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uk

The Impact of Government Policy on Business

BTEC Business

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Scope of this Session

Effects on business of: taxation subsidies interest rates exchange rates public-private partnerships

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we receive money from our work and pay tax on these earnings (income tax and national insurance) we buy goods and services and pay sales tax (VAT) firms sell goods and services to us and are taxed on their profits (corporation tax) firms pay tax on their employees wages (employers national insurance contribution)
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What We Know Already

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When we save a part of our earnings, we are withdrawing income from the flow When we pay taxes to the government, this represents a withdrawal too We may also spend some of the money on goods or services produced by nonUK businesses. Buying imports also has the effect of withdrawing income from the flow
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Money Flows Around the Economy

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When the Government raises public spending, it is injecting income into the flow When firms invest in new machinery or premises, this is also an injection of income When firms or individuals overseas consume goods and services produced in the UK, this too is an injection of income
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Injections of Income into the Economy

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The Circular Flow of Income

Make notes on this way of looking at an economy, from the following Biz/ed page on the Circular Flow of Income: http://www.bized.ac.uk/learn/econ omics/macro/notes/income.htm

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