BMP4003 Business Environment Exam Paper 2022/22

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BSC (Hons) BUSINESS MANAGEMENT
SEMESTER 2, EXAMINATION 2021/22
BUSINESS ENVIRONMENT
MODULE NO: BMP4003
Exam Paper Release Date & Time: Saturday 17 September 2022 at 10:00am
Submission Cut-off Date & Time: Monday 19 September 2022 at 10:00am
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ANSWER BOOKLET
All the pages of the answer booklet should be submitted including blank ones.
Please type your answers in the spaces provided.
Insert additional pages where required.
Student Name
ID Number
Section A
Answer to question number 1
The monetary policy committee is managed by the central government of a country and
the aim of establishing the committee is to set a benchmark interest rate for the nation.
The governor of the central bank leads the committee. The monetary policy can be
described as a process of managing the supply of money in a nation’s economy. The
committee decides the policy’s interest rate which is necessary to achieve the inflation

target. The inflation targets help to reduce the inflation expectations and help to avoid the
high inflation period (Price and Wadsworth, 2019). The MPC focuses on managing interest
rates effectively so the prices of commodities don’t rise too much. By managing the rates
effectively, the committee makes an impact on the inflation rate in a nation. Committee
members take decisions regarding repo rates and statutory rates. The committee decides
what decisions to take to manage low and stable inflation. The committee members are
the three deputy governors and few other officials. The monetary policy committee
meeting happens at least four times a year and committee publishes decisions made
during the meeting.
Answer to question number 3
A government can take various actions to promote economic growth in the country.
One of the common way governments around the world use to promote the growth of the
economy is to maintain the balance between demand and supply policies. There are many
things governments do to manage and promote the growth of economy. Government set
different departments and committees that specially focuses on economy and its growth.
Governments mainly focus on four major factors to promote growth. These factors are
capital, entrepreneurship, labour, and land. To promote economy is any government’s
fundamental function. The economic growth helps in country’s overall growth.
Land – Agricultural land helps the government in promoting economic growth. The land
also includes commercial real estate and renewable resources. It is also an important
factor in production and many industries are dependent on land (Doytch and Narayan,
2021). Land provides many economic and social benefits and governments can use it to
promote the economy.
Capital – For an economy to grow it is important that the corporations in the country have
significant capital so that they can make investments and grow their business.
Governments focuses on improving their country’s manufacturing plants to increase their
productions which leads to economic growth. By decresing interest rates governments try
to make capital available to businesses but it also has some consequences that the
economy has to face.
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Labour – Labour of a country help companies and the government to create goods and
services. Labour play a big role in any economy and it is important for the government to
train and develop labour. Labour include individuals who are working, managers, sales
persons, professionals and etc. Skill development campaigns in countries are organised
by many governments to make their labour effective and efficient. If the country have a
cheap but skilled labour them they can help industries to grow.
Entrepreneurship – New business plans can give a boost to any nation’s economy and
that’s why governments should nurture entrepreneurs in the country. Entrepreneurs bring
innovations and new business ideas which promote economic growth. Many governments
around the world is organising different schemes and policies to help entrepreneurs.
Answer to question number 4
Decreasing interest rates can make borrowing money cheaper. Cheaper rates encourage
spending and investment in a country. This can increase goods and service demand and
lead to economic growth, but this increase in demand can also bring inflationary risks.
Decreasing interest rates can have both positive and negative effects on the economy
(Ghardallou and Sridi, 2020).
Positive Effect – Lower interest rates facilitate individuals to invest in their businesses, with
lower interest rates the industries in a country can grow rapidly which can help the
economy of the country. New entrepreneurs can also make establish their businesses
easily with low-interest rates, decreasing interest rates also increases consumers
spending power which can help businesses to grow.
Negative Effect – Decreasing interest rate makes saving money less attractive. Foreign
investors avoid to invest money in the countries because they get less return and it can
cause the currency of the country to fall. A lower value of the currency in the global market
can affect the economy negatively.
Answer to question number 8
Unemployment is one of the biggest economic problems that many nations face in
the current global scenario regardless of their progress metric and tag as being developed
or developing economies. One of the major reasons as to why unemployment has become
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an issue which is quite complex in nature is because it comes in various types which all
need to be calculated in a different manner using large scale formulas and variables.
Some of the different types of unemployment are listed herein along with the way that they
are measured using various methods.
 Frictional unemployment – This type of unemployment occurs when a person
leaves one job in the pursuit of others and involves the period of waiting to apply to
a new job or to join one after leaving the previous one. This type of unemployment
signifies the gap which occurs between people leaving or switching their jobs. It is
calculated by dividing the total number of workers looking for a job by the total
labour force.
 Structural unemployment – This type of unemployment happens due to the
economic shifts in a nation’s economic workflow and market trends reducing the
need to employ people. If the economic change is negative and the economy is on
a downward spiral, the need to employ more workers will naturally reduce and give
way to more unemployment (Chen and Song, 2022).
 A robust economy on the other hand will require more workers hence will boost a
healthier employment rate. This is measured by taking the number of structurally
unemployed workers in the economy and dividing them by the total labour force.
 Cyclical unemployment – This type of unemployment happens due to the natural
business cycles bringing about a mass exodus related to jobs. The economy of
every nation goes through periodic phases of growth and depression which is also
termed as recession and these bring about major job losses in many sectors.
Cyclical employment is measured by first measuring the frictional and structural
unemployment rates and then subtracting the combined amount from the total
employment rate.
 Seasonal unemployment – This type of unemployment occurs when seasonal
cycles hamper jobs as is different from cyclical unemployment as it depends upon
natural season cycles rather than business cycles. For example in the sector of
agriculture, harvesting and plating is done in specific seasons in a year which brings
about new jobs and after such seasons pass, the jobs in question become obsolete.
This unemployment is measured by analysing the job loss rate which happens
between different yearly seasons in specific industry and market segments
(McCallum and Payne, 2021).
 Technological unemployment – This type of unemployment takes a long time to
happen and involves the job loss which happens due to upgradations of technology
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as advancement of technology often makes many job roles and market sectors
obsolete. For example, a farmer who employs people to bail his cotton will not
employ them further if he could get a gin to get it done quicker. Such types of
unemployment are calculated by looking at structural unemployment and assigning
variables which allows to measure the impact of technology such as automation
and artificial intelligence.
Answer to question number 9
The economic cycle is referred as the fluctuation of the economy between growth and
recession. Different factors like GDP, interest rates and consumer spending decides the
stage of economic cycle of a country. Investors and businesses keep an eye economic
cycle to understand when they can invest or withdraw their money (Kikuchi and
Thepmongkol, 2020). The cycle is categorised in four stages are referred below –
Expansion – In this stage the economy experience quick growth and interest rates in this
stage are tend to be low. Production capacity increases and the pressure of inflation build
in this stage.
Peak - The peak is reached when the economic growth in on its maximum. In peak
growth the economy can face imbalance which governments try to correct.
Contraction – In this stage the correction occurs and the growth slows down. Employments
began to fall and prices start rising.
Trough – When the economy hits the lowest point it is called the trough. The growth starts
again in this stage to recover the economy.
Section B
Answer to question number 1
The COVID-19 pandemic has had devastating effects all over the world due to the
major deaths it took in its wake along with the major economic spirals it was responsible
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for throughout the world. The UK economy in particular was affected harshly by the
pandemic due to the less than diligent public handling of the crisis and the major travel and
crowd restrictions which took place along with constant lockdowns. Some of the major
macro-economic effects the COVID-19 lockdowns brought on the UK economy are listed
herein.
 Due to the various restrictions imposed on the economy and the citizens of the UK,
sectors which usually contribute a major part to the overall GDP of UK such as
hospitality and entertainment saw a steep decline in the successive lockdowns.
 During the time period of 10th January, 2020 to 10th January, 2021, there was a
steep 10% decline in hospitality business numbers in UK which indicates the
massive negative impact of continuous lockdowns (Panzone, Larcom and She,
2021).
 The GDP of the UK in the second quarter of 2020 fell by 19% which can be owed to
the restrictions and the pandemic induced lockdowns as it is the sharpest economic
contraction ever recorded to date in UK history.
 Due to the lockdown being continuous in nature and being levied strictly with no
exceptions, the food retail sector of UK consisting of big companies like Tesco,
Sainsbury’s and Morrison’s all suffered from heavy losses
 The UK health sector also saw major negative growth due to lockdowns as
complaints of burdened infrastructure and poor vaccine rollout were commonplace
during the lockdown
Answer to question number 2
The decision of the UK to leave the EU in order to base its future trading aspirations
to trade in the international arena has had a major consequences of economic nature, few
of them being overtly positive so far. As far as trading internationally is concerned, the
practice has various effects on both consumers and businesses which are further
explained underneath.
Impact on consumers
 International trade has traditionally been associated with being quite healthy and
lucrative for consumers as it results in higher capital gains and improved standards
of living
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 Due to trading internationally, consumers get to enjoy greater variety of products in
the market due to increased availability of substitutes in the market from foreign
brands and product lines
 Due to their being intense competition in the market due to emphasis on
international trade, customers get to enjoy superior product lines and discounts due
to firms lowering prices to beat the competition (Avetisyan and Hertel, 2021).
Impact on businesses
 Focusing on international trade can help businesses to build their customer base in
various countries and find new market niches and avenues to market and
potentially sell their products and services
 Many businesses also get adversely impacted due to the practice of focusing
majorly on international trading as heavy imports damage the market share of
existing domestic businesses and they are forced to share profits
 Small businesses can take advantage of international trading by learning and
adopting new technologies and products in usage overseas as imports from mas
producing countries like India and China is relatively cheap
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Reference List
Avetisyan, M. and Hertel, T., 2021. Impacts of trade facilitation on modal choice and
international trade flows. Economics of Transportation, 28, p.100236.
Chen, Z. and Song, H., 2022. Impact of the Novel Coronavirus Pandemic on Structural
Unemployment and Employment Patterns, and the Corresponding Countermeasures. In
COVID-19’S ECONOMIC IMPACT AND COUNTERMEASURES IN CHINA (pp. 59-76).
Doytch, N. and Narayan, S., 2021. Does transitioning towards renewable energy
accelerate economic growth? An analysis of sectoral growth for a dynamic panel of
countries. Energy, 235, p.121290.
Ghardallou, W. and Sridi, D., 2020. Democracy and economic growth: a literature review.
Journal of the knowledge economy, 11(3), pp.982-1002.
Kikuchi, T. and Thepmongkol, A., 2020. Capital Bubbles, Interest Rates, and Investment in
a Small Open Economy. Journal of Money, Credit and Banking, 52(8), pp.2085-2109.
McCallum, A.H. and Payne, A., 2021. Seasonal Unemployment Rate Differences by Race,
Ethnicity, and Gender (No. 2021-07-08-3). Board of Governors of the Federal Reserve
System (US).
Panzone, L.A., Larcom, S. and She, P.W., 2021. Estimating the impact of the first COVID-
19 lockdown on UK food retailers and the restaurant sector. Global Food Security, 28,
p.100495.
Price, G. and Wadsworth, A., 2019. Effective monetary policy committee deliberation in
New Zealand. Reserve Bank of New Zealand Bulletin, 82, pp.1-18.
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