Influence of Government Policies on Businesses Quiz

Government Influence on Businesses

• Governments can influence businesses through fiscal and monetary policy, as well as other policies and regulations.
• Government control of inflation rates can lead to greater real economic growth in the long term.

Monetary Policy

• Changes in interest rates affect the cost of borrowing and consumer spending.
• Exchange rate changes can affect multi-national companies.

Competition Policy

• The government ensures a competitive business environment by preventing monopolies and anti-competitive behaviors.
• The government regulates proposed mergers and acquisitions to prevent monopolies.

Government Assistance for Businesses

• Government assistance can come in the form of grants for companies investing in specific industries or regions.

Bills of Exchange

• A bill of exchange is a promise to pay a stated amount of money at a future date.
• It has a drawer and a drawee, and can be used as a source of short-term finance for companies.
• A bill of exchange accepted by a bank is called a bank bill.

Certificate of Deposit (CD)

• A CD is a certificate issued by a bank stating that the bank is holding a specified amount of money as a term deposit with interest earned at a specified rate.

Commercial Paper (CP)

• CP is an unsecured promising note issued to pay a specific amount of money on a specified date.

International Financial Institutions

• The World Bank provides loans and grants for health, education, and infrastructure development projects in developing countries.
• The International Monetary Fund (IMF) grants loans to countries facing financial and economic difficulties, but with strict conditions.

Central Bank of Nigeria (CBN)

• The CBN has overall control and administration of monetary and financial sector policies of the federal government.
• The CBN ensures high standards of banking practice and financial stability through surveillance activities.

Portfolio Theory and Capital Asset Pricing Model (CAPM)

• Portfolio Theory helps investors build a portfolio of investments with a suitable balance between return and investment risk.
• CAPM is a model that provides a theoretical basis for Portfolio Theory.
• CAPM formula: Ri = Rf + B (Rm - Rf), where Rm - Rf is the risk premium and B is the beta factor.