government

Question 1

how can monetary policy support businesses during a recession

Answer 1

• (Government encourages Bank of England to) lower interest rates on loans supplies cash to businesses at low cost
  > encourages borrowing to stimulate growth/survival
• quantitative easing drives interest rates down encouraging borrowing and spending

Question 2

how can fiscal policy support businesses during a recession

Answer 2

• reduced VAT can lower selling prices encouraging spending
• reduced income tax can increase disposable income which encourages spending
  o reduces the tax revenue available to fund support for firms
• reduced corporation tax will increase profit after tax

Question 3

impact of monetary policy on UK businesses

Answer 3

• higher interest rates increase the cost of borrowing for an organisation which may mean it will be unable to invest in product development
  o may result in a loss of the firm’s competitive edge, customers and market share
• higher interest rates will encourage individuals to save, which will reduce consumer spending
• lower interest rates will increase consumer borrowing and therefore spending and consumer purchasing
• quantitative easing is used by the government to encourage spending by introducing new money to boost the economy
  o this would allow organisations to invest in growth

Question 4

impact of fiscal policy on UK businesses

Answer 4

• increases in corporation tax reduces the organisations retained profit
  > this could impact reinvestment for expansion
  > lower dividends will not please shareholders who may choose to sell shares thus impacting the market value of the organisation
• increase in income tax reduces disposable income so the demand for goods and services reduces
  > may have to increase amount spent on advertising to attract customers/make cut backs such as redundancy etc
• increases in VAT and excise duties increases the price the customer pays and organisation may not wish to pass the increase onto customers thus reducing their profits
• decrease in government spending will negatively impact on the ability
  to provide a quality service by public sector organisations (eg. NHS and state schools)

Question 5

impact of NMW regulations on UK businesses

Answer 5

if the minimum wage is increased by the government then this will lead to increased costs for UK organisations

> reducing profit/reducing the opportunity for growth

Question 6

impacts of health and safety regulations on UK businesses

Answer 6

• organisations may have to appoint specialist staff to ensure safety equipment and procedures are regularly reviewed
  > this may result in new safety equipment requiring to be purchased to meet standards
• the organisation may be liable for work-related injuries suffered by employees - may result in compensation payments which reduces cash flow

Question 7

impacts of data protection regulations on UK businesses

Answer 7

companies will now have to keep a thorough record of how and when an individual gives consent to store and use their personal data therefore companies will have to show a clear audit trail of consent