Shaheed Benazir Bhutto University Sanghar Campus

Effect of monetary
policy and
Fiscal Policy

By bilal ahmed(22 BBA 44)

 Fiscal Policy
• Fiscal Policy:
• - Easy: Fiscal policy is like the government's spending and tax plan.
• - Normal: Fiscal policy involves government decisions on spending and
taxation to influence the economy. Increased spending or lower taxes can
stimulate business activity by boosting demand for goods and services.
 Monetary Policy:

• - Easy: Monetary policy is how the central bank controls money.

• - Normal: Monetary policy is managed by the central bank and involves
controlling the money supply and interest rates. Lowering interest rates
encourages borrowing and investment, which can help businesses expand
and grow..
 Business Investment:
• :
• - Easy: Both policies affect how businesses decide to spend money.
• - Normal: Fiscal and monetary policies influence business investment
decisions. Favorable policies can encourage businesses to invest in new
projects, equipment, and hiring, leading to economic growth.
 Consumer Spending:

- Easy: It's about how people spend money.

- Normal: Consumer spending is a key driver of business activity. Fiscal
policies that put more money in people's pockets through tax cuts or social
spending can increase consumer spending, benefiting businesses.
 Interest Rates:

- Easy: Interest rates are the cost of borrowing money.

- Normal: Changes in monetary policy impact interest rates. Lower interest
rates make borrowing cheaper for businesses, encouraging investment and
expansion.
 Economic Stability:

- Easy: It's about keeping things steady.

- Normal: Both policies aim to achieve economic stability. Fiscal policy
can stabilize the economy by adjusting government spending and taxation,
while monetary policy controls inflation and unemployment through interest
rate adjustments.
 Business Confidence:

- Easy: How much businesses feel sure about the economy.

- Normal: Fiscal and monetary policies influence business confidence.
Clear and consistent policies can provide certainty for businesses,
encouraging them to invest and grow.
 Exchange Rates:

- Easy: It's about the value of money in different countries.

- Normal: Monetary policy can affect exchange rates, which impact
businesses engaged in international trade. Changes in interest rates can
attract or repel foreign investment, influencing exchange rates and business
competitiveness.
Thank you.. 👍