Monetary policies and how they affect various sectors of the economy Term Paper

Monetary policies and how they affect various sectors of the economy - Term Paper Example A proper monetary policy is essential for the growth of the economy. The rate of interest and the inflation rate in the economy are the major factors which would determine what monetary policy would be implemented in the economy. The rate of interests existing in an economy is under the control of the central bank. The monetary policy is governed by the principles of demand and supply. In order to control to taper the amount of liquidity in the economy the central bank would increase the rates of interest of the bonds. As a result people would cut down on their spending and would park their funds in the bonds. This is done because the opportunity cost of spending would be very high. The aggregate demand as a result would come down and therefore the total production of the economy would come down. This would lead to a reduction in the amount of liquidity in the economy. On the other hand when the central bank wants to increase the amount of liquidity it reduces the rates of interest. As a result the people stop keeping the money in the banks and start spending. Thus the amount of liquidity in the economy increases. Thus through the conduct of the monetary policy the central bank not only controls the money market in the economy but also influences the commodity market. This happens because the aggregate demand of the economy would depend on the amount of money that the individuals have with them for spending. The central bank however does not come into direct contact with the general public. However, they regulate the money supply through interaction with the commercial banks. The inductive effect falls on the common people (Mankiw 482). The apex banks generally change the short term interest rates more frequently which affect the long term rate of interests. The central bank would take the help of various tools to tackle the monetary policy of the country. These tools have been explained subsequently. Open Market Operations The most popular tool used by the cen tral bank of a country is through the buying and selling of the bonds and government securities. This method helps the bank to increase or decrease the amount of liquidity in the economy depending on the inflationary pressures. The short term interest rates are manipulated by the central banks and thereby influencing the supply of money in the economy. When the central banks want to increase the amount of liquidity in the economy it goes to the open market and buys the government securities. The cash going out of the fund of the central bank actually comes out into the economy thereby increasing the monetary base. On the other hand when the central bank wants to reduce the money supply it sells the bonds or the securities in the market and the money comes into the possession of the central bank. The monetary base of the economy gets reduced and thereby liquidity is controlled by the central bank (Arnold 311). The chief reasons for conducting such open market operation are to control the level of inflation in the economy. However, the government takes the help of the debt instruments for conducting this technique. These instruments are generally the short term ones. Changes in Reserve Requirements Every bank operating in an economy has to maintain necessary reserve requirements with the central bank of the country. Being the apex body of all the banks the central bank is the regulatory controller of the commercial ba

Contemporary Management issue (waleed) Essay Example | Topics and Well Written Essays - 2500 words

Contemporary Management issue (waleed) - Essay Example The Traditional theories of ethics look into the aspects in terms of an absolutist view. Under this regime, the theories are either claimed to be right or wrong. On the other hand, the Contemporary theories that are framed on ethics concentrates on the relativist positional views. The correctness of a given situation is determined by the Normative ethical theories (Warren, 2011). According to the views of Richard D. George, on the basis of Pluralism, the ethical theories can be conveyed in terms of two opposing patterns, Ethical Absolutism and Ethical Relativism. There are also other types of theories related to ethics, they are: Theory of Egoism Theory of Utilitarianism Theory of Egalitarianism (on basis of rights and justice) Theory of Non-Egalitarianism On the basis of the contemporary view, the ethical theories can be on: Virtue Ethics Feminist Ethics Discourse Ethics Post Modern Ethics The theories of morality and ethics are somewhat similar to each other. Some of the morality t heories are: Moral Subjectivism Cultural Relativism Ethical Egoism Devine Command Theory Kantian Theory Contractarianism The case deals with the consciousness of the U.S. government over the health hazards caused due to cigarette smoking. It claims that the Gladys Kessler (U.S. District Judge) would claim a penalty of $280 billion from the famous tobacco companies such as, Philip Morris, Liggett and Reynolds. These companies would be penalized if they are found to knowingly deceive the public regarding the addictive nature and risks associated with smoking. It was noted that about 400000 Americans die yearly due to the health issues caused from cigarettes manufactured by these companies. This paper would concentrate on an aspect that deals with the duties that the modern organizations cater to their customers. In the later stage, the essay would focus on the different theories of business ethics and morality. The theories in the course of the discussion would be related to the case study of the paper. The Duties to Customers from Companies In the contemporary world, the organizations are supposed to suffice three primary business goals. When describing about the duties of a company it is essential to shed light on the theories of business ethics. In simple terms, business ethics is often dubbed as the form of professional ethics or applied ethics which examines the ethical principles within a business environment. Moreover, it also appeals to every business aspect and is highly pertinent to the organization as well as the individuals. Business ethics encompasses both descriptive and normative dimensions. Hence, business ethics plays a crucial role in shaping the duties and activities of the consumers towards the company. Similarly, the theory of stakeholder holds high relevance in the field of business ethics. It states that a company has equal real responsibilities towards its stakeholders, but the activities differ from one group to the other. (Source: Elkin gton, 1999) As stated in the above diagram, the organizations must try to improve the state of environment, economy and society. This is as per the theory of Triple Bottom Line stated by John Elkington in 1999. This theory also states that the organization, by uplifting the societies, must try to bridge the gap between the poor and rich customers (Wright, 1995). However, catering to the social justice is the most essential factor that must be addressed by the