• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

How Government Spending And The Multiplier Effect Affect A Business.

Extracts from this document...


´╗┐Importance of government spending in the economy: Local level: If the government spending was used on the local level, it would be important as it will expand on local areas and improve in such areas by providing leisure centres, fun areas in parks such as swings and slides etc?.. The more money the government spends within such areas the more people there will be that will spend their money on going to such areas it has been spent on such as the leisure centres it can be a benefit for such businesses locally. National level: If the government spending are spent on the national level this would be very important as it will allow more jobs to be created which then decreases the rate of unemployment, this may only occur as more businesses will begin to open or may even begin to expand on their businesses by providing more services for the customers. If such does occur then the working class will have stable incomes which will even allow them to buy luxury items, from which people will begin to pay council taxes where more wealth is made for the country. ...read more.


From here they would have to fall and losses will be made leading the AL-MURAD profit margin to decrease as they will cut down on the prices of their products. The positive effect of government spending on AL-MURAD: AL-MURAD will begin making profits as there will be high demand for their tiles due to the improvements made on local areas and expansions (housing and environment) of areas from which people will buy their tiles as they will have the money to do so. Here more jobs will be created as AL-MURAD will have the money from the profits made to be able to expand on their businesses so their profit margin will increase from which they can plan on their future business by expanding it more such as locating their business/stores in more areas, different cities, from here more jobs will be created as the new stores opening workers would be needed so this would be beneficial for the employees who are in need of a job, this would be another way of increasing the wealth of the country as more and more people ...read more.


To be able to calculate the multiplier there would be certain formulas used as shown below: Multiplier: 1 1. Proportion of extra income spent People will then have chance to save up to 10% of their income and then have the rest 90% to spend on day to day needs. So here the multiplier will then change to: = 1 = 1 1-0.9 0.1 = 10% So if the government decided to spend up to £25 million the calculation Would be 25million X 10= 25 Million This is the extra amount of money altogether people will have, due to the extra savings they had saved for future planning’s or buy products from overseas. Due to economy having up to £250 million in their pockets this will be beneficial for AL-MURAD as the people will have enough money to spend on luxury items meaning more people will buy tiles and other luxury items from AL-MURAD, which then benefits them and their business in many ways like increase in profit margins and sales. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Business Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Business Studies essays

  1. To what extent does the use of a business plan guarantee success?

    However a lot of people may get so discouraged by what is revealed in the business plan they give up before they even give you a chance. Investing resources unwisely Many business plans fail because those involved do not spend the time or energy, or have the expertise, necessary to make the plan comprehensive enough to have true value.

  2. How Government Spending Could Affect A Tile Business.

    The negative affect here would be that the government would have the need to borrow money from the national saving which is the public sector net borrowing. In which they would have to make money from taxes that people are charged with which is income tax, council tax, value added tax (VAT)

  1. How Government Fiscal Policy Affects A Business

    This will put AL-MURAD in a critical situation where AL-MURAD will have to compromise as they will be having fewer customers which lead to less profit but due to the government law they cannot have low employment. AL-MURAD will have to pay all their workers which will be very hard as the inflation is low.

  2. How Environmental And Global Events Could Affect A Business.

    It can even delay the process of tiles being delivered to them and more checks will be taking place on the goods coming in and out of Pakistan (more security checks). Also they might spend money on insurances but may not receive any income.

  1. How Government Fiscal Policy Affects A Business.

    Monetary policy also affects the supply of money, again influencing demand and costs, and therefore inflation. The government wants to keep the inflation rate low while having high employment rate which is not very hard as the people will stop spending money due to the low inflation.

  2. To what extent did Disraelis second ministry improve the condition of the people?

    Less successful was the Merchant Shipping Act of 1876. In an attempt to prevent vessels being sent out overladen and liable to sink - allowing their owners to claim insurance payouts - it was made compulsory for a ?Plimsoll? line to be drawn to indicate how laden the ship should be.

  1. Discuss how travel factors affect travel to three selected destinations

    Several of those injured are fighting for their lives. The Boston Marathon, the world?s oldest annual marathon, attracted over 26,000 participants from 56 countries this year. However, this is shows us that the attack made has an impact on sport organisations as well because sporting events are also becoming tourist attractions worldwide.

  2. Communication in a Care Home Business

    Communication must therefore be succinct but comprehensive at the same time. The nurse also has to provide information written information in the form of written entries in the daily notes. These written entries should be more comprehensive than the information passed over at handover.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work