How Government Control Over The Economy Affects Business Activity And How Businesses May Respond:
Bayani Gaba-gaba
No business operates in a vacuum. When the government raises a tax, changes interest rates or cuts its spending, the effects ripple straight through to sales, costs and profits. A smart manager watches government decisions as closely as the competition, because they can change the whole environment a business trades in.
In this lesson you will identify the government's main economic objectives, see how changes in taxes, government spending and interest rates affect businesses, and learn how firms might respond. By the end you will be able to work out how a particular policy change would hit a particular business and what it could do about it.
Manufura
- Identify government economic objectives, e.g. increasing Gross Domestic Product (GDP)
- Impact of changes in taxes and government spending
- Impact of changes in interest rates
- How businesses might respond to these changes
Takardar Darasi
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- GDP is a measure of: A. the total value of goods and services a country produces in a year B. a single firm's profit C. the interest rate D. a company's share price Answer: A
- A rise in income tax is most likely to reduce sales of: A. basic bread B. luxury jewellery C. tap water D. salt Answer: B
- Higher interest rates are likely to: A. increase borrowing to expand B. reduce demand for goods bought on credit C. lower firms' loan repayments D. raise consumers' spending power Answer: B
- Which is a direct tax? A. VAT on goods B. income tax C. an import tariff D. a sales tax Answer: B
- If the government increases spending on building hospitals, the businesses that benefit most are those that: A. sell luxury holidays B. supply construction and hospital equipment C. export coffee D. make jewellery Answer: B
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