Government Expenditure
The UK government spends a lot of money every year, in fact the spending make up for 45% of the GDP. The spending has a big effect on the country and also affects businesses. when the government spends more money they also increase taxes which means that people will have less money to spend and demand for products and services will decrease. When taxes are raised on businesses profits will decrease so they will have to start reduce cost, fire employees and raise prices.
The multiplayer effect
When demand increases there will be a multiplayer effect because it will lead to increased spending which creates more income for businesses who then grow their business and employee more people …show more content…
For example if the government wants to encourage people to take loans and start businesses they will decrease the interest rates. Monetary policy has a big impact on all businesses including curry’s. When the government lowers interest rates it will encourage curry’s to take loans and expand their business. It will also embolden individuals to take loans and buy products from curry’s.
If the government increases interest rates it will discourage people taking loans so people will have less money to spend.
Peoples Moorgate charges will also go up which means they have to pay more money to the bank and will have less money to spend which means Curry’s sales will decrease.
Fiscal polices Just as monetary the government can use fiscal policies to affect the economy. The government can use tax system and spending to affect the economy. For example if the government desires to increase spending they can decrease taxes on people so that they will have more money to