MACRO CASE 2 : Fiscal and Monetary Policy - Essay Example

After the publications of the macroeconomic indicators, firms can observe the volatility in the market. The extent of the market volatility is determined by how important the indicator is (Zambia & Zambia, 1900). That is why understanding the macroeconomic indicator is vital for the growth of a company. It is therefore necessary for Dell Inc. to have a close monitoring of the market because the market indicators determine its profit outcome. The following macroeconomic indicators are therefore necessary for the growth of dell Inc.

Interest rates announcement Interest rate is one of the vital determinants in the foreign exchange market. As the institutions set the rates of interest, central bank of a country is therefore the most prominent actors. The flows of investments are determined and influenced by interest rates. In view of the fact that currencies are the representations of the economy of a nation, difference in the rate of interest impact the relative worth of currencies with regards to another (Zambia & Zambia, 1900).

A change in the interest rates by the central bank causes volatility and movement in the foreign exchange market. Low interest rates encourage investments in the economy because the cost of borrowing will be low. Dell Inc. is an international firm hence the movement in the forex market affect its financial result. . Employment indicators Employment indicators show the general health of the country’s economy or business cycle. To understand the rate at which the economy of a nation is functioning, it is necessary to understand how many jobs are created, how many people are unemployed, and the percentage of active workforce.

In terms of inflation, it is also vital to observe the speed at which the country’s wages are growing. Dell Inc. is a firm that depends on human capital to maximize its output. Therefore, the management has to take in deep interest the employment situation of the economy (Zambia & Zambia, 1900). According to Philip’s curve, an increase in inflation will result to an increase in employment. Therefore, an economy has to maintain a certain level of inflation rate in order to achieve a given level of employment level.

High unemployment in an economy is an indication of stagnant or an economy that is not growing. Therefore, these economies will realize low investments from within or foreign firms. Therefore, Dell will opt to invest in an economy that has high employment rate because high employment means low wages hence low labor cost. Government fiscal and monetary policy The governments attempt to stabilize the economy through manipulation of the fiscal and monetary policies. Full employment, equitable balance of payment and controlled inflation define the stable economy.

Monetary policies relates to financial markets and the supply of money, credits and other financial assets. On the other side, fiscal policies relates to expenditures and taxes (Zambia & Zambia, 1900). Monetary policies such as increasing money supply in the economy are mainly implemented by the Central bank of a country.