Assignment 2: Monetary and Fiscal Policies
P3: Outline how both fiscal and monetary policy decisions have affected a selected business.
M2: Analyse the effects of fiscal and monetary policies for a selected business in terms of the market in which it operates
Tesco like every business will be affected by Monetary and Fiscal policies, whether this be directly or indirectly. Tesco PLC will be affected more indirectly by these policies and in this report I will explain how.
Fiscal Policy involves the Government changing the levels of Taxation and Government Spending in order to influence AD (Aggregate Demand) and therefore the level of economic activity.
Monetary Policy involves using interest rates or changes to money supply to influence the levels of consumer spending and Aggregate Demand.
The objectives of the government are:
1. low inflation CPI = 2%
2. Strong economic growth.
3. To Reduce unemployment
4. To avoid large deficit on current account balance of payments
Fiscal Policy
The Fiscal Policy may be Expansionary or Deflationary.
Currently the policy is expansionary. This involves increasing AD, therefore the government will increase spending and cut taxes. Lower taxes will increase consumers spending because they have more disposable income. This will worsen the govt budget deficit.
The other method is Deflationary fiscal policy this involves decreasing AD therefore the government will cut their spending and or increase taxes. Higher taxes will reduce consumer spending. This will lead to an improvement in the government’s budget deficit.
Tesco will be affected by direct and indirect taxation which in turn has impacts on business costs, on aggregate demand, and therefore on business revenues.
Direct taxat...
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...cial banks and the consumer to decide how to go forward.
The Bank of England firstly pumps money into all the commercial banks this is done by them buying assets such as bad loans from them. This is done so in turn the commercial banks will lend more money to the consumers. As a consumer we must then spend this money increasing demand and therefore overall sales. If sales are up then profits too will be higher.
This is a positive thing for Tesco has a larger demand for their products allow them to grow and expand due to greater profits.
When an economy is in a recession the government has to act differently in order to increase demand and help businesses survive. The money supply method of the monetary policy is a good idea in theory but because of the current economic crisis, banks don’t feel secure enough to lend out there money as the return isn’t guaranteed.
There are also services that Tesco sells for example, Telecoms, such as internet- broadband, internet- dial-up, home phone, mobiles on contract, mobiles on pay as you go, travel services, cars insurance, life insurance, home insurance, credit cards, loan, mortgages etc, which are all competitively priced.
Store information provided by Tesco: Text Box: Tesco Superstore, our most frequent layout, with groceries and non-food [IMAGE] - Coffee Shop/Cafe [IMAGE] - Pharmacy [IMAGE] - Deli Counter [IMAGE] - Fish Counter [IMAGE] - Petrol Station [IMAGE] - Pay at pump Task 1 This organisation chart for Tesco Plc shows that even though the Chief Executive is in charge of Tesco Plc most decisions are still made by the Board of Directors: * [IMAGE]Tim Mason - Marketing & E-commerence Director * Davis Potts - Retail Director * Andrew Higginson - Finance Director * John Gildersleeve - Commercial and Trading Director * Terry Leahy - Chief Executive * David Reid CA - Deputy Chairman * Rowley Ager - Company Secretary * Philip Clarke - IT & logistics Director Each individual store is divided Text Box: into this organisation chart. [IMAGE] The store manager has span of control over all the deputies who have span of control of their section. When some thing needs to be done the store manager would ask his deputise who would divide the work between other workers following the chain of command. Task 2 Aims are what businesses set out to do.
Tesco is a UK based Supermarket Company which was founded in 1919 by Jack Cohen, since then it has grown to become a multinational company which specialises in a lot more than just groceries, this has improved the overall profit of the company. The overall employees recorded at the end of 2015 was 476,000+, this shows that is a source of employment for nearly half a million people in the UK. The supermarkets are no longer just in the UK they also have shops based in Malaysia, India and Poland, this presents that they are increasing the size of business to a multinational company and is also a good source of jobs for people in poorer countries. In the world over 75million people travels
Tesco is a public limited business and therefore is in the tertiary sector as it provides a service to the public, this means that the business is owned by many shareholders. Tesco sell their shares on the stock exchange and are number one out of its competitors in terms of number of shareholders. Having a high amount of shareholders means that the business needs to make and retain profit levels high so that they trust and gain loyalty to the
Tesco must also follow their statutory duty which ensures that their employees have adequate welfare facilities. Employees also have specific duties they got to follow by law which includes them to take reasonable care for health and safety for them and the people around them, they must also co-operate with the employer or any other person to enable the employer or other person to perform or comply with any legal requirements.
The marketing department advertise for Tesco in hope of getting more customers. They could advertise through the TV, newspaper and online. This would have a positive impact on Tesco international expansion because they would be reaching possible future customers faster. The chain of command is really important in Tesco as it away to pass information around the organisation.
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Economist John Maynard Keynes is credited with giving deficit spending academic legitimacy when he published “The General Theory” in 1936, even though many of his ideas were rebranded. (Deficit Spending, 2008) The advantages of deficit spending are that is helps
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Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) taking up measures to regulate the supply of money and the rates of interest. It involves controlling money in the economy to promote economic growth and stability by creating relatively stable prices and low unemployment. A monetary policy mainly deals with the supply of money, availability of money, cost of money and the rate of interest to attain a set of objectives aiming towards growth and stability of the economy. Here are some of the monetary policy tools:
The reduction of government role in the economy will affect fiscal policy by decreasing deficit spending a...
The term Monetary policy refers to the method through which a country’s monetary authority, such as the Federal Reserve or the Bank of England control money supply for the aim of promoting economic stability and growth and is primarily achieved by the targeting of various interest rates. Monetary policy may be either contractionary or expansionary whereby a contractionary policy reduces the money supply, reduces the rate at which money is supplied or sets about an increase in interest rates. Expansionary policies on the other hand increase the supply of money or lower the interest rates. Interest rates may also be referred to as tight if their aim is to reduce inflation; neutral, if their aim is neither inflation reduction nor growth stimulation; or, accommodative, if aimed at stimulating growth. Monetary policies have a great impact on the economic stability of a country and if not well formulated, may lead to economic calamities (Reinhart & Rogoff, 2013). The current monetary policy of the United States Federal Reserve while being accommodative and expansionary so as to stimulate growth after the 2008 recession, will lead to an economic pitfall if maintained in its current state. This paper will examine this current policy, its strengths and weaknesses as well as recommendations that will ensure economic stability.
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They are highly skilled in areas of design, technology, training, and research and development. In addition, Tesco has a superior presence in the area of manufacturing.