Monetary Policy, Enron, and Business Ethics

Discussion 1
-What is monetary policy? How does the Fed increase money supply?
-What is the effect of an increase in money supply?
-Explain how government deficits lead to increases in the money supply.
-How does monetary policy affect a company's financial status? Answer this question from both a profitability and balance sheet perspective.

Discussion 2
- What took place in the Enron Scandal, and why!
- In what way was ethics a major factor in the overall scandal itself? Was there any ethical behavior what so ever, and if so was it a deciding factor on whether or not the scandal took place?
- What is the Sabanes Oxley Act and how did the Sabanes Oxley Act come about in terms of the Enron scandal.
- What economic issues for example market failure, strategic management, knowledge economics, and organizational structure. Do you think apply to the Enron Scandal.

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... sheet perspective.

Monetary policy affects companies in two ways: 1.) a tight monetary policy reduces profitability of company operations, while 2.) easy monetary policy expands business operations.

Tight monetary policy according to WebFinance (2014) is manifested as a restriction of money supply in an economy by the central bank through (1) tightening of credit qualifications, (2) soaking up cash by selling government bonds, and/or (3) raising the banks' reserve requirements.

Easy monetary policy, according to WebFinance (2014), is a central bank policy designed to stimulate economic growth by lowering short term interest rates, making money less expensive to borrow.

- What took place in the Enron Scandal, and why!

Laws.com (2013) narrated this story about ENRON:

The scandal started when Enron was granted government regulation allowing it to maintain agency over the earnings reports that were released to investors and employees alike. This agency allowed for ENRON's earning reports to be extremely skewed in nature - losses were not illustrated in their entirety, prompting more and more investments on the part of investors wishing to partake in what seemed like a profitable company.

By misrepresenting earnings reports while continuing to enjoy the revenue provided by the investors not privy to the true financial condition of ENRON, the executives of ENRON embezzled funds funneling in from investments while reporting fraudulent earnings to those investors; this not only proliferated more investments from current stockholders, but also attracted new investors desiring the enjoy the apparent financial gains enjoyed by the ENRON corporation.

Due to the actions of the ENRON executives, the ENRON Company went bankrupt. The loss sustained by investors exceeded $70 billion. Furthermore, these actions cost both trustees and employees upwards of $2 billion; this total is considered to be a result of misappropriated investments, pension funds, stock options, and savings plans - as a result of the government regulation and the limited liability status of the ENRON Corporation, only a small amount of the money lost was ever returned.

- In what way was ethics a major factor in the ...