Business Management and Macro Economic Policy

This report explains economic problems such as government policies, income distribution, labor markets and employment and their impact on business environment.

BUSINESS MANAGEMENT
AND MACRO ECONOMIC
POLICY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Comprehend economic problems.................................................................................................3
Understanding the monetary policy and the supply or demand for the money along with
assessing implication of the different aspect of demand for the money......................................5
Understanding of the fiscal policy emphasizing on the taxation and its macro environment
impacts.........................................................................................................................................7
Role of secondary and primary capital markets...........................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business management is the action taken by administration for organizing workers to
accomplish desired aims and objectives of business. It comprises managing, leading, planning,
recruiting, controlling and directing a business attempt for reason of accomplishing ventures
listed goals. The current study is based on macroeconomic policy that affects business
performance and practices. This report explains economic problems such as government policies,
income distribution, labor markets and employment and their impact on business environment.
Understanding of monetary policy and supply & demand for money, implications of varied
aspects of demand for money will justified in their report.
Furthermore, in this assignment clarified understanding of fiscal policies focus on
taxation & their macro-economic affects, pensions, social security contribution and benefits. It
also defined comprehend of sustainability of public debt and public expenditure deficits.
Moreover, it clarified role of different primary & secondary capital markets such as bond and
stock markets in raising money for investment.
MAIN BODY
Comprehend economic problems
Economic issues facing the world economy and nations, include prospects for labor
market issues, employment, income distribution and government policies. There are several
economic problems, following below;
Government policies-
It contains purpose things are to be done in some way and why. It leads to development
of protocols and procedures to see that Government is a body of individual that work to
successfully and effectively guide a organization or community. It is a principles or rule that
hopefully better guides decisions, outcome in positive results that affect business. Fiscal policy,
monetary and supply side policy considered as economic issues that impact on business
environment positively or may be negatively (Abdixhiku, Pugh and Hashi, 2018). Local or
national policy can affect interest rates, rises in which maximize amount of borrowing in

business atmosphere. For example, high rates lead to minimize customers spending, it directly
impact on profitability and sales of companies. Changes in business policies governed by
government straightly affect functioning of business organizations. As an outcome, they have to
alter their policies appropriately such as taxation changes. When government make changes in
taxation policies, it impact on business activities such as import and exports as well as purchase
of raw materials.
Labor markets-
It known as job market, refer to demand & supply for individual throughout workers
cater supply and employers demand. This is the main element of UK economy and is intricately
tied in with markets for products, services and capital (Betcherman, 2019). Labor market rigidity
or flexibility refer to employment problems such as worker wages, the ease of which
organizations can recruit and select applicants, power of unions and length of probation periods.
These flexible markets that favor employee’s rights can lead to lower unemployment and
increase labor productivity rather than before. Changes in labor market put negative impact on
business environment as it decrease profit margin and put pressure on management to make
major modification in employment procedure according to current needs of this market. It affect
negatively because flexibility in labor market allow workers to demand wages according to their
needs that impact negatively on salary structure of companies. Furthermore, It can be said that
flexible labor markets are recognized by things such as low minimum wage and legislations that
do not impede recruiting or termination of workers.
Income distribution-
In economies, it is how a country’s total gross development profit amongst their
population. Income and their distribution have always been a main concern of economic policy
(Ridzuan and et.al., 2017). Income distribution within society is represented by Lorenz curve, as
it directly impact on business environment positively when distribution is based on equality, on
the other hand it affect negatively when distribute of income is unequal. Increase in income
outcomes in demanding more products or services, thus spending more money. On the other
side, decrease in income results in exact opposite. In simple words, when incomes are lower, less
spending happen and business are impact by it. When income distribution is fair and equal, it

allows people to spend more money for purchasing items. It increases the sales and profitability
of business rather than past few years, which is quite beneficial for them.
Employment-
Low employment indicates economy is operating below full ability and it is ineffective;
this will lead to lower incomes and output (Le Blanc, Demerouti and Bakker, 2017).
Employment is one of the main economic problems that can be solve by government through
creating policies and laws that affect business environment positively and negatively. For
example, when government put pressure on companies within retail sector to hire more
applicants to reduce unemployment rate in economy, it make changes within hiring structure of
organizations. Human resource management feel more pressure from local or national authorities
to hire people and offer job opportunities that require efforts and time as well in order to conduct
it properly. But it gives the best opportunity to firms as they can hire skilled candidate from
talent pool and utilize their abilities as well as knowledge to gain competitive benefits, to achieve
aims and objectives of businesses.
So, it can be said that all above economic issues impact on business environment and its
productivity level.
Understanding the monetary policy and the supply or demand for the money along with
assessing implication of the different aspect of demand for the money
Monetary policy refers to the macro-economic policies which is introduced by central
bank and involve managing supply of money & the rate of interest that in turn reflected as
demand related policy which the government of the country uses in achieving worldwide
objectives such as inflation, liquidity, growth & the consumption. It means the policy that is
adopted by monetary authority of the country which controls ROI payable on the short term
borrowings or supply of the money that often target inflation or an interest rate for ensuring price
stability and the general trust in currency (Auclert, 2019). In other words it comprises of the
process that includes announcing, drafting, execution of an action plan taken by the central bank,
board of currency or the other types of competent authority of the country which controls amount
of the money within economy & channels through which the money is been supplied. This policy
indicates management of the money supply & interest rates aiming at attaining the macro-

economic objectives such as control on inflation, growth, liquidity & consumption. These are
been attained by the actions such as modifying rate of interest, changing amount of the money
banks that are needed to be maintained as the reserves.
Economists, investors, analysts & financial experts across the globe await reports of
monetary policy & outcome or results of the meetings including decision making in relation to
monetary policy. Such development has the long lasting effect on entire economy in
consideration with the specific market or the sector. This policy is framed on the basis of inputs
that are gathered from wide range of the source. For instance- financial authority might come
across at various macro-economic factors or aspects like inflation, GDP, growth rates & the
attached figures in international market. The authorities are provided with the policy mandates
for achieving a stable rise in the GDP, maintaining lower rate of employment, maintaining
foreign exchange & rate of inflation in terms of predictable range (Cúrdia and Woodford, 2016).
Such policy could be used along with fiscal policy as an alternative, which use to government
borrowings, taxes & spending for managing an economy.
Demand for cash is referred as the preferred holding of the financial assets in terms of
money that is cash or the bank deposits. Money’s demand rises with an increase in the nominal
output level and decreases or declines with rise in nominal ROI. When demand for the money is
seen as stale, financial policy could enables in stabilizing overall economy. On the other side, in
case when demand for the money is not seen as stable then nominal or the real rate of interest
would change and fluctuations in an economy is resulted (Drechsler, Savov and Schnabl, 2017).
The quantity demanded for the money is counted as inversely proportional with that of the
interest rate. A national or central bank in the countries declines interest rates at the time when
they desire for increasing investment and the consumption in an economy. On other note, lower
rate of interest could create economic bubble where the greater amounts of an investment is been
made, however, results to greater value of unpaid debts and an economic crisis. Interest rate is
been adjusted in keeping demand for currency or money in certain range.
While demand for money includes hold of the financial assets, supply of money is
depicted as total amount of the monetary assets exist in economy at the particular time. Data
relating to money supply is been published and recorded as it impacts price level, exchange rate,
inflation rate & business cycle (Berentsen, Huber and Marchesiani, 2018). Monetary policy also

affects money supply as expansionary policy let’s to increase total supply of the money in an
economy rapidly than the usual & contractionary policy results to expand money supply slowly
than the normal. It is the policy that is used for combating unemployment, whereas,
contractionary type of policy is been used for slowing down the rate of inflation.
Implication of demand for money is stated as the result of trade-off present between
liquidity advantage of holding the money & an interest advantage in holding the other kinds of
assets. Demand for the money helps in determining the manner in which the wealth of an
individual must be held. When demand curve sit towards the right side and increases, demand for
money rises and an individual are counted as more likely in holding the money (Johnson, 2017).
Level of nominal output had increased and their present liquidity advantage in holding the
money. Similarly when demand curve moves or shift towards left, it shows decline in demand
for the money. The nominal rate of interest and greater interest benefit in holding the asset
attained rather than money.
Understanding of the fiscal policy emphasizing on the taxation and its macro environment
impacts
Fiscal policy means the policy through which government adjusts its level of spending
and the rate of taxes for monitoring and influencing nation of an economy. It is called as the
sister strategy to the monetary policy by which a central bank induces money supply of a nation.
This policy is been in combination with monetary policy in order to direct economic goals of the
country. It is based on theories of the British economist named as John Maynard Keynes (Jordà
and Taylor, 2016). It is also called as Keynesian economics, which stated that the government
could influence macro-economic productivity levels by way of increasing or decreasing the
taxation levels and the public spending. This in turn influences curbs inflation, increases an
employment and maintains healthy value of the money. Fiscal policy plays a crucial role in
managing economy of the country.
Effects of the fiscal policy depends on the political orientations and objectives of
policymakers, tax cut can also impact middle class which seems as the largest part of an
economic group. In times of the economic decline and the rising taxation, it exists in the same
group that might have to bear more teas as compared to wealthier upper segment people.

This policy refer to utilization of administration spending as well as tax policies to
control conditions of economic, including requirement of products or services, economic growth,
inflation rate and employment (Williams, 2017). Throughout a recession period, government
may utilize expansionary fiscal policy by reducing tax rates to enhance collective demand and
fuel economic progress. John Maynard Keynes concepts were created in retort to high depression
which defined classical economics believe that economic swings were self handled. Her theories
were high effectual & led to new deal which included massive spending on social welfare
systems and public works projects. Social security is the main focus of government, fiscal policy
contribute in this act as they use tax cut cost for social well being and invest in context of same
to improve their economic level after Brexit and other economic crisis that affect living standard
to people. It is how elected officials and other government body influence economy using
taxation and spending. Fiscal policy is utilized in conjunction with monetary policy implemented
by central banks and it affects economy via money supply. Main objective of this policy is to
develop healthy economic growth; perfectly it will grow between 2 to 3% a year.
A pension is a kind of retirement plan that caters monthly income in retirement, not all
recruiters offer pensions. Government companies usually offer a pension and some wide firms
offer them. Fiscal policies influence economy and pension plans as it helps to promote
sustainable and strong growth and reduce poverty. By using tax cuts amount collect through
fiscal policies make effective contribution in pension plan offered to some people after their
retirement.
In context of fiscal policies benefits, it is quite beneficial for growth of economy, it
includes increasing purchases or spending and lowering taxes. Tax cuts mean individual have
much disposable income, which lead to increased demand for items or other things. It is one of
the most essential tool used for managing economy because of their capabilities to impact total
amount of output produced that is GDP. One of the main benefit of fiscal policy is that it reduce
unemployment rate rather than before. When unemployment is high, authority can employ an
expansionary fiscal policy, this includes many aspects. To meet growing demand, private sector
will maximize manufacturing, creating and offering more job opportunities in procedures to local
people that is very beneficial for improving living standards of individual.
Public expenditure deficit-

It is spending made by government of a nation on collective wants and needs such as
provision, pension, infrastructure and other elements (Afanasev and Golovanova, 2016). Public
expenditure deficit is opposite of budget surplus, it may cause low growth and high inflation.
Sustainability of public debt-
This concept is considered sustainable when authority resources constraints can be met
devoid of disrupting their fiscal and monetary policies. It implies that budget of public debt will
not exceed current value of all future primary surpluses. Public debt is a common instrument for
optimally distributing public policies over period. Through public indebtedness, provision of
public products can be usually disassociated from taxation procedures needed to fund it
(Belguith and Gabsi, 2017). Sustainability of public debt can be helped as market equilibrium
with positive price & quantity, exposed with good probability to government default.
Role of secondary and primary capital markets
Primary market is section of capital market that handle sale of equity backed securities
and issuance to stakeholders directly by issuer. It is the places where securities are developed and
organizations sell their new stocks & bounds to public for first period such as with an IPO. Stock
market is a part of primary market that play vital role in raining money for investment. It plays a
important role in supporting to investment and finance growth by offering long term risk capital
to organizations that they can use to grow businesses at may be international level. It also helps
in raining drives innovation, long term economic progress and improvements in productivity. It
increase return on investments that may be otherwise languish in bank accounts with low repay.
It assures and caters higher profits and in return, business investors obtain measure of assurance,
flexibility and diverse chances. In they raise capital, share risk, improving responsibility, setting
standards and democratizing wealth creation. Stock market or share market is aggregation of
consumers and sellers of stocks that are called shares, which represent ownership claims on
companies (Paramati, Alam and Apergis, 2018).
Along with primary markets, secondary also play vital roles in context of same. It is
where securities are traded after organization has sold their offering on primary markets. London
stock exchange, and Nasdaq are secondary markets. Bond markets role in raising money for
investment is really very important. In simple term, when organizations need to raise money,

offering bonds is one of the best ways to do it. Unlike stocks, whose further earning are no one
can guess, bonds make set payments for a few period of era. Investors take decision how much to
give for a given bond based on how much they believe inflation to erode importance of those
fixed payments. It broadly described a market area where investors purchase debt securities that
are brought to market by either public trade corporations or governmental entities.
Crowd funding-
It is the use of certain amount of capital from a wide number of individuals to finance a
new business organization. It refer to the way for charities, businesses and people to raise money,
it works through companies who donate or may be invest crowd funding projects in return for a
potential reward or profit. Investing in this way will be risky, so companies make assure that they
know what they are doing before taking any action.
Crypto currencies-
It is a digital tool created to work as source of exchange that people tough cryptography
to protect money transactions, verify transfer of resources and handle creation of additional units.
Bitcoin, Ripple XRP, NEO, Ethereum and Litecoin are the most popular cryptoncurreies on
market in recent time. One of the benefits of this digital medium transaction is that they are one
to one affairs, taking place on peer to peer networking structure that takes cutting out middle
person a standard and effective practice. It lead to greater clarity in developing audit traits, & less
confusion over who will pay what to whom, as well as greater responsibility in that the two
entities included in transaction each know who they are.
CONCLUSION
From above analysis it has been summarized that government policies, unemployment
rate, income distribution, labor markets needs and other economic problems impact on business
environment, but by taking right decision or action management handle all the issues in effective
manner with positive results. Furthermore, it has been concluded that fiscal policies provide
many benefits as it help to lower taxation rather than before and contribute in social well being.
Bond and stock markets both play significance role in raising money for investment that is quite
beneficial for businesses growth as well as success.

REFERENCES
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Williams, E., 2017. A Four-Point Fiscal Policy Blueprint for Building Thriving State
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