, for example, by expenditure on imported ‘goods and services and investment overseas) and inflows resulting from factors such as the sale of exports and the receipt of forciga investment. These flows, which are recorded in @ ‘countty’s batance of payments, should be equal over time, The UK government also aims to improve the level of productivity in the economy, hopefully by more than other economies. This ‘means that by implementing policies such as improving the ‘quality and extent of taining or by encouraging investment in capital equipment, i attempts to increase the amount produced. from the resources available within the economy. The economic environment @ and business strategy A business seaeay is smply te Longe plans though which ecco aan ts Corporate cjetves =e the objeves of the whole busine. For erample, a buss ay have growth + Rate watve to that : In-other countries UUnomptoyment State of labour market Business cycle on “Type fea. tection) + Ski surplises roan \Grempoymert | *becation [| « statshortages lvaes accord Skils in surplus + Migration tows je shape of fousiness cycle _ Business strategy rr + Growth Inflationary pressures + Rtionalisation snore key ne boom + Matkot dominance + Diversification Technological leadersip Iefetion and Chose inks Inflation interest rates between cH Toes cna {end tose and) Interest rates interest ng | Exchange ates steof rte increase |reltogether | « Levels, relative 1 hange rates) Level and trend “trendin poe henge [>| “oineriatcne = [7] _* Affect alts ‘but especially those “Trend rising/aling Deora Figure 20.2 Business strategy and the economic environment 228as a major corporate objective and will develop plans to achieve the desired rate of growth, These plans may include increasing innovation as part of the development of new products, ‘entering new markets or pursuing a policy of takeovers and mergers. Figure 20.2 summarises some of the major economic variables that might impact upon businesses’ strategic planning and decision-making, The diagram also emphasises the intervelationships that exist between the elements that make up the economic environment for businesses. 20.2 Economic growth and the business cycle ‘A recession is characterise by fling levels of demand and dectning levels of cutput and employment over at least a sicmonth period. A slump takes place when production i tits lowest, unemployment is high and there are mary business fares. In this and the following sections we will look at each of the government's main economic objectives in more detail, Economic growth | Beonomic growth is an increase in the value of goods and services produced by 2 nation’s economy. Fluctuations in the rile of economic growth result in the business cycle, which we consider later in this section. Ifthe rate of economic growth is 20.2 Economic growth and the business cycle negative Go. ifthe economy is getting smaller) for « successive ‘six months, then iis said to be in recession. Economic growth is normally measured by an increase in gross domestic product (GDP). In 2013 the GDP of the UK was 61579401 million. The population of the UIC is approximately 63 million, giving a GDP per head, or per capita, equal to £24755. Governments seek to increase this Figure over time as it represents a rise in the country's standard of living. Most counities’ economies experience economic growth ‘over 2 period of time though, in the short term, economies may stagnate or even decline in size, Figure 20.3 illustrates the ‘economic growth rates for the UK from 2003 until 2013. Governments aim to maintain steady and sustalned economic, ‘growth aver 2 period of time, However, this i a cilficuk target to achieve, as the operation of the business cycle tends to ‘create the fluewations apparent in Figure 203. Governments, use counter-cyclical policies (including contol via interest rates ‘and taxation levels) to atempt to-oliminate she-mose-oxineme fluctuations. High rates of economic growth are not desirable, as they tend to result in slumps whereby economic growth may become negative. Governments can stimulate growth as 2 consequence of their economic policies. Shor-term growth can be encouraged bby cuts in interest rates and taxation which fuel borowing and spending, prompting greater output and hence economic ‘growth. The danger is, however, that firms and individvals purchase product from overseas, promoting growth in foreign ‘economies. Supply-side policies may be implemented to achieve sustained economic growth. This type of policy entails increasing the productive cepabilty of the economy by improving the skills of the workforce, encouraging more people into employment ‘and promoting competition within markets to increase output and GDP. 2 a0 BON 805 2008 2007 2508 2008 2010 BOTT Figure 20.3 Economic growth inthe UK: 2012 2018 229EB] ihe economic environment Case Stud UK economy grew unexpectedly fast in 2013 ‘The UK economy grew at the strongest rate in six years in 2013, having ended the year on a positive ncte as the recovery from ‘economic recession became more apparent. “The UK's services and manufacturing sectors were the drivers (oF 0.7 pee cent growth in the fourth quarter, aking the anniwal growth sate to 1.9 per cent, the strongest since 2007 before the Financial ersis ook hold, The economy grew in every quarter in 2013 according to the Office for National Statistics, providing a significant boost for George Osborne, the Chancellor of the Exchequer (Finance Miniter), who has persistently argued that a -srengthening recovery is proof that his economic plan is working. Shortly after the figures were published Osborne said: 0.7 per cent growth in GDP is a boost for the economic security of hardworking people, Our long-term plan is delivering a brighter economic Future. ‘Average wages are growing at 0.9 per cent annually, which is half the rate of inflation, which was 2 per cent in December. The economy grew at a slighty slower pace in the final quarter of the year compared with the third, when gross domestic product increased by 0 per cent, but it was in line with economists’ expectations. Joe Grice, chief economic adviser at the ONS, said ‘the ‘economy does seem to be improving more consistently’, bat GDP {is sal well below pre-ctisis levels. He added: Today's estimate suggests over four-fifths ofthe fall in GDP during the recession thas been recovered, although ic sill remains 1.3 per cent below the pre-recession peak." Source: Adapted from The Guardian, 28 January 2014 (Angela Monaghan) Questions 11 Explain why economic growth is an impostant macroeconomic objective for most governments. 6 2 Bivaluate the extent to Which the economic data provided in the case study represents excellent news for all UK businesses. 6 “The case for economic growth is not clear-cut, Growth brings disadvantages as well as advantages. These arguments are ‘summarised in Table 20.1, The business cycle All. countries sulfer Quctuations in the level of GDP and business activity within their economies. At times spending, output ‘and employment all tise; ducing other periods the opposite is 230 ‘able 20.1 The benefits and drawbacks of economic growth for businesses “The drawbacks ‘Not al regions within an economy benefit equaly during periods of | economic gtawth. Fis sling inthe south of England are Ikely to enioy ‘The benefits High ates of economic grow provide the government with increased tax reverves peiting ‘greater expenclture on health, education and trensport increased sales whl those less bbeneftng all businesses nthe UK | prosperous regions such as Wales end ‘and encouraging futher grow. | the north of England may only see a marginal increase in revenues ‘Growth provides opportunities Growth may resuitin shortages of, labour and other material. This ‘may result in higher weoes and prices fling inflation and creating ‘uncertainty among the business community for alli society. Individuals benefit from greater chances (of promotion; high levels of consumer spending encourage enterprise. Businesses small and large may tebe ina growing ‘environment, Growth places individuals and businesses under pressure, Workloads increase and decisions may be rushed. In these cumstances ‘may prove impossible to maintain the qualty of menagement and businesses may lose coordination and a lar sense of deci, Businesses generally enjoy higher sales and irereased profit Expansion fs Healy for fms selling income elastic products such as car and foreign holidays. Growth creates new markets for products, true, The value of a country’s ourput over a period of time is measured by 2 natlon’s gross domestic product ~ this figure is dependent upon the level of economic activity. rising level of economic activity will be reflected in 2 higher level of GDP. “The business cycle desexibes the regular fluctuations in ‘economic activity (and GDP) occusring over time in economics. Figure 2044 illustrates a typical business cycle. ‘Trade cycles generally have four stages: ‘# Recovery or upswing as the economy recovers from a ‘slump, production and employment both begin to increase. ‘Consumers will generally spend more in these circumstances 1s they are more confident in the security of their employment. Initially businesses may respond cautiously co signs of increasing consumes confidence. No major decisions are required to meet rising demand while spare capacity exists firms simply begin to utilise idle facories, offices and other assets. As business confidence increases firms may take the | teresigratesoftsaten |_| ut pen coool ach snd cating government cnoloment ay ca cconome sei i sagiemee spending on imports Figure 20.17 The operation of fiscal policy announcing handsome profits. The government can forecast with some accuracy the effects arising from an increase Cor reduction) in income tsx. Although the overall effect may bbe predicted, the implications for individual businesses will vary according to the type of product supplied. Firms supplying lunrury goods (long-haul foreign holidays, for example) might be significantly affected by a change in income tax rates, especially for those earning higher incomes, while those selling basic foodstuffs may be relatively unaffected. Indirect taxes VAT (value added tax) is the major tax on spending in the UK and other EU countries. It and other taxes ‘on spending are classified as indirect. Changes in this type of taxation can have a rapid effect on the level of economic activity, although its effects are difficult to predict. An increase in VAT (as in the UK in January 2011, when i rose from 175 per cent to 20 per cent) lowered consumer spending, reducing demand for goods and services and eventually lowering the level of economic activity. However, the extent of the fll in demand sill depend upon the peice lasicing of Geman forthe goods in question. Consumers will continue to purchase essentials such as fuel and food, though demand for products associated with home improvements, for example, may decline. An important side elect of increasing indirect, taxes is that ti inflationary Government expenditure i the other half of fiscal policy. Governments may spead more in two broad categories. 1 Transfer payments This is expenditure on unemployment benefit, pensions and other social security payments. Changes in expenditure on these items will have a rapic impact as they ae received by relatively poor members of socety who will most likely spend the increase or cut back if necessary almost iunmediately. An increase in wansfer payments often results in substantial increases in demand for basic goods such 2s food, public tansport and gas. 2 The infrastructure Goveenments improve the infrastructure through their spending on housing, roads and flood protection. Investment in these areas can increase the level eo Nidal cao Economic actly decines 28 See oeaeae salut rtanpropeily economy moves fat recession, ‘ireatening infition and Ee aren node atia ‘GDP following increased imports ‘or deciines, Unemployment Increasing inerrant » al ‘yell potcies Govt polices head off worst excess of a boom, Siackaring ot growth in GDP achieved by Peeet aa ae increasing Interost rates or ncreasing slump avoided by pat {talon ating govt expenltre ‘such as cutting interest rates, eee fecueing rates of taxation or Inereasing gov. expenclture : Ti Figure 20.18 Government economic polices at work wrEB tre economic environment of economic activity by boosting demand for the services of ‘construction firms while reducing costs for other firms, A new road, for example, might cut a business's ransport costs. This, however, isa much slower method of altering the level of ‘economic activity. In 2013 the Chinese government announced. that it was planning a number of new infrastructure projects including 15 expressways to prevent a loss of growth rates in the Chinese economy. Supply-side policies Supplyaid policies area ange of measur iacended to aaee he cpeton of ree mane and the arcunt dat saved by he economy. They can ae a nun forms Labour market measures In cecent years many goveraments have implemented folicies intended to allow labour markets to operate more Cirectvely. The UK government has been a strong advocate of allowing labour markets to operate more freely and flexibly. Por example, by reducing the power of trade unions businesses were enabled to implement policies to allow them to use labour more flexibly and effiienty. Employees vere able to carry outa range of duties, rather than @ Tilted role to avoid demarcation disputes, Disputes and ‘confrontations became less common as a consequence of a series of laws Other policies have been implemented to encourage the ceffecive operation of labour markets. The unemployed have Seen encouraged back into the labour force through the provision of waining programmes designed to equip them sith employable sls, by limiting the availabilty of Unemployment benefit 0 those in genuine need and the vera rates-on low earners {0 encourage people into the labour force Privatisation : “This is the process of transferring organisations from the state 10 the owneiship and control of individuals and other businesses. In the 1980s and 1990s many major UK state enterprises were sold into the private sector and the policy has continued in. recent years, although i: has slowed as the state owns relatively few enterprises, Since 2000 the London Underground system has been partly privatised as has air traffic control and the port of Dover, in 2013 the Royal Mail was sold into the private sector, “However, many analysts argue that privatised industries do ‘not operate more effectively. The perceived shortcomings of peivatisation have led to a mild backlash against the policy. Countries such as New Zealand have created new nationalised industries, and even California has taken steps inthis direction. 248 Other supply-side measures Governments have tried to make other resources more freely available by removing controls on the operation of markets that provide capital and land. The negotiating ofthe free movement Cf capital throughout the EU has been a major factor in increasing the funds available to BU enterprises. Japan's economy shows signs of recovery Japan's attempt to promote growth in its economy after years of falling prices is showing signs of sucess according to the country’s central bank, the Bank of Japan. It sald that economic conditions were starting to recover, signalling its confidence that the world’s third-largest economy was ebout to make a long-awaited tu:naround, The Bank of Japan's reseage was reinforced by a rise in Japancse, exports, helped by a fall in the value of the yen, and some signs of 2 broader recovery in consumer confidence and consumer spending, Reflecting its optimism, the central bank's policy-seting board left its monetary policy unchanged and stuck to its goal of hitting 22 per cent inflation within two years. To get money flowing ‘again in the Japanese economy, the bank, led by its governor, Haruhiko Kuroda, has pledged to pump 60 trlion to 70 tion ‘yea, oF about $600 billion zo $700 billion, into the economy annually “Japan's economy is starting to recover moderately, the bank ‘announced. For proof, the bank pointed to rise in business fnvestment and profs, industrial production, andl both business and consumer confidence. “Japan's economy is now growing faster than any of the worlds Jeading economies, recording an annualised rate of 4.1 per cent in gross domestic product over the last three months. Source: Adsptes from the New York Times, 11 July 2013 (Hiroko Tabuchi hetivawn.mptimes com Questions 1 Explain the likely effects of rising consumer confidence and spending on businesses in Japan. @ 2 Discuss how the Japanese authorities might use economic policies to ensure thatthe economy continues 0 grow steadily over the next few years 1620.8 Market failure Market fallure occurs when a market does not work properly and resources are not allocated corti A.eartel exists when two or more businesses clude to convo prices andor output thereby iting competion and increasing profits. Governments can intervene in the economy for reasons other than adjusting the level of economic activity. One such reason for intervention is market failure “When a market operates costecty it responds to the signals siven by prices and increases or reduces the resources used by businesses in the market to supply more or les ofthe product (Over time global ol prices have rien from $19 per baste in 1991 to more than $100 per barrel in 2014. The price has risen because consumers of oil Gdividuals and businesses) have demanded more of the product in response to the signal of rising prices ofl companies have sourced new supplies of oil and have increased production, ‘The failure of mazkers 10 work properly ean come about for a number of reasons. 1 Monopoties and cartels The existence of monopolies and ‘cartels might mean producers have too much power, cesulting in insufficient output and high prices. As a consequence consumers may receive too litle of eerain producss, resulting ina lower sandard of living. 2-Damage to the environment Producers do not bear the fall costs of production, and society s a result bears some costs such as these resulting from pollution. These are called ‘external cosis. These costs can result in severe damage to the environment with the potential of imposing high costs ‘on Future generations. This type of market failure creates ‘oversupply of certain products as producers (and ultimately consumers) do not pay the full cast of procuction. Some of the «oats of production ate paid by others, for example, those who have to clean up the resulting pollution. 3 Consumers and producers possess insufficient information about products Consumers may underestimate their need for certain goods such as health and education, resulting in inadequate supply without government invervention in such marke's. This form of market failure is Ukely to result in under supply as (00 few resources are allocated to producing goods and services in these markets. However, it can result in the over consumption of some Droduets (drugs, for example) if consumers are unaware of the angers they pose. 4 Poaching of skilled labour Ifa business invests heavily in training its workforce to provide job-related skills it can ‘expect a consequent increase in productivity and a reward for devoting resources to raining, However, one possible 20.9 Conclusion ‘outcome is that highly skilled employees are attracted by sival businesses who are able to offer higher wages as they have not borne the taining costs. Such poaching of labour can result in too few resources being allocated to training for fear of poaching, Thus the market fails. EST ay Market fallufe Is 2 strong argument for government intervention in the economy and can provide a powerful line of analysis when responding to questions on the merits (or ‘otherwise) of state involvement in the business environment, Responses to market failure 1 Monopolies and cartels Many governments have enacted, laws fo encourage competition and io restrict. side range __ of anti-competitive activities, Such laws prohibit the abuse of ‘monopoly power (for example, by raising prices excessively, to boost profit margins) and the operation of cartels. Such laws protect consumers from the adverse effects of monopoly ‘power, Offending firms are normally fined, sometimes very heavily. 2 Damage to the environment Governments tend to control ‘external costs in three main ways. They can impose indirect taxes with the aim of raising the costs of production to account for the external costs paid by other groups in society. ‘This should lead to higher prices and lower profit margins, discouraging production and consumption of the produc. Alternatively, governments can levy fines On businesses that damage the environment and thereby impose costs on others, Rinally, 2 government may pass laws to ban processes and products that cause external costs 3 Lack of information Governments frequently provide information about the benefits or drawbacks of products, For example, in many countries there have been health information programmes to advise smokers of the danger to health of consuming tobacco. Many such programmes have been successful and there has been 2 sharp decline in tobacco ‘consumption in many countries, 4 Poaching of skilled labour This is difficult for any ‘government, IF it has sufficient funds available it may provide some training itself and can offer tax benefits to businesses that engage in staf training. However, such approaches can be very cosily if they are to have any significant effect. 20.9 Conclusion ‘This chapter has shown that there are a vatiety of ways in which a government may intervene in an economy, The diverse forms 249EBD the economic environment of intervention can assist businesses as well as constraining thelr Most governments pursue the same economic objectives, activities although their relative importance may change overtime. Thus, ‘Table 20.8 summarises some of the methods of intervention _at the time of writing many economies have low rates of inflation and the expected effects on businesses and consumers and the and governments are focusing their economic policies on general level of economic activity in the economy. increasing the level of output or GDP and on reducing levels of Governments have a range of fiscal, monetary and supply-side unemployment at the same time. policies that they can use 10 pursue their economic objectives. 250 “Table 20.8 A summary of methods of government intervention “How governments’ economic policies help businesses Method of intervention Expected effects Businesses may invest more in new production faites as cost of barewing is reduced and consumers may increase spencing as loans te cheeper and saving is lees worth due to lower interest rates. The lave of economic activity should se ‘May encourage higher levels of production as itbecomnes more profitable and | CCutsin direct and indirect exes | consumers may also increase spending as their net pay (after tan rises or asthe | price of goods fl. Once again te level of economic activity should increase Lower income consumers in receipt of ring Benefits are Ikely to ncreese spending ‘on renge of basi product 2s saving of such rises in benefits curs rarely) Increases in government spencing | Businesses in construction and engineering sectors may receive orders from {on infrastructure or welfare benef, | overment for infrastructure projats, directly increasing output. Government’ for example) | expeneltureon infrastructure aso likely to increase pay of many associated workers, increasing pending and therefore production. These effects wil increase the level of economic activity THejping unemployed back into work | These supply-side acions should increase the level of economie activity by increasing Reductions in the rate of interest through poles such as‘tralning | the number af people who aren employment and have the right sil to cary out ‘and improving information on job | ajob efficiently. This can enable businesses to increase production and to do s0 in 2 vacances cost-affectve mannar bacause they employ suitably sled workers. How governments’ economic policies constrain business activity Method of intervention Expected effects By making borrowing more expensive this ilikaly to dissuade businesses and consumers from borrowing for Investment or to buy expensive products such ‘ashomes, cars and electra products. may aso encourage saving, reducing pee ‘consumption and investment further. “This reduces the take home pay of employees andor increases the prices oF products ithe ofthese efecs will reduce consumers spending on goods and sewices and rece the level of economic activity. Simaltaneousy, businesses may have reduced profits availabe to invest fand to encourage futur investment) Fecuction in transfer payments such as pensions drety affect the ability of| Reductions in government Jess wel-off consumers to purchase goods and serves. Atte sare time the expenditure ‘government may reduce crdars placed with a range of domestic businesses. The effets of bath types of cuts wl be to reduce economic activity Economists call products such as tobacco and alcohql ‘demerit goods because Implementing heath edvice poles, | they can be harmful and many consumers ae unaware ofthis. AS a consequence for example on the dangers of ‘consumers ae dscouraged fram consuming them through advertising and other ‘tobacco or alcohol polices. This can (and does result in reduce sales, leading to lower levels of production and decreased levels of economic activity. Increases in the rate of interest Increases in vet and indirect tanes |20.9 Conclusion Test your learning Short answer questions 1. 2 State two possible economic objectives for 3 government. p bb Explain one reason why businesses may benefit from a steady rate of economic growth, a 1 Define the term recession. + a bb Explain one consequence of an economy moving into recession fora car manufacturer. 8) ‘a What is meant by the term inflaton? a bb Explain one effect of inflation on a major retaler. (3) Explain how a government's ant-inflationary policy may affect small businesses. ro 2. Distinguish between cyctcal and structural unemployment al b Define the term exchange rate. (2) 6 @ Explain one reason why exchange rate changes cen create uncertainty for businesses. B) ‘b What is meant by the term wealth? Q) State two ways in which governments may attempt to redistribute income and wealth within their econorries, 2 bb Explzin one reason why an unequal distribution of income and wealth may pose a problem for businesses. (3), 8 a State two forms that monetary policy may take. (2), Distinguish, using examples, between fiscal and supply-side policies. 8 9. Explain how a rse in interest rates might affect an India-based exporter. 5] 410 a Explain what is meant by the term market falure. [2] bb State three examples of market failure that may affect businesses, 8) Data response question The UK's economic performance Since the global financial crisis of 2008-09, the performance of the UKS economy has been reltvely weak, although there have been some encouraging signs. Some key data forthe economy is shown in Table 1. Table 1 Selected macroeconomic data forthe UK, 2008-12 Year ‘2008 [2009 [2010 | 2011 [2012 [2013 | corgomntay [10 [39 [18 [os | oo [19 inflation rate(%y | 21 | 30 | 30 | 41 | 27 | 20 Unemployment | 79 | 84 [82 | 81 | 77 [72 rate (96) [ehangevaie ea) | 17 | ver | 17 | 150 | +62 | 168 | “The UK's working population in 2013 reached 32.5 milion, ‘The performance of the UK's economy over this period has varied between regions. London and the south-east of England have been less affected by slowing growth rates and increased unemployment. Some businesses have performed well despite the difficult economic conditions: For example, the Jaguar Land Rover Group has performed strongly, principally due to its buoyant export sales, In contrast, some of the UK's banks have struggled to restore their fi ‘Questions 41 Analyse the possible consequences of the fling rate of unemployment forthe UK's businesses. 2. a Calculate the number of people who were unemployed in the UK in 2013, “ bb Evaluste the effects of the changes in the exchange rate over the period 2008-13 on UK exporting 10} businesses. fo 3. Does the data in Table 1 suggest that UK businesses will be uncompetitive? Justify your view. he) Essay questions 41 To what extent do government pois aimed at reducing inflation cause businesses more difficulties than inflation itself? 2. ‘All businesses in a country benefit from a sustained fall ina countrys exchange rate.’ Discus the extent to which this statement is tru fora country of your choice. (20) (20) 251