¶ … Fiscal Policy
Effects of Fiscal Policy
Suppose the government imposes tax cuts for 95% of all households. How does this affect Wal Mart?
The impact of tax cuts on households will result in an increase in spending. This is because families will have more disposable income available (which can be used to purchase a variety of goods and services). Over the years, this policy has been utilized to stimulate economic growth. A good example of this occurred in 1964, when Congress enacted 18% tax cuts to spur consumer spending. The results were that the economy showed consistent levels of strengths throughout the 1960s. ("Do Tax Cuts Stimulate the Economy," 2010)
In the case of Wal Mart, this will lead to an increase in profit margins, sales and earnings. The reason why, is because the firm is one of the largest discount retailers in the world. The fact that the economy has continued to remain stagnant, will result in more consumers choosing to spend their additional income at the company's numerous retail stores. (Farfan, 2009)
Evidence of this can be seen by looking no further than same store sales for the first quarter of 2009. At the time, the federal government was reducing tax rates in an effort to stimulate the economy. This had a positive impact on Wal Mart (which realized a 2.5% increase...
Even the state needs resources, so it may decide to borrow money from the bank. JP Morgan could also emit bonds for the government, and a nice fee could be made out of that. However, should government spending be excessive, this could lead to inflation, which would seriously affect the bank's activity and profit margins. The ways in which JP Morgan would feel the effects of fiscal policies are countless.
Fiscal Policy: The United States fiscal policy affects all types of economic and financial decisions within the country. In addition, the U.S. fiscal policy has significant financial and economic effects on other countries across the globe because America is the largest economy worldwide. Generally, monetary policy is geared towards influencing the performance of an economy as evident in various factors like employment, economic output, and inflation ("U.S. Monetary Policy," n.d.).
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