Use the diagrams that follow to indicate the impact of cutting the rate of each of 4 different taxes: the GST, customs duty, excise duty, and company income tax.
Use an upward arrow ↑ to indicate an increase or a downward arrow ↓ to indicate a decrease or a cross X to indicate no effect for each economic variable.
Government action: Cutting the rate of GST
Cutting the rate of GST | ||||
---|---|---|---|---|
Effect on the market | ⟶ | Economic Activity | ⟶ | Economic performance goals |
Cash available to spend on locally produced goods |
⟶ |
Consumption |
⟶ |
Inflation |
Cash available to spend on imported goods |
Spending on Imports |
|||
After tax profits available to spend on business improvements and/or expansion |
⟶ |
Business investment |
⟶ |
Low Unemployment |
Prices of domestic goods |
⟶ |
Demand for goods and services produced domestically |
⟶ |
Economic growth |
Prices of goods imported |
⟶ |
Demand for imported goods |
⟶ |
Net exports (exports minus Imports) |
Government revenue available to spend |
⟶ |
Social security and welfare spending |
⟶ |
Equity in the distribution of income |
Government action: Using excise tax to manage the economy
Using excise tax to manage the economy | ||||
---|---|---|---|---|
Effect on the market | ⟶ | Economic Activity | ⟶ | Economic performance goals |
Cash available to spend |
⟶ |
Consumption |
⟶ |
Inflation |
Cash available to spend on imported goods |
Spending on Imports |
|||
After tax profits available to spend on business improvements and/or expansion |
⟶ |
Business investment |
⟶ |
Unemployment |
Domestic prices of almost all goods and services |
⟶ |
Demand for goods and services produced domestically |
⟶ |
Economic growth |
Domestic prices of some goods imported from other countries |
⟶ |
Demand for imported goods |
⟶ |
Net exports (exports minus Imports) |
Government revenue available to spend |
⟶ |
Social security and welfare spending |
⟶ |
Equity in the distribution of income |
Government action: Using customs duty to manage the economy
Using customs duty to manage the economy | ||||
---|---|---|---|---|
Effect on the market | ⟶ | Economic Activity | ⟶ | Economic performance goals |
Cash available to spend |
⟶ |
Consumption |
⟶ |
Inflation |
Cash available to spend on imported goods |
Spending on Imports |
|||
After tax profits available to spend on business improvements and/or expansion |
⟶ |
Business investment |
⟶ |
Unemployment |
Domestic prices of almost all goods and services |
⟶ |
Demand for goods and services produced domestically |
⟶ |
Economic growth |
Domestic prices of some goods imported from other countries |
⟶ |
Demand for imported goods |
⟶ |
Net exports (exports minus Imports) |
Government revenue available to spend |
⟶ |
Social security and welfare spending |
⟶ |
Equity in the distribution of income |
Government action: Using company tax to manage the economy
Using company tax to manage the economy | ||||
---|---|---|---|---|
Effect on the market | ⟶ | Economic Activity | ⟶ | Economic performance goals |
Cash available to spend |
⟶ |
Consumption |
⟶ |
Inflation |
Cash available to spend on imported goods |
Spending on Imports |
|||
After tax profits available to spend on business improvements and/or expansion |
⟶ |
Business investment |
⟶ |
Unemployment |
Domestic prices of almost all goods and services |
⟶ |
Demand for goods and services produced domestically |
⟶ |
Economic growth |
Domestic prices of some goods imported from other countries |
⟶ |
Demand for imported goods |
⟶ |
Net exports (exports minus Imports) |
Government revenue available to spend |
⟶ |
Social security and welfare spending |
⟶ |
Equity in the distribution of income |
Linked activity: