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Effects of Monetary and Fiscal Policies Essay


Introduction

Most countries in the world have united due to modernization of various technologies that have promoted human interactions. The use of digital communication tools has enabled people to exchange messages faster and this has given rise to transfer of political, social and economic artifacts.

The business world has benefited significantly as a result of the introduction of digital trade and trading blocks that have promoted international trade among member countries. Governments have not been left behind in terms of promoting local trade in order to encourage locals and foreigners to invest in various business activities (Walsh 2003).

At the same time consumers have been cushioned against unscrupulous businessmen who disregard the quality and quantity of their services at the expense of consumers’ ignorance.

Nations use various approaches to ensure consumers are protected against exploitation by business people and one of the major ways which trade is controlled is through the introduction of fiscal policy that regulates the prices of commodities. This essay discusses the impacts of fiscal policy on the consumer population and local investors.

Fiscal policy is defined as measures taken by the government to control trading activities in terms of tax impositions that reduce or increase the prices of goods and services. This becomes an influential tool for controlling trading activities within a country due to the fact that it lowers or increases the demand for a particular good or service depending on the nature of taxes imposed on the commodity.

If the state imposes tax cuts for 95% of all household goods it will mean that the prices of these goods will be lowered. In addition, there will be high demand for household goods and consumers will benefit as a result of reduced prices of commodities since they will have access to various goods without straining their budgets (Walsh 2003).

Furthermore, the cost of living will reduce when prices of household goods are lowered and people will be in a better position to access essential goods and services. However, imposing a 95% tax cut on household goods will mean that manufacturers and producers of such goods will make losses due to the high costs of production that are not reflected by the prices of these commodities in the market.

The government will be forced to wave certain taxes imposed on producers for investors to continue operating their businesses. However, if these steps are not taken producers will be forced to reduce the volume of goods produced in order to avoid making huge losses.

The quality of such goods will also be compromised by producers as a measure towards cutting down production costs. If the above steps do not yield any positive results many firms will be forced to close down due to the high costs of production.

Trade policy is an important element for promoting international trade and can not be ignored by governments or business investors since policies are important in promoting foreign investments in a country (Langdana 2010). In addition, foreign investments are associated with creation of job opportunities, importation of modern technology and improvement of infrastructure.

Secondly, it helps protect domestic industries against stiff competitions from well established foreign companies. Upcoming local industries are also cushioned against well established multinational companies that offer fierce competition for the local market. Therefore, local investors are given an opportunity to do their business without worrying about competitions from such companies.

Import and export policies help a country to reduce cases of dumping of useless goods since the quality of goods imported will be tested before they are allowed into a country. This enables consumers to access imports that are not only cheap but also of good quality.

Lastly, import policies protect local manufacturers against competition from smuggled goods. It should be noted that goods smuggled into a country are usually sold at cheaper prices compared to the ones produced in country (Langdana 2010). Import policy ensures that all goods being imported are subjected to full taxation processes that will enable their prices to match with those produced by local firms.

The implementation of tariffs will expand trading activities within and outside a country (imports and exports). These policies are aimed at promoting trading activities within a country in order to boost local investments and avoid overlying on imports.

In addition, the policies are usually aimed at boosting exports in order for a country to raise more revenue for its projects. Therefore, fiscal policies are aimed at ensuring that local trade activities are promoted and protected against unhealthy competition from foreign companies. Therefore, exports are increased and imports reduced in order to have a balance of trade between a country and her trade partners.

Conclusions

Fiscal policies are mechanisms aimed at protecting local traders against competition from well established multinational companies. Moreover, it restricts some elements of international trade that threaten the survival and development of local industries.

However, it should be noted that fiscal policies are not designed to stop trading activities within and outside a country; they are aimed at promoting favorable business environment for healthy competitions within and outside all countries.

References

Langdana, F. (2010). Macroeconomic Policy: Demystifying Monetary and Fiscal Policy. New York: Springer Publishers.

Walsh, C. (2003). Monetary Theory and Policy. California: Sage Publications.

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IvyPanda. (2019, April 10). Effects of Monetary and Fiscal Policies. Retrieved from https://ivypanda.com/essays/effects-of-monetary-and-fiscal-policies/

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"Effects of Monetary and Fiscal Policies." IvyPanda, 10 Apr. 2019, ivypanda.com/essays/effects-of-monetary-and-fiscal-policies/.

1. IvyPanda. "Effects of Monetary and Fiscal Policies." April 10, 2019. https://ivypanda.com/essays/effects-of-monetary-and-fiscal-policies/.


Bibliography


IvyPanda. "Effects of Monetary and Fiscal Policies." April 10, 2019. https://ivypanda.com/essays/effects-of-monetary-and-fiscal-policies/.

References

IvyPanda. 2019. "Effects of Monetary and Fiscal Policies." April 10, 2019. https://ivypanda.com/essays/effects-of-monetary-and-fiscal-policies/.

References

IvyPanda. (2019) 'Effects of Monetary and Fiscal Policies'. 10 April.

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