Summary on the Impact of fiscal and monetary policy on business organizations and their activities

Topics: Monetary policy, Inflation, Macroeconomics Pages: 2 (474 words) Published: April 22, 2015
Summary on the Impact of fiscal and monetary policy on business organizations and their activities.

Fiscal policy
Government influence the economy by changing the level and types of taxes, the extent and composition of spending, and degree and form of borrowing. Lower taxes mean more disposable income for consumers and more cash for businesses to invest in jobs and equipment. Stimulus-spending programs, which are short-term in nature and often involve infrastructure projects, can also help drive business demand by creating short-term jobs. By creating short time jobs government bust demand for other business. For example: If government is launching project to build a new bridge, it creates short time jobs for business who will be building this bridge, but also it need concrede and metal to build it. So it orders these materials from local business and increase their profitability. Local business to meet the new demand will need to employ more workers, this will increase overall disposable income in the economy and will help to grow other business too. If government is increasing income or consumption taxes usually mean less disposable income, which, over time, can decelerate business activity. It simply mean that people have less money to spend and so business has less customer less profit and less money to invest in creating new jobs.

Monetary Policy
Monetary policy is controlled by Bank OF England witch is founded in 1694, nationalized in 1946, the Bank of England is charged with providing monetary and financial stability for the United Kingdom. Monetarist economists believe that government spending and tax changes (fiscal policy) can only have a temporary effect on AD, output and jobs and that monetary policy is a more effective instrument for controlling AD and inflationary pressure. The real rate of interest is important to businesses and consumers when making spending and saving decisions....
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