The government is considering reducing the tax rate on business profits from 25% to 19%. Table 1 shows findings from a survey of 500 businesses.
| Survey response | Businesses selecting response |
|---|---|
| Would increase investment | 42% |
| Would increase recruitment | 28% |
| Would reduce prices | 18% |
| Tax change would make no difference | 35% |
| Estimated annual loss of government revenue | £9 billion |
Using Table 1, assess whether reducing the tax on business profits is likely to be an effective supply-side policy.
104 exam-style questions on AQA GCSE Economics 2.3 How the government manages the economy, covering 2.3.1a Fiscal policy and income and expenditure, 2.3.1b Fiscal policy and government objectives, 2.3.1c The government budget, 2.3.2a The meaning of monetary policy, 2.3.2b Uses of monetary policy, 2.3.3a Supply-side policies and their trade-offs, 2.3.3b Using supply-side policies, and 2.3.4 Policies to correct positive and negative externalities. Each one has a worked solution and a mark scheme showing where the marks go.