Cambridge
        TECHNICALS
                       OCR LEVEL 3 
                       CAMBRIDGE TECHNICAL
                       CERTIFICATE/DIPLOMA IN
                       BUSINESS
                       BUSINESS AND THE  
                       ECONOMIC ENVIRONMENT
                       T/502/5500     
                       LEVEL 3 UNIT 21
                       GUIDED LEARNING HOURS: 60
                       UNIT CREDIT VALUE: 10
                                      Version 2: Updated to reflect current 
                                      legislation and Acts.
      BUSINESS AND THE ECONOMIC 
      ENVIRONMENT
      T/502/5500 
      LEVEL 3 UNIT 21
      AIM OF THE UNIT
      Businesses do not operate in a vacuum; they are affected by 
      the national and international economic environment.
      This unit helps learners to understand how the economic 
      environment affects businesses and how government 
      policies, especially financial and monetary policies, impact 
      on UK business. Learners will gain an understanding of 
      the reasons behind the current economic situation in the 
      UK, which also affects them at an individual level. This unit 
      also helps learners to understand the relationship between 
      government spending and government economic policy and 
      how this affects business. Equally, this unit will help learners 
      to know how business activity influences Government 
      policy. Finally, learners will increase their awareness of how 
      international economic events and organisations influence 
      UK businesses
      www.ocr.org.uk                 2
                                                                                        Business and the Economic Environment Level 3 Unit 21
             ASSESSMENT AND GRADING CRITERIA
               Learning Outcome (LO)                 Pass                                  Merit                                 Distinction 
                                                     The assessment criteria are           To achieve a merit the                To achieve a distinction 
                                                     the pass requirements for             evidence must show that,              the evidence must show 
                                                     this unit.                            in addition to the pass               that, in addition to the pass 
                                                                                           criteria, the learner is able to:     and merit criteria, the 
               The learner will:                     The learner can:                                                            learner is able to: 
               1    Understand the impact           P1  explain the effects, of 
                    on businesses of                     changes in the economic 
                    changes in the economic              environment on a 
                    environment                          selected business
                                                    P2  identify how government 
                                                         policies impact upon on a 
                                                         selected business
               2    Know how government             P3  identify the impact of            M1  analyse the positive             D1  evaluate the effects of 
                    spending impacts on                  government spending on                and negative effects of             government spending on 
                    businesses                           a selected business                   government spending on              a selected business 
                                                                                               businesses
               3    Understand fiscal and           P4  explain how both fiscal           M2  analyse the positive and         D2  evaluate the 
                    monetary policies and the            and monetary policy                   negative effects that fiscal        consequences of fiscal 
                    effects on spending                  decisions have affected a             and monetary policies               and monetary policies on 
                                                         selected business                     have had on a selected              a selected business
                                                                                               business
               4    Know how the                    P5  describe the impact of 
                    international economy                international factors on a 
                    affects UK businesses and            selected business
                    competition
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                    TEACHING CONTENT
                    The unit content describes what has to be taught to ensure that learners are able to access the highest grade.
                    Anything which follows an i.e. details what must be taught as part of that area of content.
                    Anything which follows an e.g. is illustrative, it should be noted that where e.g. is used, learners must know and be able to apply 
                    relevant examples to their work though these do not need to be the same ones specified in the unit content.
                    Learning Outcome 1 Understand the impact                                                                                  •	      Monetary	policy:	Role	of	the	Bank	of	England,	interest
                    on businesses of changes in the economic                                                                                          rates	(e.g.	role	of	the	Monetary	Policy	Committee),
                    environment                                                                                                                       inflation control, value of the Pound Sterling against
                                                                                                                                                      other currencies, sovereign debt, sovereign investment,
                    •	     The	business	cycle:	growth	and	recession	(boom	and	bust)                                                                   quantitative	easing,	regulation	(e.g.	role	of	the	SFA).
                    •	     Effects	of	the	business	cycle	on	demand,	supply	and
                           competition at a local and national level                                                                          Learning Outcome 4 Know how the international 
                    •	     Influence	of	business	practices	on	the	environment                                                                 economy affects UK businesses and competition
                    •	     Factors	that	impact	on	business:	access	to	finance,
                           interest rates, taxation, strength of the currency, inflation,                                                     •	      European	factors:	expansion	of	the	EU,	the	Eurozone	and
                           employment, R&D investment, share value, capital                                                                           the	Euro,	the	EMU	(European	Monetary	Union),	effects
                           investment	(e.g.	buyouts,	venture	capital,	mergers),	rise	of                                                               of	Eurozone	countries	in	economic	collapse	or	danger	of
                           prices and costs                                                                                                           collapse, euro convergence criteria
                    •	     Government	policies	that	impact	on	business:	fiscal                                                                •	      Global	factors:	BRIC	economies,	world	poverty,	stock
                           policy	(e.g.	corporate	tax,	VAT),	monetary	policy	(e.g.                                                                    market crashes, banking deregulation and scandals, role
                           interest	rates),	trade	policy	(e.g.	balance	of	payments,                                                                   of	the	IMF	(International	Monetary	Fund),	role	of	the	WTO
                           tariffs,	trade	agreements),	legislative	policy	(e.g.	legislation,                                                          (World	Trade	Organisation),	industry-specific	factors	(e.g.	oil
                           regulation),	competition	policy	(e.g.	role	of	the	Competition                                                              and	gas	prices),	war	and	terrorism.
                           Commission),	industrial	policy,	social	policy.	Influence
                           of	business	on	Government	policy	(e.g.	lobbying,	fraud,                                                            It	is	important	to	maintain	focus	on	the	current	law	and	practice	
                           corruption).                                                                                                       in this area. The list given above is neither prescriptive nor 
                                                                                                                                              exhaustive.	Where	legislation	has	been	revised	learners	will	
                    Learning Outcome 2 Know how government                                                                                    consider the most up to date version as that will reflect current 
                                                                                                                                              industry practice.
                    spending impacts on businesses
                    •	     Government	spending:	the	budget,	welfare	expenditure,
                           public	services	expenditure	(e.g.	education,	health,	public
                           security),	infrastructure	expenditure	(e.g.	road	building,
                           airports),	foreign	aid,	subsidies	(e.g.	agriculture),	public
                           sector	borrowing	(national	debt)
                    •	     The	multiplier	effect	and	its	benefits	to	the	economy	at
                           local and national level.
                    Learning Outcome 3 Understand fiscal and 
                    monetary policies and the effects on spending
                    •      Fiscal	policy:	corporation	tax,	Capital	Allowance	Act, 
                           personal tax and allowances
                    •      Role	of	HMRC	(Her	Majesty’s	Revenue	and	Customs), 
                           Comprehensive	spending	review,	Redistribution	of	
                           income	
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