How Government Spending, Fiscal and Monetary Policy Impact on Business
Identify the Impact of Government Spending On Business
The government is trying to exercise different economic policies which are influencing UK business organizations to gain better living standard and improve the growth for the sake of the country. Basically the government is spending to control inflation, improve employment facilities for better employment relations and overall economic growth (Ermolina, 2016). Fiscal policy is interconnected with changing government spending and taxations.
Government changes have various impacts on the McDonald’s company and its business operations at the local, national or EU level or international level. The spending of the government can change in various situations. If the McDonald’s demand falls it can also decline the spending of the government. It has various consequences on revenues, profits, employment and interest rates for individual businesses and for the whole economy as well (Gupta, 2013). Government spending is directly influencing on McDonald’s business policy, their business pattern, production, employment sector, market operations, and economic environment control situation. If government spending increases product selling unit growth also increases with the buying power of the consumer in a positive way.
Generally, government spending indicates the products which are produced within the economy and not transferred payment collected by taxation from any business in the economic environment of the UK. The government spending impact on McDonald’s is directly affecting their supply goods and services in the private sector. The government can involve all the spending on the macroeconomy by spending on education and proving training to the labor class to improve their productivity and performance (M.mcdonalds.co.uk, 2017). If the government takes initiatives they can train and educate the employees of McDonald’s for their betterment and improved work performance.
In any economy of the country, there is a circular flow of income and spending is seen. The earned money flows from one person to another and it continues as a circle. The government spends on public issues improvement and development of the citizens and try to improve their buying and consumption power for economic growth. Here we notice the multiple effects of the government spending process.
- To supply the goods and services to the private sectors and spend on public sectors. For the welfare of the consumers and citizens, it is necessary.
- To achieve supply improvements with the help of macroeconomy.
The impact of government spending on McDonalds Company is significant. The changes bring a difference in the level of public spending which is creating public demands, increasing their consumption power and ensuring income growth of the nation.
Impact of Fiscal and Monetary Policy Decisions on Business
Fiscal and monetary policy decisions can affect business organizations in various ways. McDonald’s UK also faced some issues regarding these policies.
Fiscal policy is the part of the policy that influences the government to change the levels of taxation and spending on aggregate demand (AD) and economic activities. The policy helps to keep the inflation rate below 2% in the UK. Moreover, the policy is related to stable economic growth, avoiding a boom and recession in the economic cycle.
Monetary policy means the federal reserve of a country or nation. UK central bank influences the amount of money and credits are available within the country. This policy tries to stabilize the employment, price and interest rates.
Fiscal policy focused on changing the government spending and taxation process and the monetary policy are influencing the supply of money by controlling interest rates. The interest rates can directly affect the factors related to customer spending and saving which can also influence demand and inflation of a country. McDonald’s should focus on managing the national and international markets by government spending and try to change the pattern of the economic market.
Effects of rising and falling interest rates
Rising and the falling interest rate has a positive and negative effect on McDonald’s business. The interest rate can affect the bond and share of McDonald’s at the time of inflation and recession. The lower interest rate makes people spend more on desired products and services. But higher interest rates demotivate people from spending. The main effect is not only to the customers but also on businesses. McDonalds’s needed to cut back on spending for new equipment and slowing productivity for less demand in the market.
Effect of Exchange Rates
Exchange rates are the effect on McDonald’s can be seen by the different values of currencies in the market. Products cannot a sale at the same price in the different market as it has an adverse impact on the exchange rate in the international market. When the UK exchange rate varies the production cost or order price does not match the selling price in different countries (Pandey, 2013).