gcse economics - tools of the trade: introduction to government objectives and targets

KEY QUESTIONS

• WHAT TAXES DO WE PAY?
• WHY DO WE PAY SO MUCH TAX?
• WHAT DOES THE GOVERNMENT SPEND MONEY ON?
• WHY IS IT SO IMPORTANT WHEN INTEREST RATES CHANGE?
• WHY IS THE EXCHANGE RATE SO IMPORTANT
• SHOULD WE PRIVATISE THE ECONOMY?

HOW DOES THE GOVERNMENT TRY TO ACHIEVE ITS TARGETS?

They use their TOOLS OF THE TRADE

• Change taxes e.g. income, VAT, corporation – this can affect the level of an individuals’ disposable income

• Increase Government spending – roadbuilding, spending on benefits, grants to businesses

• Change interest rates – this can influence a persons’ disposable income and affect the cost of borrowing (see interest rates)

• Influence the exchange rate – to make it easier to export or cheaper to import.

• Use supply side policies – cutting benefits to unemployed or privatisation