Lecture on Taxation and Monetary Policy

Flashcards covering key concepts related to taxation and monetary policy, focusing on definitions, effects on businesses, and economic influences.

What is the difference between direct and indirect taxation?

Direct taxation is levied on profit or income, while indirect taxation is imposed on spending.

How does an increase in corporation tax affect businesses?

It may reduce demand for goods and services, impact costs, and cause businesses to consider redundancies or reduce production.

What is an example of an indirect tax?

Value Added Tax (VAT) and National Insurance are examples of indirect taxes.

What happens when there is a reduction in corporation tax?

It can increase demand for goods and services, impact costs, lead to business growth and expansion, and create higher levels of employment.

How is monetary policy used to influence the economy's level of demand?

Through tools like interest rates and the money supply, managed by the Bank of England.

What is an effect of expansionary monetary policy?

It lowers interest rates, reduces the cost of borrowing, encourages consumer spending, and motivates businesses to invest in new projects.

What is quantitative easing?

A monetary policy where the central bank buys financial assets to inject money into the economy.