2.5.1 ECONOMIC INFLUENCES (GOV SPEND AND TAX)

Question 1

what is a direct tax

Answer 1

type of tax that is levied directly on an individual’s or organisation’s income or wealth

Question 2

what is an indirect tax

Answer 2

type of tax that is levied on goods and services (consumption)

Question 3

examples of direct tax

Answer 3

• income tax
• national insurance
• corporation tax
• capital gains tax
• inheritance tax

Question 4

examples of indirect tax

Answer 4

• VAT
• excise duties
• customs duties
• council tax
• business rates

Question 5

effects of increased taxation on businesses

Answer 5

• higher operational costs
• reduced profitability
• decreased investment
• cash flow strains
• pricing adjustments
• competitive disadvantage
• potential job cuts

Question 6

effects of decreased taxation on businesses

Answer 6

• lower operational costs
• increased investment
• higher consumer spending
• improved cash flow
• job creation
• pricing flexibility
• reduced compliance costs

Question 7

effects of increased government spending on businesses

Answer 7

• boost in demand
• infrastructure development
• job creation
• support for industries
• increased competition

Question 8

effects of decreased government spending on businesses

Answer 8

• reduced demand
• budget cuts
• slower economic growth
• fewer contracts
• impact on public services