Impact of Fiscal and Monetary Policy on Business Organisation in UK

A
PRESENTATION MONETARY
AND FISCAL POLICY

INTRODUCTION
• Business environment refers to the such factors which reflect the internal and external working of the organisation. It also determines
various major benefits which is to be undertaken in respect of fulfilling the needs and demands of the customer and also helping the
organisation to manage the overall productivity of the economy. In respect of environment the major business occurs from the
management of business through suppliers, buyer or by conducting any social activity.
• In such manner, by adapting the advanced technology and also carrying any social activity enhances the business for longer time
period. Present report is based upon the analysing the impact of fiscal policy and monetary policy in respect of carrying any activity
in business organisation in UK.
• It also carrier’s various aspects which is relating to forming any development in global and regional aspects which shape the business
activities in better scale. The report also carries various factors which identifies the needs and demand of the fiscal policy in respect
of attaining any transaction or expanding any business activities.

A) IMPACT OF FISCAL AND MONETARY POLICY IN CONTEXT OF
BUSINESS ORGANISATION IN UK
• Monetary policy:
• Monetary policy is the instrument that is used by the nation central bank to control cash flow in the nation. In
case of economic fluctuation many times cash flow increase and decrease in the economy. Both conditions are dangerous
for the nation. If money supply increase in the market then in that case liquidity increase which means that people have
more money to spend which ultimately lead to increase in the inflation rate in the nation (Hansen, 2018).
• On other hand, in case there is decrease in the liquidity in the market and in that case, it is possible that demand for
products get declined in the market which ultimately lead to deflation in the economy. Both inflation and deflation are
harmful for the economy. Deflation is more dangerous then inflation. This is because if there is inflation then in that case
with its decline demand increase gradually which ultimately benefit the nation economy.

CONTINUE
• On other hand, if there is deflation in a nation then it means that there is no demand in the market. Ultimately,
profitability of the firms shrinks and they failed to survive in the market. All these things lead to increase in
unemployment on large scale in the nation. In such kind of situation monetary policy acts as a tool that assist
nation in dealing with inflation and deflation pressure. Monetary policy tools that central bank of England use is
given below.

CONTINUE
• Bank rate: It is the rate at which Bank of England lend money to the commercial banks in the nation. When this
rate is increased loans for commercial banks become dearer and this impact is passed to the final clients or those
who take loan. Means that if loan is increased by the central bank of England then in that case loan will become
dearer. This will lead to change in people behaviour and they will take less loan for their business and home need
etc. Opposite to this in case central bank reduce interest rate then in that case commercial banks will got loan at
cheaper rate and commercial banks will lend money at cheaper rate (Williams, 2016). Hence, more and more
people will take loan from the bank. In order to understand overall impact of monetary policy on nation economy
it is necessary to analyse to understand impact of monetary policy on nation economy. Important point to note is
that few months ago central bank of England raise bank rate by 0.25% to 0.75%.

CONTINUE