What happens when economic indicators rise?

Jonty By Jonty, 11th Nov 2011 | Follow this author | RSS Feed | Short URL http://nut.bz/2a3zrlt7/
Posted in Wikinut>Money>Economics

For each of the indicators there is a paragraph to explain the effects on businesses in general if they are rising.

GDP – Gross Domestic Product

This is good as the economy will be booming as businesses are selling more and so unemployment will fall. However, inflation rates would rise which affect the amount of money that people have to spend. Also, interest rates would increase, which depends on whether it has good or bad affects (good for saving, bad for borrowing). This would also mean that the pound (£) is stronger against the other currencies. This is good for imports, but bad for exports and so UK manufacturers will be hit hard.

Unemployment

If unemployment rises then people will not have any money to spend and so business will struggle and therefore GDP will decrease. This will mean that interest rates will fall, which is good for borrowing, although bad for saving. If unemployment rises it will also mean that the pound (£) will be weaker which is good for exports (UK manufacturers will benefit), however, it will have a bad effect on imports and therefore prices will rise. This should mean that inflation will increase.

Exchange Rates

If exchange rates rise it will mean that the pound (£) is stronger against the other currencies which is good for importing but bad for exporting. This will mean that people will find prices abroad cheap and therefore they may decide to go on more holidays abroad which will mean that businesses such as hotels and leisure parks will find a decrease in sales which will mean that eventually the economy will equal itself out again.

Inflation

If inflation rises then people will have less money to spend and so businesses will see a decrease in sales which could lead the economy into a recession as more businesses will be failing and therefore, more people will be out of work. The effects would worsen but eventually they would pick up as other effects such as exporting would highly benefit which would mean that UK manufacturers would be generating a lot of sales and therefore would be looking to employ more people.

Interest Rates

If interest rates rose then more people would save there money and there would be a decrease in borrowing and therefore people would put off buying houses as it would greatly affect the cost of a mortgage. As people put more money into savings they will have less money to spend and so businesses will see a decrease in sales which will mean that GDP will decrease which means that the economy is suffering.

Tags

Bank, Business, Countries, Domestic, Economics, Economy, England, Exchange, Gdp, Good, Gross, Increase, Inflation, Interest, Money, People, Product, Rate, Rise, Service, Unemployment

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