The Impact Of Government Policy On Business

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The Impact Of Government Policy On Business

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The Impact Of Government Policy On Business

  1. 1. The Impact of Government Policy on Business BTEC Business
  2. 2. Scope of this Session <ul><li>Effects on business of: </li></ul><ul><li>taxation </li></ul><ul><li>subsidies </li></ul><ul><li>interest rates </li></ul><ul><li>exchange rates </li></ul><ul><li>public-private partnerships </li></ul>
  3. 3. What We Know Already <ul><li>we receive money from our work and pay tax on these earnings (income tax and national insurance) </li></ul><ul><li>we buy goods and services and pay sales tax (VAT) </li></ul><ul><li>firms sell goods and services to us and are taxed on their profits (corporation tax) </li></ul><ul><li>firms pay tax on their employees’ wages (employers’ national insurance contribution) </li></ul>
  4. 4. Money Flows Around the Economy <ul><li>When we save a part of our earnings, we are withdrawing income from the flow </li></ul><ul><li>When we pay taxes to the government, this represents a withdrawal too </li></ul><ul><li>We may also spend some of the money on goods or services produced by non-UK businesses. Buying imports also has the effect of withdrawing income from the flow </li></ul>
  5. 5. Injections of Income into the Economy <ul><li>When the Government raises public spending, it is injecting income into the flow </li></ul><ul><li>When firms invest in new machinery or premises, this is also an injection of income </li></ul><ul><li>When firms or individuals overseas consume goods and services produced in the UK, this too is an injection of income </li></ul>
  6. 6. The Circular Flow of Income <ul><li>Make notes on this way of looking at an economy, from the following Biz/ed page on the ‘Circular Flow of Income’: </li></ul><ul><li>http://www.bized.ac.uk/learn/economics/macro/notes/income.htm </li></ul>

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