James Osborne
I am now going to describe the characteristics of the environment
GDP stands for Gross Domestic Product. Gross means how much everything costs without
losing value. Domestic is the products that the country has made/bought. GDP is used to
measure the economic activity of a country. When the economy expands, GDP rises and
when the economy shrinks, GDP falls. However, GDP has its limitations because it is good
as looking at the past and not so good at considering the future.
Income flows between two main parts of the economy; Households and Firms. Households
provide firms with land, labour,
entrepreneurship and capital. Firms give
households in return, an income. This
income is converted into expenditure.
This expenditure goes around the
circular flow of income to firms again but
this time it is converted into revenue for
the firms. The revenue made creates an
output of goods and services from the
firms to the households. There are
however leakages of income. One type
of leakage is savings, where the amount
of spending inside the circular flow is
decreased. There are also injections into
the circular flow. One of these is
investments, where investments are
made from the financial sector using savings. Another leakage out of the circular flow of
income is taxation. This is where money is paid to the Government from households. This
money is then injected back into the circular flow by being spent on things such as public
services and welfare. Finally, the last leakage is imports. This is where the amount of
income in the circular flow is reduced due to the money being spent on imports. The last
injection is exports. This is where money is injected into the circular flow as exports generate
capital from other countries and it is injected into the circular flow.
The circular flow can affect a business or organisation in various ways. One way the circular
flow can affect my chosen business, Jaguar Land Rover, is taxation (a leakage). This is
because JLR must pay taxes and the amount will depend on the overall amount of income
they make. Thus, if JLR have a very successful year then a large percent of their revenue
will go towards paying tax. The circular flow will also affect JLR because of injections such
as exports. This is because JLR export their products all around the world and this helps to
boost the businesses income.
The economic cycle is the natural changes of an economy during periods of expansion and
contraction. There are four stages of the
economic cycle; Boom, Slump, Recession,
and Recovery. These stages are
influenced by factors such as GDP, interest
rates, consumer spending and levels of
employment. An Economic Boom is a
period in the economy when expansion is
occurring. It is where there is a fast-
economic growth resulting in high GDP.
This fast-economic growth may lead to
more consumer confidence which will lead
to extra spending. This economic growth may also lead to higher business confidence which
could lead to increased investment. An economic boom also indicates that the economy is
I am now going to describe the characteristics of the environment
GDP stands for Gross Domestic Product. Gross means how much everything costs without
losing value. Domestic is the products that the country has made/bought. GDP is used to
measure the economic activity of a country. When the economy expands, GDP rises and
when the economy shrinks, GDP falls. However, GDP has its limitations because it is good
as looking at the past and not so good at considering the future.
Income flows between two main parts of the economy; Households and Firms. Households
provide firms with land, labour,
entrepreneurship and capital. Firms give
households in return, an income. This
income is converted into expenditure.
This expenditure goes around the
circular flow of income to firms again but
this time it is converted into revenue for
the firms. The revenue made creates an
output of goods and services from the
firms to the households. There are
however leakages of income. One type
of leakage is savings, where the amount
of spending inside the circular flow is
decreased. There are also injections into
the circular flow. One of these is
investments, where investments are
made from the financial sector using savings. Another leakage out of the circular flow of
income is taxation. This is where money is paid to the Government from households. This
money is then injected back into the circular flow by being spent on things such as public
services and welfare. Finally, the last leakage is imports. This is where the amount of
income in the circular flow is reduced due to the money being spent on imports. The last
injection is exports. This is where money is injected into the circular flow as exports generate
capital from other countries and it is injected into the circular flow.
The circular flow can affect a business or organisation in various ways. One way the circular
flow can affect my chosen business, Jaguar Land Rover, is taxation (a leakage). This is
because JLR must pay taxes and the amount will depend on the overall amount of income
they make. Thus, if JLR have a very successful year then a large percent of their revenue
will go towards paying tax. The circular flow will also affect JLR because of injections such
as exports. This is because JLR export their products all around the world and this helps to
boost the businesses income.
The economic cycle is the natural changes of an economy during periods of expansion and
contraction. There are four stages of the
economic cycle; Boom, Slump, Recession,
and Recovery. These stages are
influenced by factors such as GDP, interest
rates, consumer spending and levels of
employment. An Economic Boom is a
period in the economy when expansion is
occurring. It is where there is a fast-
economic growth resulting in high GDP.
This fast-economic growth may lead to
more consumer confidence which will lead
to extra spending. This economic growth may also lead to higher business confidence which
could lead to increased investment. An economic boom also indicates that the economy is
