Copyright 2006 – Biz/ed The Impact of Government Policy on Business BTEC Business

Copyright 2006 – Biz/ed Scope of this Session Effects on business of: taxation subsidies interest rates exchange rates public-private partnerships

Copyright 2006 – Biz/ed What We Know Already 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)

Copyright 2006 – Biz/ed Money Flows Around the Economy 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 non- UK businesses. Buying imports also has the effect of withdrawing income from the flow

Copyright 2006 – Biz/ed Injections of Income into the Economy 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

Copyright 2006 – Biz/ed 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’: omics/macro/notes/income.htmhttp:// omics/macro/notes/income.htm