Economic issues: Practice Questions

The government decides to increase the standard rate of Income Tax from 20% to 25%. How is this fiscal policy change likely to affect a local retail enterprise?

A government reduces Corporate Tax (tax on business profits) to encourage investment. Which of the following is the most likely direct result for a successful enterprise?

A government introduces a new supply-side policy by offering generous grants to enterprises for staff training and development in the technology sector. What is the long-term economic objective of this policy?

The following table shows the exchange rate between the Euro (€) and the US Dollar (\$):

January: \( 1 \text{ EUR} = 1.10 \text{ USD} \)
June: \( 1 \text{ EUR} = 1.25 \text{ USD} \)

What is the most likely effect on a European enterprise that exports high-end furniture to the USA?

An enterprise plans to expand its operations by taking out a variable-interest loan. If the central bank decides to increase interest rates to combat inflation, what is the most likely impact on this enterprise?

Describe how a significant increase in income tax might create an economic risk for a new enterprise selling luxury handmade furniture.

The government introduces grants for enterprises that use \(100\%\) renewable energy. Analyse how this change in government policy represents both an opportunity and a potential financial risk.

Explain how a rise in interest rates could act as a financial risk for an entrepreneur who has taken out a variable-rate bank loan to fund their start-up.

The government of a country has recently announced an increase in income tax rates from 20% to 25% to control inflation.

(a) Describe the effect of this tax increase on the disposable income of consumers. [2]
(b) Explain two ways a luxury car dealership might respond to this change in government policy. [3]