Monetary and Fiscal Policy to Grow Business †MyAssignmenthelp.com

Question: Discuss about the Monetary and Fiscal Policy to Grow Business. Answer: Introduction: Like any institution, a business enterprise also has an organizational structure and certain normative frameworks under which the enterprise operates. The factors of production can be broadly divided into four categories, namely land, labour, capital and organization. The managers are the factor, who organizes the production process of any enterprise. Generally, the manager of a company is in charge of the overall production operation of the company. The roles of the managers mostly consist of managing the different sides, taking significant decisions regarding the pricing and quantity of production of the product or service provided by the concerned enterprise, employment and wage structures, new ventures and others (Burstrm and L. Wilson 2014). A good manager by nature tends to be adaptive to any unanticipated or anticipated changes, is adept enough to take necessary strategies, and changes such that the interest of his or her company is not jeopardized. The report discusses the strategies in the resilience package designed by the manager of such a local multinational company, in response to different policy dynamics in the economy. Monetary and Fiscal Policy: The economy as a whole and the business enterprises in particular are subjected to sufficient dynamics in their mode of operations depending upon the policy structure prevailing in the economy and the changes that occur in these policy frameworks from time to time, depending upon the actions of the governing authority of the country. The policies maybe broadly divided into two types, mainly monetary and fiscal policies. The monetary policies are those policies, which deal with the nominal economic variables such as price, nominal wage, cost and others. On the other hand, the fiscal policies deal with the dynamics of the real variables such as level of output, real income, purchasing power and others. Changes in monetary and fiscal policies, both expansionary as well as contracting ones, have significant impact on the operations of the business enterprises as much of their business strategy implementations and future profitability and prospects depend upon how the enterprises adapt to these policy changes. The managers play a key role in designing and implementing strategies in response to these changes, which determines the fate of their company (Goetsch and Davis 2014). Policy changes and strategies in response: a) Expansionary monetary policy- This type of policy, if undertaken, increases the liquidity in the economy, by increasing the money supply and the overall level of demand as a whole. In response to that, the manager of the local multi-national company can expect an upward trend in the demand for the commodities or services, which they produce, as people tend to buy more with an increased money supply. To gain from the situation the manager can increase the production of his company as well as increase the price of the product to some extent, as that is expected to increase the revenue earned by the firm to considerable extent (Afonso and Sousa 2012). b) Contractionary monetary policy- In many instances, to curb high inflationary pressure and decease the money in hand of people, contractionary monetary policies are undertaken, which in turn reduces the money supply and the aggregate demand in the economy. In such a situation, due to a fall in aggregate demand levels, the manager can speculate a decrease in the decrease in the demand for their product. To combat this crisis, the manager can take price-reducing strategies, such that the demand is not affected by huge magnitude and the company succeeds to maintain its clientele (Kiyotaki and Moore 2012). c) Expansionary fiscal policy- During recessionary periods, strategies of these types are taken to increase the disposal income in the hands of households. This is mostly done by reducing tax burden and increasing the public expenditure and results in an increase in aggregate demand. In response of implementation of such a policy and a resulting increase in the aggregate demand, the manager of the concerned company can take production increasing strategies, which can include incorporation of better technologies, skilled labor and other production augmenting techniques (Afonso and Sousa 2012). d) Contractionary fiscal policy- Inflationary pressures can be often combated with contractionary fiscal policies, as they are more effective than those of the monetary policies are. Contractionary fiscal policies include increase in the taxes and decreasing public expenditures, thereby decreasing the households disposable income, lowering the aggregate demand. In response to this, apart from reducing the prices of the product, the manager can also design quantity-reducing strategies to save the company from suffering huge losses in terms of excess and unsold productions (Kiyotaki and Moore 2012). Conclusion: The report discusses about the strategies that can be taken by the managers of business enterprise in response to the changes in the policy framework. Apart from the above discussed strategies, the manager can also take strategies in terms of advertisement, workers welfare and incentives, proper interactions with the clientele and fast redressal or appropriate actions in response to their queries and complaints, which can prove to be beneficial for his company in the long run. References Afonso, A. and Sousa, R.M., 2012. The macroeconomic effects of fiscal policy.Applied Economics,44(34), pp.4439-4454. Burstrm, T. and L. Wilson, T., 2014. Requirement managers roles in industrial, platform development.International Journal of Managing Projects in Business,7(3), pp.493-517. Goetsch, D.L. and Davis, S.B., 2014.Quality management for organizational excellence. Upper Saddle River, NJ: pearson. Kiyotaki, N. and Moore, J., 2012.Liquidity, business cycles, and monetary policy(No. w17934). National Bureau of Economic Research.