Question

IY1 Economics for Business Individual Course Work - Suggested Structure

1. INTRODUCTION:

Show an understanding of the requirements of the assignment by:

• Define Macroeconomics and identify the key macro-economic policy issues.
• State how government influences these policy issues specifically in the context of the UK economy in 2019

2. The Macro Economy

• Identify the key participants/actors in an economy and their role in the circular flow
• Briefly explain the relevance of the macroeconomic indicators and how the impact on a country’s economy
• Identify the key macroeconomic objectives of governments in general but specifically the macro economic objectives of the UK government in the context of the UK economy in 2019.

3. The Macro Economy and its impact on businesses

• State how these macroeconomic indicators impact on businesses
• Using relevant data give an overview of the UK macro-economic situation in 2019 and its impact on UK businesses

4. Fiscal and Monetary policy

• Explain fiscal and monetary policies and how government uses these policies to influence the macroeconomic indicators
• Discuss how the UK government used fiscal and monetary policies to address some of the issues identified in your overview relating to UK businesses

5. Support your essay with relevant data, diagrams and accurate Harvard Referencing style

Economic Objectives of government include

• Sustainable economic growth
• Low inflation (2% Per Annum)
• High Employment / Full Employment
• Favourable balance of payment/ Current account surplus
• Rising Standard of living / Relative decline in poverty
• Improvement in productivity
• Good government finances- Low or reduced budget deficit
• Reduction in Inequality
• Improved economic well-being
• Sustainable Environment

Answer 1

Macroeconomics is a branch of economics that studies how an overall economy the market systems that operate on a large scale. Macroeconomics deals with the performance, structure, and behavior of the entire economy, in contrast to microeconomics, which is more focused on the choices made by individual actors in the economy ((like people, households, industries, etc.).

Economics is divided into two parts that are Macro and Micro economics, as the term implies, macroeconomics looks at the overall, big-picture scenario of the economy  This includes study of variables like unemployment, GDP, and inflation.

Key macro-economic policy issues.

- 1. Trade cycle- Trade cycles refers to cyclic fluctuations in the levels of economic activity over the time in a recurring sequence of ups and downs. There is boom periods of high output and high employment alternate with slump periods of low output and low employment. Macroeconomics study the causes of business cycles and suggest remedial measures.

2. Unemployment - Unemployment refers to involuntary idleness of resources including manpower it causes due to different issues and results in less GNP than its potential output. Government always tries to have a good policy to ensure full employment.

3. Economic growth -In spite of short-term fluctuations of output that are associated with the trade cycle, the long-term trend of total output has been upward in most industrially advanced country. The trend in the nation’s total output over the long period is known as economic growth. It is measured in terms of GDP GNP.

4. Inflation - It is constant increase in prices of common goods and services and factors of production. The opposite condition is deflation where fall in the prices of goods and services and factors of produstion are seen

In UK in year 2019 the data shows increase in GDP and other positive policies as GDP was $3.0 Trillion in year 2019 which shows 1.4 % growth , Unemployment rate is 4.0%. where inflation rate is 2.5%.

The economy of the United Kingdom has slowly been climbing the ranks of the mostly free for the past decade. GDP growth has been solid for the past five years but slowed in 2018 amid confusion about Brexit.

The strong majority secured by the Conservative Party in the 2019 parliamentary elections has positioned the government to move forward expeditiously with the Brexit process.

There are four actors in the economy and they are-

1. Households

2. Firms

3. Governments

4. "The Rest of the World"

. Households

All those people living under one roof are considered a household.Households do two fundamental things vital to the economy.

1.      Demand goods and services from product markets

2.      Supply labor, capital, land, and entrepreneurial ability to resource markets.

Economists think of each household acting as a single decision-maker  Householder: The key decision-maker in the household.

2. Firms: Economic units, formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale. Firms have evolved as providers of goods and service.

3.The Government

A.     MARKET FAILURE: A condition that arises when unrestrained operation of markets yields socially undesirable results. In the case of market failure, intervention could improve society's overall welfare.

B.     The Role of the Government

1. Establishing and Enforcing the Rules of the Game.

2. Promoting Competition

3. Regulating Natural Monopolies

4. Producing public goods. Public good: A good that, once produced, is available for everyone to consume, regardless of who pays and who doesn't.

5. Externality: A cost or benefit that falls on third parties and is therefore ignored by the two parties to the market transaction.

6. Income Distribution

7. Full employment, Price stability, Economic Growth