ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
Which of the following is a likely consequence for a business when unemployment in its economy is high?
High unemployment typically reduces consumer spending power, lowering demand for non-essential goods. Fewer people have earned income, which hurts sales. Labour scarcity, wage pressure and recruitment difficulty are features of low unemployment, and government income tax receipts normally fall rather than rise.
- AGreater upward pressure on wages as labour becomes scarce
- BReduced consumer spending power, lowering demand for non-essential goodsCorrect
- CIncreased difficulty recruiting skilled staff because few applicants apply
- DA rise in tax revenue for the government from income tax
Explanation
High unemployment reduces household incomes, so demand for non-essential goods typically falls. Wage pressure and recruitment difficulty are features of low unemployment, and income tax revenue generally falls with fewer people in work.
Did you get it right without looking?
One question tells you little. A timed set on Macroeconomic factors shows your real accuracy, how long you take and where you lose marks.
More Macroeconomic factors questions
- A government wishes to reduce demand-pull inflation using fiscal policy. Which action is most consistent with this aim?
- An economy experiences a prolonged fall in the general price level. Consumers delay purchases expecting lower prices later, and firms cut ou…
- A government increases its spending on infrastructure and, as a result, interest rates rise because the extra borrowing competes with privat…
- A government wants to reduce structural unemployment caused by a mismatch between workers' skills and available jobs. Which policy is most a…
- A government reduces the corporate tax rate and cuts the marginal rate of income tax on higher earners, arguing that this will encourage ent…
- A government wants to protect a domestic steel industry from cheaper foreign competition. It imposes a limit on the physical quantity of ste…