Question

3.Governments can use two different types of policy to impact that growth of its national economy.

a)List what these two types of policy

Policy 1:

Policy 2:

b)Explain 1 way that EACH type of policy could affect a company's profitability

Policy 1:

Policy 2:

Answer 1

Answer 1:- Governments can use two different types of policy to impact that growth of its national economy which are as below:-

Fiscal Policy:- Fiscal policies can be defined as the different types of policies carried out by the government which helps it to manage its expenditures and tax rates. These policies include mainly three initiatives from the government which is maintaining the price stability, attaining an increased level of employment level and output and having greater economic development in the economy.

Monetary Policy:- These are the policies which are taken by the government with the help of central bank in order to take some credit control measures and it is mainly related to control the flow of money in the economy. This mainly deals with determining the interest rate in the country to regulate the demand and supply of money in the economy.

Answer 2:- Effect of fiscal policy:- Fiscal policy can affect the profitability in a greater deal. As fiscal policy is mainly related to the taxes thus any increased tax on the business which can be direct or indirect can reduce the revenue generation and thus the profitability of the business. Higher taxes result in lower demand for the products and services and thus lower business profitability

Effect of monetary policy:- As this policy mainly deals with the flow of money, higher interest rate will lower the supply of the money in the economy and thus the purchasing power of the customer will be lowered or the customers will not look to buy the products and services, thus the demand will go down and vice versa. Thus these policies have the direct effect on the organizational profitability.