CHAPTER 12 - Government Objectives and Policies

Question 1

FISCAL POLICY - TAXATION

Answer 1

• the money raised from taxation is used by a government to help fund its spending on public services ( police, education, health… )
• businesses and individuals pay taxes.

Question 2

TYPES OF TAXES

Answer 2

• income tax ( direct tax ( charged on income ) )
• corporation tax ( direct tax ( charged on income ) )
• value added tax - VAT ( indirect tax )

Question 3

INCOME TAX

Answer 3

Paid on personal income

Question 4

CORPORATION TAX

Answer 4

Paid on company profits

Question 5

VAT

Answer 5

Paid when buying goods and services

Question 6

WHY ARE LOWER TAXES BETTER FOR BUSINESSES THAN HIGHER TAXES ?

Answer 6

Lower taxes are better for businesses than higher taxes, because high taxes will reduce demand and discourage work and enterprise

Question 7

MONETARY POLICY - INTEREST RATES

Answer 7

• interest is the cost of borrowing money and the reward to savers
  
  • usually controlled by the authorities and can therefore change
  • help to control the economy, and this use is called monetary policy
• monetary policy: using changes in interest rates and the money supply to manage the economy

Question 8

LEGISLATION

Answer 8

impacts on:

• consumer protection
• competition policy
• environmental legislation