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  • Created by: Natasha
  • Created on: 12-04-13 12:13

Goverment and Business- Demand

Employment and consumer incomes are rising this is called an economic growth. There is a high demand for goods and services.

As businesses produce and sell more,they employ more and pay people more, and make more profit for themselves while still boosting our economy

When employment and cosumer incomes are falling this is called recession and the demands for good and services falls.

The credit crunch was when international banks had made too many bad loans. It affected housing market, car manufacturing and the building industry. Businesses closed such as Woolworths

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Interest Rates

It can be a cost(borrowing) or a reward(lending and saving) 

The amount of interest is a sum of money that must be paid on a loan, to calculate this:

Interest paid= Amount borrowedxInterest rate/100

How interest rates affect businesses.

  • Cost to the business for borrowing money
  • Cost to consumers for borrowing money
  • Reward for saving

Inflation is when prices of good and services are generally rising. 

  • If inflation is too high, the bank raise the interest rate. This should reduce demand for goods and services
  • If inflation is too low, the bank will reduce interest rate. This should lead to a rise in demand.
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It uses money from taxes to pay for goods and services, including social secruity benefits

Uses taxes to raise the price of some goods that cause external costs so that people buy less of them such as cigarettes, alcohol and petrol 

Taxes paid on income

  • Income tax
  • National insurance
  • Corporation tax 

Taxes on spending

  • VAT 
  • Excise duties
  • Business rates
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