How Government Spending Could Affect A Tile Business
Government spending decision: The government can choose to spend on areas locally, nationally an European Level however if only one is used to spend government spending on then is still can have an effect on AL-MURAD, there can be negative and positive affects if they were spent on local areas and nationally then this can create contracts for AL-MURAD, in which unemployment rates will begin rising and people will have income to spend on luxury items and it can be beneficial for AL-MURADs due to people buying their luxury items in which product demand will rise which will then have a positive effect of their profit margin as it will begin rising. Education spending to reach ? 74bn.
Chancellor Gordon brown’s budget promises cash increases for the next three years of 5. 3%- 2. 5% in real terms- to a total ? 74bn for 2010-11. http://news. bbc. co. uk/hi/eduaction/6474789. stm Looking at the above source here I can see that the government spending will be used on education showing that in another 3 years time it is likely for AL-MURAD to receive contracts for tiles to improve education facilities such as improving school standards and building. So here AL-MURAD can receive many contracts from school which will have a positive effect on them as the profit margin will begin increasing from which they will get a chance to expand in their business.
I believe that government spending is very important as it will boost up the economy of the nation as when government spends money within the different areas it will create contracts for private firms from which then rise unemployment rates and employ workers who then will have a stable income to be able to spend on luxury items. 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) an etc… if such borrowed money is not repaid then it can lead the country to fall into great debt this is when recession takes place.
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If the government decided to increase tax rates then AL-MURAD would be affected a lot if there has been an increase in taxes as they will be leading the customers not to have enough money to be able to afford luxury items, so the demand for the products will fall and AL-MURAD will not be able to make profits leading them sacking their workers and not be able to improve on their business. But it can have a positive affect also as the government will receive more money to be able to spend on public services, education, hospitals etc…. so it could be possible for AL-MURAD to receive contracts from such services and buy the tiles which can have a great impact on AL-MURADs business leading them to improve on their business.
But if there was a decrease in taxes then AL-MURAD would have positive effects from this change in taxation as it would affect the economy as, the people and AL-MURAD the business itself would have more money to spend and have demand from the customers as the overall aggregate demand in the economy would increase. The government often try to get a balance in between the taxation in order for them to balance out the employment rate in the economy. Monetarists are based on the statement that the economy can be keeping up by measuring and manipulating the levels of money supply within the economy. So the money supply is the actual total amount of money available to be able to spend within the country. So monetary policy is the best tool for the government for controlling inflation within the UK. But it is seemed that inflation is created by overload aggregate demand in the economy.
Looking at this there can be both negative effect on the overall economy as it according to the overall demand in products and services so if there is no demand then inflation will rise and people would have no job this will have a negative effect on AL-MURAD as there would be no demand on their products and it will be difficult to pay wages as no one is buying their products and here employees would lose their jobs and won’t have any money to buy luxury items this will become difficult for the overall products and services demand in the economy to get back in a flow(recession here is taking place) so then there would be demand in products and services in the economy again.
“This year’s increase in the income tax personal allowance of 120 a year for basic rate taxpayers will be made permanent increased to ? 145 in April, helping 22 million basic rate taxpayers- another 500,000 households not just this year but for good”. http://news. bbc. co. uk/2/hi/uk/politics/7745340. stm looking at the above source here we can see that there has been an increase income tax free allowance from ? 120 a year to 145, this may have a positive impact on AL-MURAD as the customers can be able to afford to buy luxury items due to the high amount of tax free allowance received in which then AL-MURAD can have an increase in their profit margin. UK Interest rates lowered to 0. 5%- The bank of England has cut interest rates to 0. 5%- a fresh all-time low-and says it will now boost the money supply to help revive the economy. http://news. bbc. co. uk/1/hi/business/7925620. stm looking at the above source we can see that the UK has lowered their interest rates have fallen by 0. 5% here it shows that people will not be charged as much by the bank so here the customers will be able to afford to items up to a limited budget which is beneficial for AL-MURADs as they will receive more customers.
European development: AL-MURADs Company is based within the UK which is the part of the European Union which could have a positive effect on AL-MURAD as they can trade within the Europe without any barriers and they would not have to pay for import or export taxes. If UK does change their currency to Euro money then it would be way simpler trade across the Europe as there would be no need of exchange rates, so having currency in pounds can be a disadvantage for AL-MURAD as they have to spend more money on paying exchange rates. AL-MURAD also trade outside the Europe from countries like Pakistan, here they would have to face certain issues of security as the products would need to be checked thoroughly making sure that the products are safe to take over to Europe as costs will be issued as it may cause delays.
If the European Union constantly then this can be a great advantage for AL-MURAD as then they can expand their stores nationwide and other European countries and will become easier as no barriers will set between trading as no import and export taxes charged. EU unemployment hits 20 million- Unemployment across the 27 EU member states reached 20 million in March http://news. bbc. co. uk/1/hi/business/8026546. stm looking at the above source we can analyse that the EU unemployment rate has gone very high it has hit 20 million, from this we can recognise that people have no jobs to earn any money this is having a negative effect on AL-MURAD as no-one will buy their products which will affect their company a lot because their profit margin will begin going down and lead them to make no sales.
When the European Union begins to develop more than UK will change their currency to Euros as well as this would be beneficial for AL-MURADs as they would not have to pay the costs for exchange rates and it would allow them to compare prices better and set competitive prices. To make tiles you need right weather the reason why AL-MURAD receive their tiles from countries like Pakistan and other hot countries as UK does not have preferable weather to make tiles. So if Turkey became part of the EU then it would be beneficial for AL-MURAD as they would be able to receive the tiles at a very cheap price as no taxes as well there be any high security checks taking place, which money and time is saved.