Gov influcence

Question 1

Why have a fiscal policy

Answer 1

To boost growth in times of recession

To reduce unemployment - when there is an increase in demand for goods and services more staff are needed- so when there’s more people in work there is more disposable income to spend.

Redistribution of income - by increasing income tax on higher earners, this gives the government access to more funds, to support those on benefits or top up incomes on lower benefits/lower income bands.

Aim is to reduce the amount of government borrowing this can be achieved by changing tax, examples- all boost demand ; more spending = more income= higher economic growth

increase in income tax reduces disposable income so the demand for goods and services reduces o may have to increase amount spent on advertising to attract customers/make cut backs such as redundancy etc

increase in corporation tax means educes the organisations retained profit - this could impact reinvestment for expansion of lower dividends will not please shareholders who may choose to sell shares thus impacting the market value of the organisation

Increase government spending

decrease in government spending will negatively impact on the ability to provide a quality service by public sector organisations for example NHS and state schools

Question 2

monetary policy

Answer 2

Monetary Policy- Money supply and interest rates are controlled by the bank of england (central bank)

Central bank controls inflation; they usually want inflation to sir around 2 percent.

How?

They manage credit and interest rates- which affects borrowing for customers- if cheaper borrowing this gives incentives for customers to spend and to save less

Decrease mortgage rates - this encourages new builds and people to move house - less monthly outgoings - more spending

Decrease in savers = more spending on consumer goods or houses

Question 3

decrease business loan rates

Answer 3

Decrease business loan rates

Weaker exchange rates - can happened if lower interest rate

There will be less growth- investors will want to move their money out of the uk, seeking a better exchange rate, this can lead to a boost on imports- leads to a boost on the economy, we will gain cheaper priced goods

Question 4

quantitive easing and legislation

Answer 4

Quantitative easing - used by the government to introduce new money into the economy, so that businesses can flourish whether old or new and increases employment

Legislation- national minimum wage

If the minimum wage is increased by the government then this will lead to an increased cost for uk businesses
This reduces profit and opportunity for growth

Question 5

health and safety work act

Answer 5

Organisations may have to appoint specialist staff to ensure safety or equipment/procedures- this may result in new safety equipment to meet any new standards introduced by the government

Organisation is liable for work related injuries suffered by employees which may result in compensation being paid therefore reducing cash flow.

General data protection regulation (GDPR)- how companies keep a record of information= how and when an individual gives consent to storing personal data- a clear audit trail of consent is required.