Gov influcence Flashcards
Why have a fiscal policy
To boost growth in times of recession
increases in corporation tax reduces 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
Higher income tax reduces disposable income, lowering demand; firms may need more advertising or cost-cutting like redundancies.
Higher VAT/excise duties raise prices; firms may absorb costs to avoid losing customers, reducing profits.
∙ 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
monetary policy
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.
higher interest rates increase the cost of borrowing for an organisation which may mean it will be unable to invest in product development o this may result in a loss of the firm’s com
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
decrease business loan rates
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
quantitive easing and legislation
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
health and safety work act
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.
