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Impacts of business policies on economic growth. Achieving a strategic plan

Akademische Arbeit 2019 11 Seiten

BWL - Unternehmensethik, Wirtschaftsethik

Leseprobe

Table of Contents

Introduction

The History of Changes in GDP

Impacts of Business policies of Economic growth

The Influence of monetary policy

Describe how trade deficits or surpluses can influence the growth of productivity and GDP

Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan

The achievability of the strategic plan

Conclusion

References

Introduction

A strategic plan is used to set business priorities, inform the decisions, and guide the business operations of various organizations. The strategic plan ensures that every member of an organization plays their role in the achievement of a common goal that effectively accommodates the changes in both internal and external business environments. It’s also used as a communication tool to inform all the stakeholders of the business objectives and the action plan for achieving those objectives. To develop an effective business plan, it’s important that all aspects of internal and external business environment are taken into consideration. This is due to the fact that these factors such as inflation, interest rate, the Gross Domestic Product, and trade balance significantly affect the ability of the organization to attain its set objectives according to the business plan.

The History of Changes in GDP, Savings, investment, real interest rates, and employment and their forecast in the next five years.

The Gross Domestic Product (GDP) refers to the cumulative measure of economic activities of a nation. Basically, the economic activities are measured on the basis of the total monetary value of exchange products in a country within a certain period of time. To obtain the value of a country’s GDP, a sum of all the consumption, government expenditure, investments, and exports is calculated then the value of imports are subtracted. The economic data of Gross Domestic Product in the United States is release for every quarter of the financial year. This data largely indicates how the economy is doing.

The economy of the United States has grown over the recent years due to the sequential increase in GDP. During the early 1930s, the US economy was ailing after the great depression and the world wars. However, the government has focused on development and trade that has boosted the economy to regain its status despite the economic, social, and political challenges. In a span of the last five years, the country’s GDP has significantly increased compared to the previous years. For instance, the US GDP in the last five years was $16,155 billion. However, the figure increased to $16,663 billion in the year 2013, $17,348 billion in the year 2014, $17,974 billion in the year 2015, and $18, 560 billion in 2016.

According to the economic analysts, the US GD will increase by 2.5%, 2.6%, and 2.4% by 2017, 2018, and 2019 respectively. Despite the increase in GDP, various economic factors have limited the growth of economic growth making it significantly slow. Savings refer to the amount of money that is stored for future use after subtracting the consumption expenditure from the total income within a specified period of time. Savings take different forms such as the securities and bank deposits. However, the amount of money saved by an individual is affected by the certainty or uncertainty of the future income, the interest rates, and the comparison of consumer preferences between the current and the future. For instance, the value of personal savings has significantly reduced among the citizens within the last forty years. Thus, the rate of savings is currently said to be around 5.2% in the year 2016 compared to the rate of savings in the early 1960’s. According to the economists approach, the value of savings in the year 2018 is expected to be around 5.2% while the value of the total savings in the year 2019, the total savings in the year 2020 and 2021 is projected to be 5.3% and 5.2 respectively.

Impacts of Business policies of Economic growth

Certain policies set by the government are focused on improving the country’s GDP. These policies significantly contribute to the increase in total supply or economic growth. During the time or economic recession, monetary policies were used to influence the demand for goods and services. For instance, the government can increase the demand by reducing the aggregate interest rates. Thus, reduced interest rate significantly reduces the cost of borrowing and investment (Bilas et al., 2014). Moreover, the government can use the fiscal policy to promote economic growth by increasing either the rate of government spending or reducing the rate of taxation on the common goods and services. As a result, the disposable income increases and the consequently increased rate of consumer spending also increases. Sometimes, the government may choose currency devaluation as the best option of boosting the domestic demand of the local currency. Moreover, the central bank can also boost the rate of economic development by increasing the amount of money in circulation.

A reduction of the income taxes is one of the most effective methods that a government can use to promote economic growth. This policy will motivate the citizens to put some extra effort on their work which the government will facilitate through the provision of flexible markets that encourage the organizations to hire more workers. This is important in the establishment of new business entities that increase the production capacity of the country and the general rate of economic growth. Moreover, privatization of the state-owned corporations would also significantly contribute to efficiency and reduction in the maintenance costs.

The Influence of monetary policy on the long-run behavior of price levels, inflation, accost, and other real and nominal variables.

Monetary policies are used by the government to regulate the value of a country’s currency such that it remains stable at all times. The monetary policy is also concerned with a reduction in the rate of unemployment which significantly affects a country’s GDP (Agénor & Montiel, 2015). Therefore, a country that wishes to achieve economic milestones should be in a position to change its monetary policies so as to control important factors such as the rate of inflation. Changing these policies gives the country full control over various nominal variables such as the exchange rate and money supply so as to increase the rate of economic growth especially with regard to imports and exports. As a result, the monetary policies set by a country have consequences on the economic growth of that country.

Describe how trade deficits or surpluses can influence the growth of productivity and GDP

The trade deficits significantly influence how the direct imports and fares of the economy affect various economic factors such as the GDP. When the number of imports is higher than the fares, the economy gets into Exchange shortfalls so as to direct more imports from outside to offset the exchange shortages. However, there is a likelihood of increased assessments as well as levy sums which are grouped together with the imported goods. In most cases, this merchandise is usually taken a gander at the assessment of the asserted economic interests on the United States. In this way, it’s easier to balance the exchange understanding as various organizations set goals and objectives to concentrate on the currency exchange. However, the opposite of the economic shortfalls is the surpluses which result from an increase in the traded merchandise compared to the imported goods.

Consequently, an excess of these economic conditions results in different yields on the United States Government such that it may decide to purchase more fortune shares to reduce the rate of expansion. This reduces the cash flow in the economy thus increasing the purchasing power of family units as they focus on starting new businesses that add the value of the Gross National product. However, the deficiencies may result in economic disturbances that force the government to increase the cash flow. This can only be achieved by infusion of boost bundles whose role is compensating the economic shortfalls to improve the ability of the economy to adequately deliver local items that increase the organizational efficiency in the long-run. In the last five years, the deficiencies have not been a new occurrence in the economy and not expected to have more consequences in the future because they can be offset easily. Economic surpluses also significantly boost the household purchasing power thus making it facilitating the growth of a country’ GDP (Akhmetova et al., 2017).

The United States government has opened its economy for global exchange to boost the Gross Domestic Product due to the high profitability and other economic developments. A high GDP is an indication that the country is efficiently managing its economic resources for development while a Low GDP is an indication of little development and reduced profitability. Based on the contribution of the net fares to the GDP, it’s important that a country should have an open economy for more trade options. In the event that a country has adjusted exchange rate that implies equality of fares and imports, then there is no change in GDP or the trade profitability. When a country has an exchange shortfall, it implies that there is a trade deficit which indicates diminishing development and poor efficiency that is dangerous for the Gross Domestic Product.

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Details

Seiten
11
Jahr
2019
ISBN (eBook)
9783346049360
Sprache
Englisch
Katalognummer
v504835
Institution / Hochschule
University of Washington – Economics
Note
2.1
Schlagworte
business policies economic growth strategic plan stakeholders Gross Domestic Product trade balance

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Titel: Impacts of business policies on economic growth. Achieving a strategic plan