ExpertMedium2 marksMultiple Choice
ACCA · Question 05 · The business organisation and its external environment
A national economy is currently experiencing a prolonged period of 'stagflation'. How is this macroeconomic condition best defined, and how would it typically impact a luxury eco-tourism company?
A national economy is currently experiencing a prolonged period of 'stagflation'. How is this macroeconomic condition best defined, and how would it typically impact a luxury eco-tourism company?
Answer options:
A.
High inflation combined with rapid economic growth; leading to increased costs but higher sales.
B.
Deflation combined with stagnant economic growth; leading to cheaper operational costs and higher margins.
C.
High inflation combined with stagnant economic growth; leading to reduced discretionary spending and lower sales for the company.
D.
Low interest rates combined with high employment; leading to a boom in luxury travel.
How to approach this question
Break down the word 'stagflation': Stagnation (low growth/high unemployment) + Inflation (rising prices). Luxury goods suffer when incomes stagnate and prices rise.
Full Answer
C.High inflation combined with stagnant economic growth; leading to reduced discretionary spending and lower sales for the company.✓ Correct
Stagflation is an economic cycle characterized by slow growth and a high unemployment rate accompanied by inflation. Discretionary sectors like luxury tourism are hit hardest as consumer purchasing power drops.
Common mistakes
Confusing stagflation with standard inflation (where growth might still be occurring).
Practice the full ACCA BT — Business & Technology Practice Exam 6
52 questions · hints · full answers · grading
More questions from this exam
Q01AeroFarms, a vertical farming startup, is planning to build a massive indoor facility in an urban...MediumQ02AstroMine Inc. is a commercial space exploration company preparing to extract rare earth metals f...MediumQ03SynthoMeat Ltd produces lab-grown synthetic beef. Recently, the price of traditional farmed beef ...HardQ04StreamForge is a new esports broadcasting platform. The industry is currently dominated by two ma...MediumQ06BlockVote is a Decentralized Autonomous Organization (DAO) where there is no central management. ...Medium