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UNIT 1 - The Business Environment - Controlled Assessment 2
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- PEARSON (PEARSON)
UNIT 1 - The Business Environment - Controlled Assessment 2
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7. Monetary PolicyA. Define monetary policy
This is when they set up the rate of inflation and control inflation, this is checked every month and the inflation rate should be at 2,0%, the monetary policy
makes the supply of money increase. Monetary policy is the way that banks and government govern the supply of money and interest rates so that the
supply of money will be constant and organisation such as are going to be able to make wages of employees. The monetary policy committee oversee the
monetary policy and they set up the inflation rate, the Bank of England will do this every single month, the aim of the monetary policy is to increase the
money flow in the country. The CPI is used to set up the inflation rate, this is when the cost of products every single day and CPI stands for (customers
price index).
B. Explain how monetary policy is impacted during a boom and the affect this has on your selected organisation.
In boom the inflation rate will be increasing more than 2.0%, this means that we are demanding too much, the customers of Greggs will be demanding too
much of the products this means that they will have to increase the supply of the raw material and that means this will have be increased, this means that
the costs are going to increase. However, the organisation will have to look at if they are working closely to their breakeven. The disposable income is going
to be decreased because the mortgagees and loans are going to be increased.
C. Explain how monetary policy is impacted during a recession and the affect this has on your selected organisation.
The inflation rate is going to be decreased this means that the interest rate is going to be decreased to have a constant demand and this is by reducing the
prices of the products and the services. Greggs will be affected because the customers are going to have fewer disposable incomes this means that they will
have to decrease the prices of their products to make sure that they are having some profit. The raw material will be decreased this means that the
production prices are going to be decreased and this will make affordable for the customers to buy products. The mortgagees and the loans are going to be
decreased this means that the customers of Greggs are going to be able to afford the products.
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