Impact of Fiscal and Monetary Policies on Business Organizations in United Kingdom

INTRODUCTION TO BUSINESS
ENVIRONMENT

Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1..................................................................................................................................3
Assess and explain the impact of fiscal and monetary policies on the activities of business
organizations in United Kingdom................................................................................................3
1.Meaning of economy................................................................................................................3
2.Explain how the economy is formed........................................................................................3
3.Explain what is meant by Fiscal Policy....................................................................................4
4.Explain what is monetary policy..............................................................................................5
5. What is the current economic state of United Kingdom..........................................................5
6. How does the interest rate affect money supply and demand?................................................8
7.What factors in the United Kingdom economy can lead to economic crisis?..........................9
QUESTION 2..................................................................................................................................9
How Development in a regional and global aspect can shape business activities global aspects
.....................................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment can be defined as that environment in which the organizations are dealing
in. It also comprises of the various internal and external factors that are affecting the working
conditions of various firms. The internal factors consists of competitors, suppliers, stakeholders
and many more. External factor that can affect business re political economical social and many
more. Present report will lay emphasis on the impact of fiscal and monetary policies on the
activities of business. It will also present how the economy of United Kingdom will be formed.
QUESTION 1
Assess and explain the impact of fiscal and monetary policies on the activities of business
organizations in United Kingdom
1.Meaning of economy
An economy of a country can be defined as the big combination of the activities related to
production and consumption which aids to determine that how scarce the resources can be given
to particular region. Economic condition of the region defines that how scares the resources can
be allocated. An economic system also consists of production and consumption as a part of it
which analyses and fulfil the needs and demands of living. A countries economic condition is set
to be good when the living conditions of people in country are stable and better. Also it can be
analysed from the environment existing in country. An economy consists of all the activities
which is linked with production, consumption and trade.
2.Explain how the economy is formed
The economy of the United Kingdom is highly developed and market oriented. The economic
condition of any country is being measured by analysing its gross domestic production. It has
been analysed that business and conditions of market can be a big part of UK economy. There
are various components that make-up economy of United Kingdom. These can be businesses and
financial institutions, consumers and labours, government and many more. Businesses make up
the United Kingdom economy by creating sales, they get things and sale it local consumers
increasing the gross national income of country. This can support country like United Kingdom
in growing. Financial institutions make up the United Kingdom economy by providing loans and
granting funds to these businesses. Consumers and labours are also one of the most important
part which make up the economy. All of these people, collectively called labour, are responsible
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for the business being able to produce value for the United Kingdom economy at all. Without
them, those businesses would not exist.
3.Explain what is meant by Fiscal Policy
Fiscal policy can be defined as that policy in which the government is involving in settling the
levels of spending and tax rates so that the government can keep a check on nation’s economy.
Monetary policy can be termed as the sister strategy to fiscal policy. Both monetary and fiscal
policy is of most importance for the country. Fiscal policy can put an impact on the money
supply of nation. There can be two main instances of fiscal policy like tax cuts and an increased
government spending. The two policies can assist United Kingdom in achieving and settling
down their economic goals and objectives. This can assist country in saving them from the
phenomena related to economics. Fiscal policy can be used by the country to maintain the high
economic growth. This can also be utilized by United Kingdom to cut down the unemployment
rate in a country. Policies like Fiscal and monetary can support country in growing and achieving
the nations goals and objectives.
Briefly explain how this policy came out
Fiscal Policy came out by a famous theorist and British economist who is known as John
Maynard Keynnes. The theory given by him keenly explains that government is being engaged
in increasing the productivity level related to macroeconomics. This can be done by increasing or
decreasing the tax rates and public spending. If this is done by government of United Kingdom,
then this can curb inflation by about 2-3%. It can support country in growing and increasing the
employment level. The policy related to Fiscal plays the most important part in maintain
economy of country.
Does this policy exist within United Kingdom?
Yes, United Kingdom do make use of fiscal policy. The main aim of country’s fiscal policy in
2018 was to cut down the deficit related to fiscal by 2% in coming years 2020-2021 (Chubb and
Watermeyer, 2017). This is because of the country is at risk related to macro-economic and
financial sector risk. Like for example It is because the country is facing slowdown in North Sea
oils and gas. Also this policy is being implemented because there has been a long term risk
which is being arising because of the structural changes in Economy. In order to overcome this
Fiscal Policy has been implemented. Fiscal Policy has also been implemented because of the
changes which are occurring in demography. The country is facing high risk because of the
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