4.5 - Tax + AD/AS

Question 1

How do changes in NI + income tax affect AD?

Answer 1

Affect disposable incomes
Spending power + consumption

Question 2

How do changes in corporation tax affect AD?

Answer 2

Influences profit reinvestment
Productivity + growth

Question 3

How do NI changes affect employers?

Answer 3

Affects cost of employing extra labour
Indirect income +cons/save effects

Question 4

How does VAT affect AD?

Answer 4

Affects retail prices
Spending power + real incomes
Consumption

Question 5

How can VAT affect AS?

Answer 5

Firms component costs
Affects investment potential

Question 6

How can direct tax affect AS?

Answer 6

Work incentives + disincentives

Question 7

How can business taxes affect AS?

Answer 7

Incentivises/dissuades FDI

Question 8

When might direct tax cuts fail to improve AD/AS?

Answer 8

Low confidence
Skill shortages
Overseas investment opportunity
Policy conflict

Question 9

What are the general evaluation points regarding taxation?

Answer 9

Scale
SR/LR
Equality - Prog/Reg

Question 10

How can business taxes adversely affect the AD/AS?

Answer 10

Improved investment potential
Capital Labour substitution
Negative multipliers