Business Unit 4 notes

Economics and Business Unit 4

The wider economic environment and business

Edexcel A2

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Can the government control the economy?

Good for the economy - 

- Increased incomes

- High employment 

- Increased production 

- Government recieving more tax 

Bad for the economy - 

- High unemployment 

- Low pay rises and pay cuts 

- Businesses selling less and cut down on production 

- Low taxes for the government 

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Macro Economics objectives

The governments objects for the economy 

- Stable and low rate of inflation 

- Balance of payments equilibrium 

- Low unemployment 

- Econmic growth 

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The multiplier effect

Explains how an increase in spending has a greater effect on the economy...

- More people employed

- More people have income to spend 

- Demand for goods increases

- High demand will increase production 

- More production means more people employed 

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Government injections

Government spending = 

- Higher sales of goods

- Increaed spending 

- Firms achieve higher profits

- Increased employment 

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Adams Smiths "canons of taxation"

- Equality 

Prepotionate to income

- Certainity 

Tax should be clear to understand

- Convenience of payment 

Taxes should be collected in a manor convenient for the tax payer

- Eonomy of Collection 

Taxes shouldn't be expensive to collect and should not discourage businesses

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Supply Side Policies

"Economic Growth is best achieved by lowering barriers for people to produce goods and services"

1. Lower income tax - less tax - more production

2. Lower capital gains tax - incentive to expand as a business

3. Reduce regulations and Red tape - time and money is taken away from production

4. Training and education - More skilled people

5. Flexible workforce - 9 day fortnight

6. Mobility - helping the workforce move around to jobs and businesses 

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Evaluating Supply Side performance


- Sustained growth 

- Large fall in unemployment 

- Low inflation and improvements in macroeconomics 

- UK has a felxiable labour market 


- An investment gap in public sector services 

- Manufacturing industries suffer

- Other countries have faster growth rates

- Rise in the blance of payments deficit suggests continual problems

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