Question

What are some of the ways that various U.S. and state regulatory agencies might promote or discourage business activity?

Answer 1

Some of the ways that various US and state regulatory agencies might promote or discourage the business activity-

1. Interest rates- The Federal Reserve can alter the Federal Funds Target Rate, the figure that directly influences the prime interest rate to stimulate lending to businesses. When the prime rate decreases, the borrowing becomes more profitable. This promotes businesses to expand. When the prime rate increases, borrowing becomes bad option, this discourages businesses to expand.

2. Tax rates- lower corporate taxes promotes business activity. Tax incentives to certain types of businesses, can give fledging markets a powerful boost. Tax incentives promote entrepreneurs to start new businesses. Whereas, higher corporate income taxes discourages business activity.

3. Trade policies- foreign trade policies, like tariffs and import quotas, can be lowered or eliminated to promote foreign trade. Relaxed trade restrictions and free-trade zones allow domestic or local businesses to realize significant cost savings, allowing them to increase their bottom lines. It also encourages business expansion. While, high foreign trade policies discourage foreign trade.

4. Providing contract work to private companies- government entities directly promote business activity when they contract with private businesses to perform government responsibilities. Whereas. Government entities directly discourage business activity when they do not contract with private companies to perform government responsibilities.

5. Grants, Loans, and Disbursements- loans and grant programs offered by government to entrepreneurs are one way to use tax revenue to stimulate business activity. Fund agencies and programs like the Small Business Administration, which provide assistance to new entrepreneurs. Unemployment and other federal assistance benefits ensure that a large number of people enough money to pay their general expenses. Whereas, in absence of loans, grants, and disbursements discourages business activity.

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