effects of the government fiscal policies

effects of the government fiscal policies

Running head: effects of the government fiscal policies






United States in the 1930s was reeling from a Great Depression and the government began to use fiscal policy, to support itself and pursue social policies and most importantly to promote economic stability.

Effects of Fiscal policies in an organization

The fiscal policies may affect WalMart organization either positively or negatively. First and foremost promoting various education and job training programs designed to develop a high skilled hence productive and competitive labor force is a very important policy that would boost the company miles and miles in realizing its goals. The back bone of any organization is its employees. If the employees have high level skills the profits out put is likely to increase in any organization. When the workers idle around and take time to do what they would have done in less time if they had high level skill then they achieve less. The company with high skill worker reduces the cost of production as the worker takes less time to do work given and may then undertake something else. Also the quality of work produced is very important. If the quality of work is poor then the company is likely to make less profit. The workers with low level skills will produce poor quality work. Poor quality work cost the company not only in the cost of production but also its market and thus can really destroy its profit margins with high cost of production and les of supplies made (Anderson 2005).

It is also important for the organization when the high skilled workers are readily available. The competition to have the skills with other companies is not really high and the high skilled worker can be easily and cheaply availed to the company. When such highs skills workers are not available the company has to compete for the few and thus will end up hiring them at very high fees and thus the cost of production will increase (Brown 2006).

When people are unemployed they don’t have the money to buy goods and so their spending habits are cut. The rise of joblessness led the federal government to increase its own spending and cut taxes. This way the federal government was trying to combat the rise of joblessness in either of the ways incomes rises people will spend more and the economy could start growing again. The government was ready to run a deficit for this purposes. Now going back to the company we realize that he good move fast when they are bought and that in return the time the company makes a lot of profits. When good are slowly moving the company may not make losses but all the same the huge profits that are every companies dream may not be realized. So for the goods of the company to sell the consumer must have money to buy the good. When the government policy is to reduce the state of joblessness, this means that people will have more income and they will be able to buy good. The company in return will have its goods moving fast and can make huge profits. The company can even reinvest these profits. However when the good are moving slowly it means the company will take along time to make profits the money that could have been made along time and then reinvested results in a huge loss. When people have no income they cause the other companies supplying raw materials to fall if they have less people to consume their products. The cost of production, in the case of our company, may increase because of the unavailability of raw materials. This is very uneconomical. It is always important to have low cost of production (Vining 2003).

Managing the overall economy has shifted substantially from fiscal policy to monetary policy, although the budget has remained enormously important. Monetary policy is concerned with the actions of the central bank that determines the size of the money supply. The Federal Reserve is in charge of monetary policy in the United States and it implements by performing actions that will influence short term interest rates (Anderson 2005) .

The first and foremost policy that affect the company positively is when the federal government increases the money supply buying government bonds and securities and paying for them in check which are deposited in banks ad in return give the banks money to lend out. Such policies will enable the company to aces large amounts of credit and are thus able to have huge capital in the business. For example if the company was pursuing a goal to expand the business and the capital was not available in other means, it can take advantage of such a federal policy which increases the amount of money in supply but which specifically help the company to access credit from banks which have it in form of the checks deposited so as to pay for the government securities which have been bought. In line with this policy the company may be affected negatively when the federal decides to sell the securities so as to reduce amount of money in supply (Schwartz 2008). The banks, in this case, buy the securities and thus the government reduces their reserves and they have no money to lend. An organization with plans of expanding when such a policy is made is not likely to access credit from banks. This could be also the case when the federal regulates the amount of rates that are charged by commercial banks on the loans given. The federal may increase the rate of charges and thus the organization may fail to access the loans with low interest rates and thus increasing the cost of production if the company goes ahead and takes such a loan. The availability of credit is also important when it comes to creating more customers for the organization. There are customers who buy goods and services when they access credit from the bank. In instances when such customers cannot access credit then it many the policy of reducing the money supply will negatively affect an organization which is inclined towards making more supplies (Brown 2006).


The fiscal and monetary policies affect the various organizations indifferent way but it is important to note that they may affect the organization negatively at the present but have future negative effects. For example the monetary polices of increasing money supply may lead to inflation and put the future of the organization at stake even though the present effects were positive.


Anderson. B. (2005) Consumer Fraud in the United States. Washingon D.C. DIANE Publishing

Brown.J. (2006) United States Economics. California. In the Hands of a Child  

HYPERLINK “http://www.google.co.ke/search?tbs=bks:1&tbo=p&q=+inauthor:%22Eric+Schwartz%22&source=gbs_metadata_r&cad=4” Schwartz.E ( 2008)Latino Economics in the United States. New York. Mason Crest Publishers

HYPERLINK “http://www.google.co.ke/search?tbs=bks:1&tbo=p&q=+inauthor:%22Daniel+Rutledge+Vining%22&source=gbs_metadata_r&cad=7” Vining.D. (2003) Economics in the United States of America edt 3.michigan. University of Michigan