How can the US fiscal and monetary plans affect the demand

How can the US fiscal and monetary plans affect the demand

How can the US fiscal and monetary plans affect the demand, supply, and financial performance of Procter and Gamble with respect to its Charmin toilet paper? The US economy is facing hardships following an economic disruption during the Covid-19 crisis. The US government is employing fiscal and monetary policies to boost the commercial operations through improved supply, demand, and financial health of firms and households.

The monetary policies are vital in controlling the money

supply in the economy. On 15 March 2020, the Federal Open Market Committee

(FOMC) cut a 100 basis points from the benchmark rate. The decision resulted in

a 0.00%-0.25% rate on federal funds (“United

States Monetary Policy March 2020″).

Reducing the borrowing cost for the banks also results in low debt costs for

consumers and investors.

The US government has a $4.829 trillion budget for 2020/2021

fiscal year. Tax revenues are estimated to fund $3.865 trillion which creates a

deficit of $966 billion (Amadeo and Berry-Johnson). However, the government has

offered a tax relief to respond to the Coronavirus. The ratification of the

CARE Act allows individuals to pay taxes by an estimated 10% lower the normal

rate. Additionally, individuals can file for refund of the extra 10% paid in

2019 to be refunded in 45 days (“US

Income Tax Relief”). Hence, the

taxation plan seeks to increase individual income to handle the health issue.

Both policies are likely to increase the demand and

supply of Charmin. The monetary policy makes it cheaper to access credit for

investment by the company and personal consumption by households. The tax

relief also increases disposable income for households. Consequently,

individuals have more finances to spend on consumables such as toilet paper.

However, the consumption rate of the product will increase in a lesser rate

than that of the income and money supply. One cannot over consume a toilet

paper. Consequently, the financial performance of the firm will grow at a

proportion lower than that of money supply and disposable income increment.

The monetary and fiscal policies are designed to increase

production and consumption. However, Charmin product is a necessity and has an

inelastic demand. Therefore, the policies have little impact on its demand,

supply, and financial performance.