9. Government, Tax & Economy

What is tax?

Money collected by the government from individuals and businesses to fund public services.

What is a budget?

An annual financial plan outlining government spending and how it will be funded through taxation and borrowing.

What is income tax?

A tax paid on earnings such as wages and salaries.

What is VAT?

Value Added Tax charged on goods and services when they are bought.

What is National Insurance?

A tax on earnings that funds welfare benefits such as the NHS and state pensions.

Why does the government collect tax?

To fund public services like healthcare, education, transport and welfare.

How does the government manage the economy?

By using taxation, spending and interest rates to control issues like inflation and recession.

Why is government spending important?

It supports essential public services and maintains economic stability.

What is an advantage of taxation?

It funds key public services such as the NHS and education system.

What is a disadvantage of taxation?

High taxes can reduce disposable income and discourage work or investment.

Why does government budgeting matter?

It ensures public money is allocated to priorities and helps control national debt.

What is the role of government in a recession?

To increase spending or reduce taxes to stimulate economic growth.