303 - PEST - Political

Question 1

Political factors

Answer 1

Stability/instability, taxation, subsidy, regulations, the view of the political part in power

Question 2

How political factors can affect business activity

Answer 2

Increase in taxation, new regulations/laws, government policies

Question 3

Role of the government

Answer 3

Economic objectives such as low unemployment, stable prices, low inflation, economic growth

Question 4

Subsidies

Answer 4

A payment from the government to individuals or businesses, usually to supplier that reduce their costs of production and encourages them to increase output of a good or service

Question 5

How subsidies affect businesses

Answer 5

Can help to lower prices as subsidies can cover costs, the profit argon could increase which could be an incentive to carry on producing the goods that attract the subsidy, lower prices can attract more customers

Question 6

Fiscal government policies

Answer 6

Taxation and public spending

Question 7

Fiscal policy - Taxation

Answer 7

Taxation is a payment to the government, the government uses this money to pay for public services. Income tax, value added tax, corporation tax, national insurance, local government, there are also specific taxes for individual products

Question 8

How taxes affect businesses

Answer 8

1) An increase in income tax means less money to spend for consumers
2) An increase in VAT means that consumers have to pay more for the goods and services, businesses costs increase as supplies will be more expensive
3) An increase in corporation tax will mean the business keeps less of its profits which may means less money to pay dividends and less money to reinvest in the business

The opposite is true for a tax decrease.

Question 9

Public spending

Answer 9

‘The budget’, how much money the governments collects in taxes and where they will spend this money

Question 10

How does public spending affect businesses

Answer 10

1) It creates employment, more people will have disposable income that they can spend in private sector businesses
2) It creates demand for goods and services to supply the public sector businesses

Question 11

Monetary policy

Answer 11

Policies to control exchange rates and interest rates, the government influences exchange rates and interest rates, these are also economic factors

Question 12

The importance of the government as a purchaser of goods from the private sector

Answer 12

They spend over £100 billion a year, they may be the key purchaser of the goods the business produces