Reflecting on whether it is in the best interests of the business Essay

Reflecting on whether it is in the best interests of the business community for there to be constraints on a government's disc - Essay Example Nevertheless, this report looks at the nature of fiscal and monetary policy and implementation may affect business specifically with regard to investment. In the end, the report postulate that there is little effect resulting from expansionary fiscal policy and that it has little effect on demand, output, and employment. Also, the report notes the important role business community should play in fiscal and monetary policy making since they constitute the largest group that get affected by these policies. Governmental Discretion over Fiscal and/or Monetary Policy Introduction Business activities are affected by different factors macro and microenvironment operation environment. While microenvironment sometimes may be within the control of the organization, macro-environment –on the other hand involves external factors that affect the business, which in turn may define the success or the failure of the organization. For example, macro-environment spans politics, economics, socia l matters, technology, legislation, and eco-environment (Elearn Limited and Pergamon Flexible Learning 2005). Political environment particularly legislative environment constitutes specific set of external business environment that business communities in any given country have been forced to adhere to. For example, monetary and fiscal policy process in any country has affected business in the positive way or negative way given the nature of the particular legislation law. Therefore, the focus of this paper will dwell on investigating and finding out whether it is in the best interests of the business community for there to be constraints on government discretion over fiscal and monetary policy. Exploring the concept of fiscal and monetary policy Both fiscal and monetary policies are seen to be interrelated and key tools to the development of many countries especially the developing one. For instance, fiscal policy constitute all measures that are adopted in order to increase the ge neral welfare through the public control of resources by means of public spending, resource mobilization and price fixation in public and semi-public enterprises (Elearn Limited and Pergamon Flexible Learning 2005). Today, fiscal policy has been embraced as a toll of development strategy when analyzed in broadest sense it can be seen that it provides a set of instruments to pursue both the best use of resources in terms of efficiency and equity and their maximum possible use in terms of employment, price stability and satisfactory rate of growth (Mukherjee 2007). Exhibiting characteristics of monetary policy, fiscal policy performs a very critical and beneficial role in the economy and analysis has shown this kind of policy performs two important roles in the economy with regard to raising financial resources for development (Mukherjee 2007). First, fiscal policy constitutes a set of mechanisms that ensure the country’s employment level is maintained at its full capacity and as such, the aggregate capacity to save does not go down (Mukherjee 2007). Secondly, it helps to raise the marginal propensity to save of the community above the average propensity to the maximum extent possible without discouraging work effort or violating the law of equity (Mukherjee 2007). Fiscal, together with monetary policy, are seen to be two