BMP4003 Business Environment Exam Paper 2022/22

This solved exam paper for BMP4003 Business Environment covers topics such as the economic cycle, fiscal policy, monetary policy committee, government's role in promoting economic growth, and the impact of Covid-19 lockdown on the UK economy. It is for Semester 2, Examination 2021/22 of BSC (Hons) Business Management.

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
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Section A
Q1. Identify and describe the four stages of the ‘Economic Cycle’.
The results of the monetary cycle indicate that the economy grows between expansionary
(improving) and contractionary phases (slump). Indicators including gross domestic

product (total national output), credit costs, cumulative businesses, and consumer
purchasing power might be useful in defining the colloidal suspension of the financial
cycle. The growth, peak, retraction, and depression phases constitute the cycle's central
four phases. The first phase of the cycle is called Extension or Progressive stage; during
this phase, the economy changes course relatively quickly, borrowing rates are frequently
low, production rises, and inflationary pressures rise (Ewe and Ho, 2022). The Crest or
Peak then follows. When development picks up speed at its most amazing rate, a cycle
has reached its peak. Top improvement frequently results in a financial blight that needs to
be fixed. The phase of Trough is followed by the Contraction, which happens when the
economy reaches a low point and development begins to pick up. Contraction inhibits
advancement, business diminishes, and expenses deteriorate.
Q2. Explain the effectiveness of the fiscal policy in economics.
The governmental power modifies its spending and remuneration through budgeting
regulations in order to influence the global economic system. By changing the amount of
usage and requirement pay for money, the government can temporarily increase or
decrease monetary development, which will have an impact on the economy. For
example, when the governmental supply runs a financial arrangement setback, it should
be engaging in fiscal lift, encouraging financial activity, whereas when the general
populace power runs a financial arrangement overstock, it should be engaging in
budgetary withdrawal, reversing financial action. Similar to how the public expert would
utilise it to leverage the fiscal lift to promote economic growth by raising government
spending, reducing obligatory pay, or a blend of the two, the basic viability of this strategy
may be illustrated. Increasing government consumption will contribute to economic growth
in general, whether directly by purchasing more products and services from the shadow
economy or indirectly by allocating resources to individuals who may later spend the
money (Gedefaw Birhanu and Wezel, 2022). Conversely, raising people's disposable
income would ultimately result in those individuals consuming more work and goods.
Indirectly, this will affect total monetary development.
Q3. Briefly describe and explain how the Monetary Policy Committee (MPC) impact
the inflation rate?
The Monetary Policy Committee (MPC), which seems to have nine members in
total, is composed of the Governor, the three Deputy Governors for Monetary Policy,
Financial Stability, and Markets and Banking. The Chief Economist, and four external
members directly chosen by the Chancellor. By choosing outside candidates, the MPC is
certain of receiving information and advice from sources other than the Bank of England.
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In addition, a Treasury representative attends MPC meetings. The Treasury representative
may make policy statements but cannot cast a vote They are designed to make sure that
the MPC is completely informed about developments in fiscal policy and other areas of the
Government's economic objectives, and that the Chancellor is kept properly informed
about monetary policy. Actual interest rate fluctuations currently have an effect on
borrowing costs, the availability of bank loans, household wealth, and foreign exchange
rates, all of which have an impact on the demand for goods and services by the general
public. Both wages and prices will begin to rise more quickly if monetary policy increases
aggregate demand to a level that exceeds the long-run capacity of the labour and capital
markets. In actuality, an ongoing monetary policy with low short-term real rates will
eventually lead to higher inflation and nominal interest rates, with no longstanding
commitments in production evolution or reductions in redundancy (Haar, O’Kane and
Daellenbach, 2022)
Q4. What can a government do to promote economic growth? Use examples to
illustrate your points.
Increases in GDP, which measures the value of all goods and services produced in
a country in a given year, are used to measure economic growth. The government is
allowed to use some measures, such as the effects of tax cuts and refunds that are meant
to put more money in consumers' pockets. The economy grows as a result of the higher
productivity this particle action produces. The economy can be helped by consumers
spending more money as a result of refunds or anticipated price cuts. There is also
another strategy, such as the notion of deregulation, to boost the economy. It can be
described as the easing of constraints put in place on a corporation or a certain area of the
economy. Supporters of deregulation argue that limiting regulations prevent businesses
from growing and operating to their full potential. In turn, this inhibits the GDP economy's
growth by reducing hiring and output. Similarly, implementing infrastructure upgrades to
drive a nation's overall economic growth can help advance the relative prosperity of the
country. In order to finish the approved projects, personnel are required, hence
infrastructure spending creates jobs (Tjiptono and et. al., 2022). It might also result in new
economic growth. Building a new highway, for example, or other projects that will aid in the
development of the economy of the country, could result in further investments.
Q5. How would an increase in income tax influence the aggregate demand and the
aggregate supply in the economy? Use examples to illustrate your answer.
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Taxes on income have an effect on the consumption part of aggregate demand.
Increased income taxes reduce individuals' disposable income, which in turn reduces
spending (but by less than the change in disposable personal income). Due to the initial
change in consumption brought on by the change in income taxes multiplied by the
multiplier, there is a corresponding left shift in the aggregate demand curve as a result. In
the event that tax rates alter, the multiplier's value will too. With a higher income tax rate,
the aggregate expenditures curve will flatten down and the multiplier will drop. A higher
income tax rate consequently causes the cumulative expenditures curve to be shifted
downward. The income tax rate rotates the curve higher, making it steeper, just like the
aggregate spending curve does. The aggregate expenditures curve, for instance, will spin
southward by a quantity equivalent to the initial change in consumption at the first
equilibrium value of real GDP determined in the aggregate appropriations paradigm,
assuming no additional modification in aggregate expenditures. By reducing the inclination
of the aggregate expenditures curve, it lessens the multiplier. An increased income tax
rate in this scenario reduces the slope from (Urbaniec and et. al., 2022). The exponent is
therefore drastically decreased. In the fictitious model of aggregate spending, a higher tax
leads to decreased consumption and optimum real GDP.
Section B
Q1. Discuss and explain the macroeconomic effects ‘Covid-19 lockdown’ has had
on the UK economy.
A sharp decline caused by the pandemic epidemic was immediately followed by areas
of strength. This study examines the modified features of the financial impact of the
pandemic up to this date and graphically represents the most significant financial issues.
The pandemic's effects on the economy have never been as widespread in the modern
world. According to ad hoc estimations, the GDP decreased by 9.7% in 2020, which is
equivalent to the decline in the year 1921 and represents the largest decline since reliable
figures have been recorded since 1948.
 Notwithstanding this, the degradation was essentially less in terms of its limit than
during the substantial lockout since purchasers and associations had changed
during the previous year. In spite of that growth slowed down in the middle and at
the end of the year, a strong comeback in the spring of 2021 led to a rapid increase
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in GDP. As of October 2021, the gross domestic product was 0.5% lower than it
had been before the outbreak (Vauhkonen,2022).
 During the crucial shutdown period in April 2020, the UK's GDP was 25% lower
than it had been only two months earlier in February. After the spring and summer
of 2020, financial developments took place, reflecting the economy's opening up.
Again, this was followed by a rise in Covid cases and more lockdowns during the
pre-everlasting winter, which resulted in a slowdown in economic growth.
 In reality, inflation's effects have been worse during 2021. The rise in energy prices
and the unsettling effect on all reserve chains were the key contributors to this.
Families found it challenging to manage their finances and possibly keep track of
financial advancement due to high inflation rates. The pandemic's sudden financial
shock will eventually subside, but the crisis may still leave the economy with
permanent damage, or "scarring." In accordance with a measure from the OBR that
was presented in October 2021, this will entail a 2% decline in GDP levels as
compared to what it would have been without the consequences of the outbreak.
 As a consequence, the contagion had variable degrees of impact on various
economic sectors. Accessibility and diversion are two favourable touchpoints that
have been particularly heavily hit. There are several sectors where financial
organisations have performed marginally better.
Q2. Explain how an economy can achieve sustainable economic growth and analyse
the different methods of measuring economic growth?
Sustainable economic growth attempts to satisfy human needs while
simultaneously protecting the natural environment and natural resources for future
generations. An economy exists within the ecology, and the two are closely intertwined.
Actually, an economy cannot survive without it. The ecosystem provides capital, labour,
natural resources, and land—the factors of production that fuel economic growth.
Sustainable economic expansion requires the management of these resources to stop
their depletion and guarantee their availability for future generations. To guarantee that
future generations can use natural resources, sustainability is essential.
 Analysts and policymakers use a range of methods to track economic progress.
The most famous and frequently tracked metric is the gross domestic product
(GDP). Organizations like the Bureau of Labor Statistics (BLS) and the Organization
for Economic Co-operation and Development (OECD) also keep track of relative
productivity metrics to evaluate economic potential. Several people have argued
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that changes in the standard of living should be used to gauge economic growth,
however this can be difficult to do.
 The OECD identified a variety of statistical problems that have an impact on GDP.
Multi-factor productivity (MFP), which conceptually imitates the inputs of labour and
output, was utilized to measure how much operational and technological progress
contributed to aggregate expenditures, and GDP was used to evaluate collective
outlay.
 Besides, economic experts also use the conception of GNP largely to comprehend
how much money a nation's residents earn overall over a certain time period and
how they spend it. GNP calculates the total revenue received by the populace over
a specified time period. Corresponding to GDP, it is only intended to be used as a
measure of productivity and is not a reliable indicator of a country's well-being or
pleasure. Contrary to gross domestic product, it does not account for income
earned by non-residents within the nation's borders (Zhuplev and Blas, 2022).
Reference List
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Ewe, S.Y. and Ho, H.H.P., 2022. Transformation of Personal Selling During and After the
COVID-19 Pandemic. In COVID-19 and the Evolving Business Environment in
Asia (pp. 259-279). Springer, Singapore.
Gedefaw Birhanu, A. and Wezel, F.C., 2022. The competitive advantage of affiliation with
business groups in the political environment: Evidence from the Arab
Spring. Strategic Organization, 20(2), pp.389-411.
Haar, J., O’Kane, C. and Daellenbach, U., 2022. High performance work systems and
innovation in New Zealand SMEs: testing firm size and competitive environment
effects. The International Journal of Human Resource Management, 33(16),
pp.3324-3352.
Tjiptono, F., and et. al., 2022. The perfect storm: Navigating and surviving the COVID-19
crisis. In COVID-19 and the Evolving Business Environment in Asia (pp. 145-172).
Springer, Singapore.
Urbaniec, M., and et. al., 2022. Fostering sustainable entrepreneurship by business
strategies: An explorative approach in the bioeconomy. Business Strategy and the
Environment, 31(1), pp.251-267.
Vauhkonen, K., 2022. Business process runtime support: an overview of the approaches,
potential benefits and challenges.
Zhuplev, A. and Blas, N., 2022. Business Education in the USA: Evolution, Strategic
Disruptors, and Implications. In Global Trends, Dynamics, and Imperatives for
Strategic Development in Business Education in an Age of Disruption (pp. 1-33). IGI
Global.
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