303 PEST factors (political)

Question 1

identity political factors

Answer 1

• stability/instability
• taxation
• subsidy
• regulations
• view of political party in power eg. some governments would like a smaller public sector

Question 2

role of government

Answer 2

• as many people employed as possible
• stable prices ie. low inflation
• economic growth ie. higher standard of living

Question 3

what is a subsidy

Answer 3

• a payment from the government to individuals or business
• usually involves a payment to suppliers- helps reduce their cost of production- increase output of goods/services

Question 4

how can a subsidy affect a business

Answer 4

• a business can use the subsidy to lower prices as they could use the subsidy to cover some of their costs
• because of this subsidy - their profit margin can increase- can be an incentive to carry on producing the goods that attract the subsidy
• leads to lower prices- attract customer- demand increases
• eg. farmers- subsidy - competitive pricing -farms keep running- food security

Question 5

2 ways the government control the economy

Answer 5

1. fiscal -> policies for taxation and public spending
2. monetary-> policies that control exchange rates and interest rates

Question 6

what is fiscal policy

Answer 6

involves the use of government spending , direct and indirect taxation and government borrowing to influence the perforce of the economy

-direct taxes-> income tax, national insurance, corporation tax, capital gaining tax, inheritance tax (taxes on INCOME)

-indirect taxes-> value added tax (VAT), customs duties, control tax, business rates (taxation on SPENDING)

Question 7

what is monetary policy

Answer 7

how the government influences exchange rates and interest rates

• interest rates are -> cost of borrowing, the reward for saving

-> if inflation is high- interest rates will increase
-> if inflation is low- interest rates will decrease

Question 8

what are contractionary / expansionary policies

Answer 8

contractionary-> to slow down economic growth , usually to reduce inflation
expansionary-> to increase economic growth and to increase business activity and demand

Question 9

impact of fiscal/ monetary policy

Answer 9

(on yellow note book)

Question 10

why do businesses legislate and regulate business activity

Answer 10

to prevent them from exploiting people-> laws protect consumers who buy from business and workers employed by businesses
eg. they regulate:
- consumer rights, employment rights, advertising rights, product standards, health and safety ext

Question 11

(-) of government policy on business

Answer 11

• tax increased- reduces retained profits available
• minimum wage increases
• health and safety compliance is expensive and time consuming
• employment rights can make it harder to improve productivity
• competition law can make it harder to UK business to grow and dominate business

Question 12

(+) of government policy on business

Answer 12

• lower corporate tax rates- higher retained profit
• increased business spending - more business opportunities
• free trade agreements -more export opportunities
• government grands and subsidies - encourages innovation and reduces costs
• competition laws- fairer markets and opportunities for small business