Economics for Business: Fiscal, Monetary, and Supply-Side Policies

This report, titled "Economics for Business," provides a comprehensive analysis of the UK government's role in facilitating economic growth. It delves into supply-side policies, including tax reductions, deregulation, and labor market reforms, and their impact on investment, entrepreneurship, and GDP growth. The report also examines the application of fiscal and monetary policies, using the AS-AD model to illustrate how these tools influence aggregate supply and demand. It discusses the impact of government interventions such as tax adjustments and changes to corporate and income tax. The report further explores various initiatives implemented by the UK government to stimulate economic activity, including enterprise zones, infrastructure projects, and incentives for low-carbon technologies, as well as the role of supply-side policies in enhancing employment and productivity.

ECONOMICS FOR
BUSINESS

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Role of UK government To facilitate economic growth.........................................................1
TASK 2............................................................................................................................................6
2. Use of fiscal and monetary policies in stimulating temporary economic growth...................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Economy of an country can be defined as the capacity of production and delivering
services by an economic system is called as its rate of economic growth in specific period of
time. Government policies largely influence growth of country economy to large extent. Various
supply side policies largely contributes in growth of country. The various policies of government
which increases supply of products in UK are like decreasing tax rate, regulating interest rate for
borrowings helps in development of economy of country (Babor and et.al., 2013). This helps inn
achieving the higher growth rate in country and provides an growth opportunities for foreign
investors.
In this particular report various type of supply side policies are studied in order to
facilitate economic growth in country. Role of UK government in implementing these policies
are also described in following report. This specific assignment also deal with various fiscal and
monetary policies. Different role of fiscal and monetary policies in growth of economy is
described through defining aggregated supply and aggregated demand in country. These fiscal
policies deals in controlling tax on products and services in order to achieve an equilibrium
situation in supply and demand of product in UK.
TASK 1
1. Role of UK government To facilitate economic growth.
Supply side policies are implemented by government in order to increase the GDP
growth in country. These policies help in enhancing the investment proper of business in market.
Supply side policies are carried out in free market. The free market is comprise of productive
activities with lower interference of government in the commercial actions. Supply side policies
are implemented by government in order to enhance the entrepreneurship in marketplace and
brings high GDP growth. Supply side policies are enforced by government in order to facilitate
economic growth development of UK (Baker and Hoekstra, 2010). This policies defines the
supply capability of an economic system and ability to produce and attain an higher productive
rate in country market. In order to attain an profitable results from supply side policies the
government has to reduce taxation with help of these policies and encourage the entrepreneurs
resulting in enhancing the investing powers of national and foreign investors in country. This
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will ultimately contribute in higher production which helpful in accomplishing high demand of
products and services in UK efficiently and contribute in attainment of growth in GDP rate.
In the conditions when country is not accomplished its employment carrying capacity
they supply side policies can be useful in shifting supply curve to right in order to enhance the
quantity of production at lower prices (Bakke and Endal, 2010). This can be stated that
employment carrying capacity of an country is total employee numbers which can work in
country, this referred as employment level. In order to shift the aggregate supply towards right
supply side policies in free market plays an important role until the employment level is not
fulfilled.
It can be also seen that execution of supply side policies by government in UK market
leads to an right side shift of LRAS curve i.e. Long run supply curve. This will facilitate in
increase in GDP through enhancing quantity of production in market. Long run aggregated
supply can be shown in prices v/s quantity graph and straight line parallel to the Y axis. This
defined that with increase or decrease in price which does not affect level of aggregate supply in
long run. Supply side policies shift this graph to which which produce higher quantity at lower
prices which contributes in increase gross national product of UK.
2
Source 1 Aggregate supply. 2017

Different government decision helps in increasing the positive effects of supply side
policies in market will enhance the rate of growth of economy in UK. This can be achieved
through adopting variety of policies in commercial environment in order to regulate GDP of
country to large extent. The government policies can interfere the supply of products in free
market. Reducing in tax rate will largely encourage entrepreneurs to invest in market and
conclude in growth of UK economy (Bowen and Sosa, 2014). Government can make some
change in tax structure of UK this provides benefits to increase output keeping aggregate demand
of production and services constant. The UK governance can implement various taxation places
in order to reduce direct tax like corporate tax and income tax. The decreased corporate tax will
be beneficial to make investment through new entrepreneurs in country which will enhance
production in UK. another benefits of reduction in income tax will motivate the unemployed
workers to work for labour market and helps in receiving higher wages as an incentive. This is
also an encouragement to the employed workers as this will increase the total salary as an
incentive from getting relaxation from lower income tax.
Government is continuously working in development of new policies and plans in order
to enhance economic growth of country. This can be achieves through enhancing
competitiveness of labour market. This can achieve through implementing various plans which
right the functioning and policies of labour marketplace and directs them to work strictly.
Government plans helps in enhancing competitiveness in labour and employment through
reducing restriction in practices like reducing impact of employment protection act in
marketplace. An initiation of government in restricting employment protection policies in free
market in order to enhance efficiency of supply side policies and increase GDP of country is
observed in 1980. This initiation of government brings many changes in the powers and
authority of trade union in order to reforms some output through supply side policies (Cafferky,
2010). This reduction in powers includes formation of secret ballots of members of trade union
which restricts them to go for strike continuously. This will conclude in limiting the strike rate in
country and the employee can work efficiently in market which will shift the aggregate supply
curve toward rights and conclude in increase GDP of country.
This policy of supply side implemented by government is having positive affects on the
mobility of labour which enhance the motivating level of labours to perform good quality work.
This will conclude in increasing production in UK and enhance effectiveness of supply side
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policies in free marketplace. Liberal and flexible supply side policies of government will
motivate investors to invest more and also encourage workers to perform well in market to fulfil
demand through increasing capability to produce in market which will facilitate the economy of
UK to large extent.
Currently government is implementing various types of plans in order to enhance the
economic growth of country to increasing effectiveness of supply side options. This can be
achieved through creating better development opportunities to the employee and workers
through organising various training and development programme. Through an effective training
program the employee can develop flexibility and new capability skills in order to enhance
productivity which is known as development of human capital in market (Cho, Roberts and Kim,
2011). The government can adopt various plans in order to initiate skill part in schools and
colleges ion order to decrease unemployment rate in country which will facilitate economic
growth of UK. Government also develop various policies to invest in organising various
governmental training and development programme in order to provide people of UK future
carer growth opportunity and also can provide in incentives to private suppliers who will provide
training to enhance competencies of individual. These all governmental plan will helps in
increasing effectiveness of supply side policies and contribute in increasing output through
enhancing GDP and GNP of UK.
The government is also engaged in adapting various strategy in order to enhance the
performance of employee in the business environment. The governmental agency are providing
pays to workers according to their performance. This helps in motivating employee ton work
better in organisation dealing in public sector (Croce and Ghignoni, 2012). The national
governance also adopting policies which provides pay based on the local scenario which helps in
increasing mobility in employment. The pay rate at national level does not reflects the economic
growth of local level. So,implementing local pay bargaining approach in order to identify various
growth opportunities available in different employments sector and worker can mobilise towards
the growing industry faster.
The recent Supply Side Policies adopted by UK governance in practice are as follows:
 Government of UK is provide an relaxation on Sunday trading through introducing
Sunday trading laws while this is focusing in managing a balance between work and life.
Governing body is continuously developing various strategies in order to develop an
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work-life balance in commercial environment which increase the productivity of
employee through achieving more satisfaction in work-culture. This ultimately increase
effectiveness of supply side options.
 Governing bodies are developed about 24 new enterprise zone which enhance the
entrepreneurial activities in country in many folds through increasing internal investment
pans in country by taking advantage of growing scale of external economies.
 London's Cross rail plans of UK governance helps in increasing communication and
transportation between the geographical areas faster (Del Giovane, Eramo and Nobili,
2011). Which brings interconnectivity in processes and helps in increasing performance
of employee through utilising time optimally through establishment of 2 Cross rail and
HS3 in city.
 Government is implementing new policies in order to enhance the profitability through
supply side policies in country by motivating the business who are engaged in using low
carbon technologies. This plan of government is an big relief to such investors through
gaining relaxation taxation policies of UK government in order to increase investment in
renewable energy sources.
 Government is also providing relief through income tax rates which results in giving
opportunity to gain higher incentives for the unemployed and employed workers in
country. This plan of government incudes over free allowances in income tax policies of
about 11000 euros yearly.
 The policies of reducing taper rate in the country which results in providing opportunity
to employee to earn extra income (Godfray and et.al., 2010). Income rate of employees
are increased about 65% to 63% which helps in increasing work incentives of employees
of UK.
 The government is implemented new policies with relaxation reducing corporate taxation
rate. This helps in increasing investment in UK. It is planned by government that current
rate of corporate tax 20% will fall to 17% approximately to 2020. This encourage
domestic investors to invest in commercial market.
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TASK 2
2. Use of fiscal and monetary policies in stimulating temporary economic growth.
AS-AD Model-
This model helps in development various policies in order to attain an equilibrium in
demand an supply of the products and services in commercial business environment. Every
organisation is engaged in accomplishing demand through availing right amount of supply of
products to the market. The aggregated supply is referred as the total number if available good
and services in marketplace at all possible process. While the aggregate demand in economic
system can defined as total quality of requirement of products and services in the marketplace in
order to accomplish all needs of people of country (Keyes, Hatzenbuehler and Hasin, 2011). The
government and private companies work in integration in order supply their services to fulfil
aggregate ate demand in business surrounding. The change in prices will influence the demand
and supply rate of products and services of an firm. The aggregate supply curve demonstrate the
quantity supplied and the price of products. The aggregate demand curve defines relation
between GDP demand and the process of products and services. The AS- AD is an graphical
representation between the quantity and capacity to produce with respect to the prices of an
products. This defines the relationship between supply and demand curve. When the demand
curve is linked with the supply curve there comes an intersection percent in graphical
representation. This intersection of demand and supply illustrate the equilibrium condition
defines the exact prices of products and services along with defining its real GDP (Meier,
Purshouse and Brennan, 2010). Any change or shift in demand curve will leads to change in
GDP growth and pricing of products and services. This also same of the shift in supply curve
with keeping demand of products in economic system constant. This will also shows change or
shift in process and GDP rate either this grows or falls.
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In order to achieve an an short run equilibrium in macro economic environment of
country there should an balance maintained between the demands of products and services with
the short run aggregated supply in the business environment in the condition when there is not
accomplished full employment rate in country (Meyerhoff, Ohl and Hartje, 2010). In order to
attaining long run equilibrium demand curve is intersected by an long run aggregated supply this
should that real GDP is achieved the level of potential GDP in macro economic system.
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So
urce 2: Tejvan Pettinger. 2015.
Source 3: Equilibrium GDP and
prices, 2017

Use of fiscal policies in growth of economy in UK are as follows:
The monetary and fiscal policies of government largely influence the growth of economy
temporarily. These policies are used by government in order to stimulate the economic growth of
country in many folds. The fiscal policies controls of the taxation of policies of countries which
helps in increasing the development of economy of UK to large extent. The various role of fiscal
policies in stimulating temporary growth in the UK economy are defined below.
Fiscal policies of an country can be related with the maintaining and controlling the
taxations rate, borrowings, total governmental purchase and their transfer of money. These
policies largely influence the economic factors which largely contribute in the growth of GDP of
country to large extent. Fiscal policies develop an should tin the demand curve in order to
enhance the growth of economy of country (Michalski, 2012). This can be achieved through
maintaining the various outflow and inflow of the government. Inflow for the country
governance is different taxes while the outflow for the governing body are the various expenses
in different purchases and maintaining exchange relationship with other countries.
The fiscal policies are related with the composition of inflow of expenses in the
government which are resulted from spending in various growth sectors like health and
education, infrastructure, society welfare and subsidies to the citizen and the various type of
taxes rate is the sources of inflow. The government is implementing variants of policies in order
to attain higher GDP rate through encouraging the investors to invest in country economy. In
order to deal with credit crunch in UK government plays an important role through enforcing
various strategies and fiscal policies resulting in the reducing the deficient and decreasing
expenditure which enormously motivates the public sector investment and stimulate economic
system to grow (Moyer, 2013). While another fiscal policies enforced by UK government can be
observed in financial crises if 2008 which involves reduction in taxation rate by governing body
in order to motivate and stimulate the entrepreneurial investors to invest in economy of country
and helps in faster recovery of financial crunch in UK.
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From this particular graphical representation it can be stated that fiscal policy is having
great role in the growth of economy of country. As reduce in taxation and increase in
expenditure power shows an expansion in the demand which brings higher prices of products
from Po to P1 and the GDP rate to the Yo to the Y2. Which shows an right shift of demands will
leads to the increase in GDP (Mshale, 2013). While the supply curve is shifted towards back
which leads to decrease in GDP rate as this will leads to increase in prices with higher rate i.e.
from P0 to P1 and also decrease in GDP of the country i.e. from Yo to Y1.s
Use of Monetary policies in the growth of economy in UK:
Fiscal policies are deals with the inflow and outflow in economy while the monetary
policies deals with the value of monetary and currency exchange in the country. These policies
regulates the availability of the funds in country along with defining the cost in marketplace.
These policies and norms helps in developing an stability in investment and funds of country.
This strengths the financial capability of the economic system. This maintaining an positive and
growing relationship between the real monetary and economic growth with the potential
economic development of UK and country always try to keep real GDP more than the potential
monetary conditions (Parkin, 2011). Monetary process regulate over the back rate, borrowings
and purchases rate and also interest rate on country which helps in stimulating the economic
growth of UK.
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Source 4: Economies For Business: Different Supply Side
Policies, 2017

In order to enhance the economic growth of the country it can be developed Monterey
policies by the government in order to enhance the GDP of UK. Monetary policies controls over
the supply of money, interest rates and the liquidity in the funds. The liquidity of money states
that the funds can be exchanged and changed in others things interchangeably which regulates
flow of the currency is continuous in country which enhance the liquidity of the money in
country (Parkin, 2011). This helps in reducing the debt of country and leads to higher investment
plans by the private companies. The credit crunch of UK can be recovered through implementing
monetary policies by the government of UK through reducing the interest rates in the country a
which will motivates investors to invest more investment in the city. Monetary policies and
fiscal policies largely helps in increasing the GDP rate of country and this will helps in
enhancing the ceoenck9c growth of to large extent.
CONCLUSION
From this report it can be concluded that government policies largely facilitate growth of
economy is country. Fiscal policies of an government regulate tax rate in UK which controls
inflation and deflation in country. These policies helps in development of business and
increasing spending power of society people. Monetary policies also helps in determining the
capacity of investor and borrowing rate of loan in banks which controls the aggregate supply and
demand of products and services in UK. The monetary policies controls over exchange rate of
currency and power to invest and controls monetary inflow of UK. These policies can be affected
by pricing strategy of government to large extent which ultimately affects GDP rate of UK.
Gross Domestic product and Gross national product describes the economic state of any country.
Government of UK is continuously engaged in enhancing the productivity of country through
various supply side policies and fiscal and monetary policies in country in order to keep balance
between aggregated demand and supply of products and services in UK.
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