BMP4003 Business Environment Exam Paper 2022/2022

Prepare for your BMP4003 Business Environment exam with this solved exam paper from Desklib. Learn about the Monetary Policy Committee, fiscal policy, interest rates, supply side policies, and the impact of COVID-19 on the UK economy. Discover how to achieve sustainable economic growth in the UK through carbon pricing and green innovation strategies.

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.
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Section A
Answer to Question 1
The Monetary Policy Committee in United Kingdom has the responsibility of making
decisions about the bank rate. This involves determining money involved in the economy
with the aim of attaining monetary stability in United Kingdom. In addition to this
appropriate monetary policies are laid out by the monetary policy committee which are
used for stabilizing the British Economy. Some of the other responsibilities which are
completed by the Monetary policy committee of United Kingdom are supporting different
aspects of the monetary policy framework such as quantitative easing and forward
guidance (Apel, Blix Grimaldi and Hull, 2022.). The Bank rate decisions taken by the
Monetary Policy Committee are implemented to control the inflation rate of the country
under specific target. When the inflation rate increases, the monetary policy committee
takes steps to increase the bank rate which acts as a deterrent for banks to borrow from
the central bank. This reduces the amount of economy in the economy supply and helps to
lower the inflation rate of the country. In this way the monetary policy committee plays an
important role in stabilizing the inflation rate and reaching the targeted inflation rate in the

United Kingdom Economy. Apart from this the policies formulated by the committee help in
controlling inflation.
Answer to Question 2
The concept of fiscal policy is defined as the usage of government expenditure and
taxation policies to stimulate economic condition specifically the macroeconomic
environment of the country. Fiscal policy of a country plays an important role in economics
because successful implementation of fiscal policy helps attain variety of goals including
maintaining full employment, reaching high rate of economic growth and keeping stability
of wages and prices. Another important role of fiscal policy in maintaining stable economy
is that it supports mobilization of considerable amount of resources for the funding of
various government projects which are essential for development of public infrastructure
and national economy (Boushey, Nunn and Shambaugh, 2019).
The fiscal policy helps optimize available economic resources so that appropriate
stimulus can be provided to improve the savings rate which results in higher capital in the
country supporting economic development of the country. Fiscal policy also impact
inflation and can be sued to enhance the average demand in the country which showcases
its important role in resolving macroeconomic instability and other challenges. The fiscal
policy also affects the private sector because it gives adequate incentives to the private
sector to support its expansion. Increased financial activities in the financial sector
supported by suitable fiscal policy helps create healthy and growing economy.
Answer to Question 4
The cost of borrowing capital and the amount which is earned by creditors for
lending money is represented by the interest rate. In context of economic system of a
country because it affects the cost of borrowing return on savings and the return on
various investments. Therefore the rise or fall in interest rate has significant impact on the
economic environment of a country. In context of decreasing interest rate, the economy is
positively impacted as growth of the economy is supported by low interest rate. This is
because lower interest rate create an environment where government, commercial
enterprises and individuals to borrow and complete expenditure at liberty. This in turn
supports higher gross domestic product of the country and also facilitates increase job
creation (Harada, 2021).
On the other hand the decrease in interest rate in an economy can also have
negative impact in the firm of rising inflation. Lower interest rate means that more money is
supplied on economy resulting the inflation rate. Despite this disadvantage, low interest
rate are advantageous as they can influence people to spend more helping manage
economic crises such as recession. In addition to this lower interest also have positive
impact on market as companies issue new bonds in the market because of higher
spending to facilitate financial expansion.
Answer to Question 7
A supply side policy is defined as the economic policy implemented by the
government with the aim of economic productivity and efficiency by boosting aggregate
supply and increasing overall economic output. Supply side policies help lower price level,
control inflation, improve economic growth, enhance trade and balance of payments wrong
with supporting higher employment. The three primary supply side policies which can be
implemented by the government to handle unemployment are provide below:
 Privatization: This is a free market oriented side supply policy which requires sale
of government owned assets to private sector parties. This is done to earn revenue
from the sale of government asset which can be used for economic growth and
reducing unemployment. In addition to this privatization also directly affects high
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unemployment as the sale of private sector leads to better expansion of the
company and rise of employment opportunities in the private sector (Nagel, 2018).
 Deregulation: In this supply side policy the focus is on improve free market by
lowering the barriers to entry and enabling new firms to enter the market. This
increases the competitiveness of the market and both regional as well as
international firms introduce new opportunities for employment in the market.
 Public Sector Investment: This is an investionist supply side policy which requires
improvement of public infrastructure such as transportation, education and
healthcare while also lowering costs. This reduces unemployment by increasing
public sector job opportunities and increasing skill level of individuals through better
education. Apart from this investment in public transportation and industrial
infrastructure facilitates private sector commercial activities creating new jobs.
Answer to Question 9
 Expansion: In the first stage of the economic cycle, there is positive impact on
economy which includes quick growth, lower interest rate, higher productivity and
rise in inflammatory pressures.
 Peak: This stage of the economic cycle begins as the highest point of economic
growth is achieved. Here economic imbalance may occur which requires correction
to ensure stability in economy (Forcadell and et. al., 2020).
 Contraction: During this period of the economic cycle growth slows, prices fall and
unemployment rises. This period of the economic cycle is also marked with
reduction in inflation.
 Trough: In the final stage of the economic cycle the economy experiences revival
with the economy reaching its lowest point with further growth of the economy.
Section B
Answer to Question 1
The COVID-19 pandemic created a national healthcare crises in united Kingdom.
In order to contain the spread of the virus, restrictive guidelines were implemented by the
United Kingdom Government among with a national Lockdown which implemented on 26
March 2020 including various local lockdown in further in the year to curb the rise of
COVID—19 virus spread. A lockdown is defined as series of stay at home orders which
are introduced with the view of reducing spread of virus and dealing with contagious
healthcare crises. National Level lockdown have significant impact on the country’s
economic environment because they halt the regional and international economic activities
of the country (William, 2021). The macroeconomic environment of United Kingdom was
affected because of the national Lockdown because it negatively affected the economic
productivity and created challenge sin completing essential private sector as well public
sector activities. The macroeconomic impact of COVID-19 lockdown on UK economy are
provided bellow:
 Economic Contraction: The COVID-19 lockdown was implemented in the March
of 2020 and the primary macroeconomic impact of this was the national economy
contraction. Prior to the global spread of the COVID-19 virus the economic growth
rate of United Kingdom was predicted to be 1.4% for the year 2020. On the other
hand the economic growth rate of United Kingdom reduced and the economy
contracted by 9.8% in the year 2020 (The impact of COVID-19 restrictions on UK
growth and the benefits of full inoculation, 2021). This macroeconomic impact can
be associated with the barriers created by lockdowns both national and local in
continuing daily business and even survival activities with efficiency.
 GDP Reduction: The gross domestic product of a country is the foremost
indicators of economic growth. The COVID-19 pandemic lockdown in United
Kingdom had direct negative impact on the GDP of the country. The lockdown was
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implemented on 23 March 2020 and there was 5.8% economic contraction for
March of 2020 for United Kingdom. This suggests that there was fall of 20% in
terms of GDP for the lockdown period in United Kingdom (The economic effects of
coronavirus in the UK, 2020). This high rate is despite the fact the lockdown only
implemented in the last few days of March 2020. This showcase the significant
macroeconomic damage caused by the COVID-19 lockdowns in United Kingdom.
 Employment: The level of jobs available and filled in the country are important part
of the macroeconomic environment. In case of United Kingdom the employment
opportunities in the country suffered because of Lockdown. Immediately after the
national lockdown action came into effect, in May of 2020 the around 7.6 million
jobs and 24 percentage of United Kingdom workforce was at risk of loosing their
employment because of lockdowns related to COVID-19 (COVID-19 in the United
Kingdom: Assessing jobs at risk and the impact on people and places, 2020 ). This
includes primarily lower income jobs which affected extremely vulnerable
communities and populations in the country.
 International Trade: The global trade and commerce in which country engages is
important part of its macroeconomic environment. The COVID-19 lockdown
weakened demand in the country and also created supply chain challenges
because of COVID-19 trade restrictions. This negatively affected international
trade in UK during and after the lockdown period. This coupled with the low GDP of
the country reduced opportunities for improving international trade quickly.
Answer to Question 3
The concept of sustainable economic growth is defined as achieving economic
growth rate which does not have high impact on the prices of goods and services. Under
an economy which has attained sustainable economic growth consumption is done at a
rate which is not harmful for the future generations (Suárez-Eiroa and et. al., 2019). In the
modern age where meaningless consumption, social and health create challenges in
creation of sustainable economy. In addition to this as evidenced by COVID-19 economy,
sudden global economic challenges cannot be easily handled by the current fiscal policies
and economic measures. This means that in order to attain sustainable economic growth
investment based and policy changes need to be made.
The primary change which needs to be made to achieve sustainable economic
growth in united Kingdom is development of clear and credible carbon price across the
economy. This will lead to replacement of inefficient and ineffective approach towards
lowering carbon emissions and lead to lowering currently existing emissions. In addition to
this, the implementing specific carbon price will lead to changes in low carbon innovations
and implementations across all industries and sectors as lesser carbon emissions will be
incentivized (Fatimah and et. al., 2020).
The other recommendation for achieving sustainable economic growth is from an
investment and strategic viewpoint. This involves prioritizing implementation of green
innovation strategies and policies in Government’s existing strategies such as the
Industrial strategy and clean growth strategy. This will introduce a strategic level change
supporting sustainable development of the country and contributing to sustainable
economic growth. In addition to this de-carbonizations of various sectors which heavily
contribute to carbon emissions also needs to be implemented because it will provide
relevant results. This can be done by collaborating with private and voluntary sector
parties and investing in ground level de-carbonization of certain high emission industries.
Some of the factors of measuring economic growth are explained below:
 GDP: It is the most common way of measuring economic growth of a country
because it calculates the total value of every goods and service produced in the
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economy. In this way it provides specific measurement of entire production ina
country (Durguti and et. al., 2020).
 Consumer price Index: This economic growth indicator looks at the average price
level in an economy. It is used to measure the modifications in the purchasing
power for the current of a country and the price level of bundle of goods and
services. It is an important measurement factor for economy as it helps indicate
inflammation level.
 Per Capita Income: This economic indicator identifies the amount of money earned
by per person for specific national population or regional population. The average
per person income can be determined through this economic metric and helps
identify economic growth in a country through comparison of per capita income
during specific time period.
Reference List
Books and Journals
Apel, M., Blix Grimaldi, M. and Hull, I., 2022. How much information do monetary policy
committees disclose? Evidence from the FOMC's minutes and transcripts. Journal
of Money, Credit and Banking, 54(5. pp.1459-1490.
Boushey, H., Nunn, R. and Shambaugh, J., 2019. Recession ready: Fiscal policies to
stabilize the American economy. Washington, DC: Brookings.
Durguti and et. al., 2020. Evaluation of economic indicators for Western Balkans countries:
policy recommendations for the financial and economic growth. International
Journal of Finance & Banking Studies, 9(1). pp.36-46.
Fatimah and et. al., 2020. Industry 4.0 based sustainable circular economy approach for
smart waste management system to achieve sustainable development goals: A
case study of Indonesia. Journal of Cleaner Production, 269. p.122263.
Forcadell and et. al., 2020. Is the restructuring-performance relationship moderated by the
economic cycle and the institutional environment for corporate
governance?. Journal of Business Research, 110, pp.397-407.
Harada, Y., 2021. Non-traditional monetary policies and their effects on the
economy. International Journal of Economic Policy Studies, 15(1). pp.23-40.
Nagel, J., 2018. Supply-Side Policy in den USA: Eine theoretische und empirische Analyse
der angebotsorientierten Wirtschaftspolitik Reagans unter besonderer
Beruecksichtigung steuerlicher Aspekte (p. 154). Peter Lang International
Academic Publishers.
Suárez-Eiroa and et. al., 2019. Operational principles of circular economy for sustainable
development: Linking theory and practice. Journal of cleaner production, 214.
pp.952-961.
William, W. R., 2021. Who Should Pay for the UK Blockade in the Face of the COVID-19
Pandemic?. Journal of Law and Economics, 2(3), pp.27-34.
Online
COVID-19 in the United Kingdom: Assessing jobs at risk and the impact on people and
places, 2020. [Online] Available through
<https://www.mckinsey.com/industries/public-and-social-sector/our-insights/covid-
19-in-the-united-kingdom-assessing-jobs-at-risk-and-the-impact-on-people-and-
places >
The economic effects of coronavirus in the UK, 2020. [Online] Available through <
https://www.resolutionfoundation.org/publications/the-economic-effects-of-
coronavirus-in-the-uk/>
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The impact of COVID-19 restrictions on UK growth and the benefits of full inoculation,
2021. [Online] Available through
<https://blogs.lse.ac.uk/businessreview/2021/07/05/the-impact-of-covid-19-
restrictions-on-uk-growth-and-the-benefits-of-full-inoculation/ >
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