Government Influence on Businesses Flashcards
Monetary policy
ways in which to control the money supply in the economy, this affects spending which may be achieved by varying interest rates
To reduce inflation, governments increase interest rates to reduce consumer spending
MPC
Monetary Policy Committee is responsible for the Monetary policy
Increasing interest rates means… x3
increases cost of borrowing for businesses which has an adverse effect on cash flow and profits
unable to invest in future technology which result in losing competitive edge, customers and market share
reduced customer spending means less demand for products
Decreasing interest rates means… x2
borrowing is cheaper which encourages businesses to expand
increase customer borrowing means that they will spend more which increases demand
Quantitative easing means…
MPC introduce measures to increase bank’s ability to lend to customers and businesses
Quantitative easing encourages… x2
encourages customer spending by producing new money to boost economy
businesses can invest in new equipment/machinery/technology
Fiscal policy
involves the use of government spending, government borrowing and taxation to achieve economic objectives
IMPACT of National Minimum wage x3
increase costs for UK firm
reduces profit
reduces opportunity for growth
Increased income tax means…
customer disposable income will reduce which reduces demand for good/services so firms will need to work hard to attract sales. Businesses may have to drop prices to attract customers which reduces profits back to business.
Increased VAT means…
customers will be charged higher prices
Increased corporation tax means… x2
firms’ net profit is reduced which could put expansion plans on hold
lower dividends to shareholders who could sell their shares
Consumer Protection legislation
sets standards of hygiene and safety
IMPACT of Consumer Protection x2
compliance can increase costs
pressure could enhance quality and increase sales in the long run
Employment legislation x4
Working Time Directive reduces firms flexibility e.g. no working over 48hours a week
cannot fire employees (need verbal or written warning)
redundancy only if job doesn’t exist anymore and compensation must be given
Maternity leave is extended to 1 year which impacts the quality of the customer service that customers receive.
General Data Protection
companies need o keep record of how and when an individual gives consent to store their personal data therefore companies have to show a clear audit trial of consent