gcse economics - tools of the trade: taxes and disposable income
DISPOSABLE INCOME
The amount of money an individual earns after taking away tax and national insurance payments.
HOW IS IT AFFECTED BY TAX?
SCENARIO 1 TAXES ARE HIGH
PAYSLIP OF JIMMY SHIN
GROSS PAY £500
LESS
INCOME TAX 20% £100
NATIONAL 5% £25
INSURANCE
NET PAY £375
SCENARIO 2 INCOME TAX IS CUT
PAYSLIP OF JIMMY SHIN
GROSS PAY £500
LESS
INCOME TAX 10% £50
N I 5% £25
NET PAY £425
WHY IS THIS IMPORTANT?
• Jimmy Shin’s disposable income has increased
•
He has more money to spend
•
Other people will also have more money to spend because of lower taxes
•
There should be lots more spending in the economy
•
This should help businesses sell more goods
•
They may take on more workers ….. this would reduce unemployment
These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email
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