State any five impacts of government policy changes on business and industry.

1) Market Catalyst: The government can implement a policy that changes the social behaviour in the business environment. For example, the government can levy taxes on the use of carbon-based fuels and grant subsidies for businesses that use renewable energy. Similarly, tax and duty exemptions on a particular sector trigger investment in it and may generate growth.

2) Political Stability: Government policy will always depend on the political culture of the moment. A stable political system can make business-friendly decisions that promote local businesses and attract foreign investors. Unstable systems present challenges that has a negative affect on the business environment.

3) Government Spending: Governments get money to spend from taxation. Increased spending requires increases in taxes or borrowing. Any tax increase will discourage investment, especially among entrepreneurs, who take the risks of starting and managing businesses.

4) Interest Rates: Government policy can influence interest rates, a rise in which increases the cost of borrowing in the business community. Higher rates also lead to decreased consumer spending. Lower interest rates attract investment as businesses increase production.

5) Regulations: Trade regulations, and the requirements for permits or licenses have effects on business. Businesses might spend a lot of money and time to comply with regulations that ultimately prove to be ineffective and unnecessary. Fair and effective regulations, however, promote business growth.