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Analyse the impact of the economic environment of business performance.

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AO7 - Analyse the impact of the economic environment of business performance For this assessment objective there are four options which I will interpret. Option One Option one is to invest the money in a Building Society high interest account in order for it to earn some interest and retain the capital. Investing the money in a building society: Inflation Inflation is looking at the increase of price in goods over time. Inflation has its own target which needs to be met every year and is set by the central bank of England. The rate has to be 0.5 percentages above or 0.5 percent below 2%. The banks of England have meetings every month to discuss the inflation rate. They check whether any particular product is going to have a major affect on the inflation rate. Impact on the option The money invested in a saving's account will lose value if the interest is paid on the account is at a lower rate the current rate of inflation. A highly inflationary rate will often provide a low return on the investment. Interest Rates The interest rate is the amount that individuals or businesses are given back on their investments. ...read more.


When buying shares you are always depending on the economy. If the economy is not very strong at the time you want to sell your shares, it is less likely that the price of the shares will be high. We need to consider the opportunity cost. Could we get a better rate of return by putting the �15,000 in a in a bank/building society then investing in shares. You could get a better rate of return by putting the �15,000 in a building society/bank this is because if the interest rates are high you will have a higher return. Stock Markets The stock market is an exchange for the purchase and sale of stock shares and commodities. The economic health of the stock exchange is measured through FTSE. A rise in FTSE shows confidence in the stock market. A fall in the FTSE may suggest that share holders are trying to sell their shares. The FTSE will rise and fall daily. Impact on the option The state of the economy will affect the share prices of companies. This is because if the economy is strong more people will have money to spend and if it is strong the share prices are going to be high because there is more demand. ...read more.


Sue could employ more skilled workers in France more efficiently. This is because it is cheaper employing a worker in France then in the UK. This is because the French do not have a minimum wage law. The European Union and the single Market The European Union has one central philosophy, which is that there should be free trade in goods, services, and Labour between EU member states. Being part of the EU will affect the business in many ways. Production and Trade Level's Sue is able to trade freely with French customers as there are fewer barriers to trading. Sue has access to larger markets not just in the UK i.e. France. If Sue's productivity was efficient she would be able to have an extensive place in the market and become well established. Impact on prices Sue will be competing in French market so sue will need to reduce her prices in order to be competitive and increase demand. If sue becomes established in a niche market for her goods the she maybe able to increase her prices. Investment Sue may be able to invest her money in French investments opportunities rather then in the UK. Wages and Salaries The setting of the minimum wage from the EU may have EU member states must follow the social chapter that provides directives on working conditions ...read more.

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