BUS 203: BUSINESS ENVIRONMENT

Section: 03

Fall 2013
Nov 14 & 17, 2013

L13&14

Admin
RP1: Update plenty plagiarism, ~7 late, ~3 hardcopies missing
Midterm grading Handed out on Nov 17, 2013
Makeup classes
Follow university circular + additional make ups on weekend days

Todays topic Fiscal policy, monetary policy, exchange rate policy and
business

Todays topic
Fiscal Policy, Monetary Policy, Exchange Rate Policy and Business
1. Justin Paul 2008. Business Environment, pp. 174-195.
2. Ian Worthington and Chris Britton.2009. The Business
Environment, pp. 412-421

Fiscal Policy
Government policy pertaining to public revenue, public expenditure and public
debt.
Govt. revenue tax and non tax revenue
Govt. expenditure planned and non-plan expenditure
Important in stimulating rate of growth.
Objectives:
1. To strike a balance between government revenue, expenditure and
borrowings
2. To attain best possible level of economic development
3. To achieve full employment
4. To reduce inequality of income and wealth
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Fiscal Policy
Tools of fiscal policy:
1.

Taxation

2.

Public expenditure

"The expenditure incurred by public authorities like central, state and local
governments to satisfy the collective social wants of the people is known as public
expenditure."

1.

Public debt - the total financial obligations incurred by all governmental bodies of
a nation

2.

Deficit financing - government spends more money than it receives as revenue

3.

Budget announcement -

Taxation
Value Added Tax (VAT) - A value added tax (VAT) is a form of consumption tax. From
the perspective of the buyer, it is a tax on the purchase price.

Customs Duty - Tariffs or taxes payable on merchandise imported or exported from

one country to another.

Personal Income Tax - Personal Income Tax is a direct tax levied on income of a
person.
And you?

Corporate Tax - A levy placed on the profit of a firm, with different rates used for
different levels of profits.

Role of the Government

The trend of privatization
The concept of Public Private Partnership (PPP)
The modern role of enabler and facilitator
Observations around fiscal and monetary policies of Bangladesh
Introduced VAT in 1991, issues with black money white money, others?

Finance and Savings

Shanchaypatras 5 years, 3 months, family, etc
Development bonds wage earner, prize bonds, FC bonds

Monetary Policy
Monetary Policy is the other principle mean by which government authorities
in an economy regularly influence the pace and direction of the overall
economic activity.
Objectives: (Lets expand in active discussion)
Price stability
Credit availability
Stability of exchange rate
Full employment
High rate of economic growth
Distribution of money

Monetary Policy
Tools of Monetary Policy
Open Market Operations
Open market buying and selling of securities to increase or decrease supply of
money

Reserve Requirements
Lending by Central Bank at Bank Rate
Rate the CB lends works as a floor for short term market rates

Repo Rate
Repurchase agreements
Short term interest bearing loan against collateral

Exchange Rate
The Floating Exchange Rate
A currency's value is allowed to fluctuate according to the foreign exchange
market.
The Fixed Exchange Rate
A type of exchange rate regime where a currency's value is fixed against the
value of another single currency or to a basket of other currencies, or to
another measure of value, such as gold.

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