business and economy short answers

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Questions and Answers

How do businesses contribute to reducing unemployment in the economy?

Businesses create jobs, thereby decreasing unemployment rates and reducing the need for social welfare payments.

What is the significance of taxation in relation to business profits?

Higher profits and employment levels lead to increased tax revenue for the government, which can be used for essential services like education and infrastructure.

Explain how competition among businesses can keep inflation down.

As competition intensifies, businesses strive for efficiency, resulting in lower costs and consequently lower prices, which helps control inflation.

In what ways can local enterprise support community development?

Local Enterprise Offices help regenerate areas and support small businesses, fostering community spirit and creating local role models. Signup and view all the answers

How does reinvesting profits affect economic growth?

Reinvesting profits allows businesses to expand, which leads to job creation and increased sales, thereby contributing to economic growth. Signup and view all the answers

What role does increased entrepreneurship play in reducing reliance on Foreign Direct Investment (FDI)?

Encouraging entrepreneurship decreases dependence on MNCs, which may relocate for better opportunities, fostering a more stable local economy. Signup and view all the answers

How does the expansion of businesses improve the balance of payments (BOP)?

As more home-produced goods are exported, the balance of payments improves due to increased foreign sales and reduced reliance on imports. Signup and view all the answers

What is import substitution and how does it affect domestically produced goods?

Import substitution is the strategy of reducing imports by promoting domestic production, which can lead to an increase in the availability of domestically produced goods to compete with imports. Signup and view all the answers

Explain the concept of spin-off effects in entrepreneurship.

Spin-off effects occur when successful entrepreneurs inspire others to start their own businesses, leading to increased demand for local suppliers and enhancing the overall enterprise culture. Signup and view all the answers

How can increased competition contribute to unemployment?

Increased competition may lead to larger firms outgrowing smaller firms, resulting in the closure of local businesses and subsequent job losses. Signup and view all the answers

What is the relationship between profit maximization and inflation?

When firms aim to maximize profits, they might raise prices instead of cutting costs, which can trigger inflation as employees seek higher wages to keep up with increased costs. Signup and view all the answers

Discuss the environmental costs associated with increased business activity.

Increased business activity can lead to pollution and waste issues, such as improperly disposed hazardous materials, harming the environment and sectors like food and tourism. Signup and view all the answers

What are some social costs linked to increased business activity?

Social costs can include heightened road traffic, noise pollution, and health risks to workers that arise from expanded business operations. Signup and view all the answers

In what way does foreign competition impact the Irish market?

Foreign businesses entering the Irish market can benefit consumers by offering cheaper goods, but they may also threaten local businesses and their sustainability. Signup and view all the answers

How can business activity affect government income?

Increased competition and firm closures can lower tax revenue for the government while also increasing social welfare demands. Signup and view all the answers

Study Notes

Benefits of Business to the Economy

Businesses create jobs, reducing unemployment rates and minimizing government social welfare payments.
Increased employment and profits lead to higher tax revenues (PAYE, VAT, corporation tax), which fund education, social welfare, health, and infrastructure.
Competition from expanding businesses prompts efficiency, lowering costs and aiding in inflation control. For example, grocery stores compete to keep prices low.
Job creation and a wider range of goods and services enhance public living standards significantly.
Local Enterprise Offices focus on revitalizing areas and supporting small businesses, fostering community spirit and growth in regions impacted by closures and migration.
Reinvesting profits allows firms to expand, resulting in more job creation and increased sales and profits.
Business expansion drives economic growth, providing the government with more funds for grants and continuing economic stimulation.
Increased entrepreneurship reduces dependence on foreign direct investment (FDI) by ensuring the loyalty of locally owned businesses as opposed to multinational corporations.
Business growth leads to improved balance of payments, as exports rise and imports may decline due to competitive domestic products in the market.
An enterprise culture can emerge, inspiring local entrepreneurship and creating demand for associated local suppliers.

Disadvantages of Business to the Economy

Competitive pressures can cause smaller firms to close, leading to unemployment and increased social welfare costs, along with decreased tax revenues.
Firms may raise prices to maximize profits instead of pursuing cost efficiency, potentially causing inflation. This may lead to wage demands from employees and a detrimental spiral of price increases.
Profit-driven practices might neglect environmental responsibilities, leading to pollution, which harms critical sectors like food and tourism by deterring consumers.
Increased business activity often results in social costs such as elevated road traffic, delays, noise pollution, and health risks for workers.
Foreign competition may enter the Irish market, providing cheaper options for consumers, which can threaten local businesses.

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Description

This quiz explores the positive impacts of businesses on the economy, including job creation, taxation benefits, and effects on inflation. You'll learn how businesses contribute to lower unemployment rates and increased government revenue, which in turn supports essential public services. Test your understanding of these concepts with this engaging quiz.