Role and Impact of Fiscal and Monetary Policy in UK Economy

This presentation outlines the role and impact of fiscal and monetary policy in the UK economy, focusing on managing stability, boosting growth, and controlling inflation.

INTRODUCTION TO BUSINESS
ENVIRONMENT

INTRODUCTION
 Business environment of any country is regulated by economic policies and
stability.
 The presentation will outline role and impact of monetary and fiscal policy in
UK economy.

ROLE OF FISCAL POLICY
 Fiscal policy aims at creating stability in economy by managing income of
private sector and aggregate demand at the time of economic downturn.
 The role of policy is to manage strong growth of all sectors at the time of
moderate economic activity.
 Fiscal policy plays a crucial role in maintaining a situation of full employment
and stability in UK economy

Key role of Fiscal policy in UK economy
 Enlightening competitiveness of country
 Handling market failures
 Enabling safe and stable living environment to society
 Modifying distribution of wealth and income

CONTINUE
 On the basis of role of fiscal policy, tax reduction is best option which a help in
managing growth of UK economy like it is important for the government to cut
income tax in order to boost consumer spending which will aid in increasing
demand.
 Increase in employment tax is also essential to manage stability which can be
done by reducing insurances tax

Impact of fiscal policy on business
organisation
 It affects retail industry by creating fluctuation in amount of disposable income
which society aim at spending.
 Increase in taxes on specific items lowers income of society which makes them
more conscious towards budget and limits their expenditure.

ROLE OF MONETARY POLICY
 Monetary policies play a significant role in boosting growth of economy by
inducing cost and availing credit.
 Monetary policy in UK are set with the motive of keeping inflation at 2 percent
for which government is focused on generating incomes via borrowings and tax
and on the other hand by limiting spending’s of government.

FOUR TOOLS OF MONETARY POLICY
 Interest on reserves
 Discount rate
 Open market operations
 Reserve requirements

Impact of monetary policy on business
organisation
 The policy impact business organisation by increasing supply of money and
lowering interest rate because of which the enterprise is unable to save capital.
 Further, it encourages incentives for business borrowings and bank loan.

IMPACT OF POLICIES ON ECONOMY
 Improving rate of unemployment
 Stabilizing business cycles
 Controlling inflation by setting targets as per economic condition

CONCLUSION
 The presentation outline role and impact of fiscal and monetary policy which
are framed to control inflation and manage stable growth of economy but on the
other hand impact business organisation as it reduced consumer buying ability.
 It outlined role of Fiscal policy for economy of UK which is focused on
enlightening competition, controlling market failures, altering distribution of
wealth and income, etc.

REFERENCES
 Books and journals
 Afonso, A. and Sousa, R.M., 2012. The macroeconomic effects of fiscal policy.
Applied Economics. 44(34). pp.4439-4454.
 Dosi, G. and et.al., 2015. Fiscal and monetary policies in complex evolving
economies. Journal of Economic Dynamics and Control. 52. pp.166-189.
 Sawyer, M., 2012. The tragedy of UK fiscal policy in the aftermath of the
financial crisis. Cambridge Journal of Economics. 36(1). pp.205-221.
 Arestis, P., 2011. Fiscal policy is still an effective instrument of macroeconomic
policy. Panoeconomicus. 58(2). pp.143-156.

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