BMP4003 Business Environment Exam Paper 2022/22

Prepare for your BMP4003 Business Environment exam with this solved exam paper for Semester 2, Examination 2021/22. The paper covers topics such as the Monetary Policy Committee, effects of decreasing interest rates, impact of income tax on aggregate demand and supply, supply-side policies to reduce unemployment, and ways a government can promote economic growth. The paper also discusses sustainable economic growth and methods of measuring economic growth, as well as the impact of UK leaving the EU on consumers and businesses.

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. Briefly describe and explain how the Monetary Policy Committee (MPC) impact
the inflation rate?

The Governor, the three Deputy Governors for Monetary Policy, Financial Stability,
and Markets and Banking, our Chief Economist, and four external members selected
directly by the Chancellor make up the Monetary Policy Committee (MPC), which has nine
members in total. Appointing external members ensures that the MPC receives input and
knowledge from sources other than the Bank of England. Additionally, at meetings of the
MPC, a Treasury official is present. While not permitted to vote, the Treasury
representative may speak on matters of policy. They are intended to ensure that the
Chancellor is kept fully informed about monetary policy and that the MPC is fully briefed on
developments in fiscal policy and other areas of the Government's economic objectives
(Anand and Mishra, 2022). Now, changes in real interest rates primarily have an impact on
borrowing costs, the availability of bank loans, household wealth, and foreign currency
rates, which in turn have an impact on the public's demand for goods and services. If
monetary policy boosts aggregate demand enough to exceed the long-run capacity of the
labour and capital markets, wages and prices will start to rise at faster rates. In reality, a
continuously low short-term real rate monetary policy will eventually result in greater
inflation and nominal interest rates, with no long-term advances in production growth or
decreases in unemployment.
Q2. Identify and briefly explain the main effects of decreasing interest rate on the
economy?
Alterations in the current interest rate could have either beneficial or negative
effects on certain business sectors. In reaction to monetary activity, banking institutions
frequently modify their goal loan pricing, inadvertently raising interest rates during periods
of economic development and mistakenly lowering rates during those of sluggish
economic growth. Lower interest rates mean less expensive borrowing. This can minimise
asset expenses and stimulate customer and corporate expenditures. However, this could
also result in issues like extension and liquidity deceptions, which limit the usefulness of
low interest rates. It is possible that a change in interest rates will have an immediate
effect on the financial markets, but it might take up to a year before the economy as a
whole notice the change. In terms of its impact on the economy's total buyers, when
customers pay less in revenue, this gives them more money to spend, which can have a
growing influence of extended burning through across the economy (Baltagi, Moscone and
Tosetti, 2022). Decreased borrowing costs also benefit businesses by enticing them to
invest extensively in equipment due to the low cost of acquisition. Competence and
expertise have been advancing as a result.
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Q3. How would an increase in income tax influence the aggregate demand and the
aggregate supply in the economy? Use examples to illustrate your answer.
The consumption component of aggregate demand is impacted by income taxes.
An increase in income taxes lowers disposable income for individuals, which in turn lowers
consumption (but by less than the change in disposable personal income). This causes a
left shift in the aggregate demand curve equal to the initial change in consumption caused
by the change in income taxes multiplied by the multiplier. The multiplier's value will
change if tax rates change. The aggregate expenditures curve will become flatter and the
multiplier will decrease with a higher income tax rate. The cumulative expenditures curve
is thus rotated downward by a higher income tax rate. Similar to the aggregate spending
curve, the income tax rate spins the curve upward, making it steeper. For instance,
assuming no other change in aggregate expenditures, an increase in the income tax rate
will cause the aggregate expenditures curve to rotate downward by a quantity equal to the
initial change in consumption at the initial equilibrium value of real GDP found in the
aggregate expenditures model. It lessens the multiplier by lessening the slope of the
aggregate expenditures curve (Hosseini Tabaghdehi and Kalatian, 2022). In this case, a
higher income tax rate lowers the slope from. As a result, the multiplier is further
decreased. In the hypothetical aggregate expenditures model, the higher tax results in
lower consumption and lower equilibrium real GDP.
Q4. Discuss the three main supply-side policies that the government can use to
reduce unemployment?
In an effort to try and minimise the extent of unemployment, the paramount officials
can conduct supply-side interventions like offering development and training options for
aspiring youth or they can try unlimited economy game plans like extending job market
variety. These tasks could entail providing the teenagers with better facilities for education
and preparation. This eventually will lead to the development of suitable skills that will help
those who have been unemployed for a long time retrain and find employment in a tight
labour market. This could help to lessen the extent of hidden unemployment. There is no
guarantee that organisation expenditures will be required to close the capacity gap; it
depends on the public authority's competence to provide the resources that organisations
actually need. The public authority could really use business endowments or work
appropriations in terms of the government-funded subsidies. Businesses that agree to
long-term unemployment may get gifts from the group. It's possible that the excessively
long-term unemployed now have another option. In any event, it will be dramatic, and
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there is a possibility that employers would terminate current workers in order to benefit
from higher earnings (Idris, Saridakis and Khan, 2022).
Q5. What can a government do to promote economic growth? Use examples to
illustrate your points.
Increases in GDP, which is the total value of all products and services produced in
a nation in a year, are used to quantify economic growth. The employment of some
policies by the government, such as the consequences of tax cuts and refunds, which are
intended to put more money in consumers' pockets, is permitted. The increased
productivity brought on by this particle action expands the economy. Consumers can boost
the economy by spending more money thanks to rebates or the anticipated slashes.
Additionally, there is an additional measure like the idea of deregulation to stimulate the
economy. It can be referred to as the loosening of restrictions placed on a sector of the
economy or a company. Deregulating proponents contend that restrictive restrictions limit
firms' ability to expand and function to their full potential. In turn, this reduces hiring and
output, which prevents the expansion of the GDP. Additionally, using infrastructure
improvements to boost a country's general economic growth can aid in the relative
advancement of the nation's riches. Spending on infrastructure generates employment
since workers are needed to complete the approved projects (Sánchez-Fung, 2022). It can
also lead to fresh economic expansion. An additional investment could even result, for
instance, from the building of a new motorway and etc, which will help in the promotion of
significant scope of development of the nation’s economic condition.
Section B
Q1. Explain how an economy can achieve sustainable economic growth and analyse
the different methods of measuring economic growth?
Economic growth that aims to meet human needs while also preserving the
environment and natural resources for future generations is known as sustainable
economic growth. Within the ecosystem, there is an economy and the two are inextricably
linked. In actuality, without it, an economy cannot survive. The ecosystem supplies land,
natural resources, labour, and capital—the factors of production that drive economic
expansion. In order to prevent their depletion and ensure that they are available for future
generations, sustainable economic growth involves managing these resources.
Sustainability is crucial to ensure that future generations can utilise natural resources.
 To monitor economic growth, statisticians and economists employ a variety of
techniques. The Gross Domestic Product is the most well-known and often
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monitored (GDP). Relative productivity measurements are also maintained by
organisations like the Bureau of Labour Statistics (BLS) and the Organization for
Economic Co-operation and Development (OECD) to assess economic potential.
Some people advocate gauging economic progress by changes in the standard of
life, but this can be challenging to measure (Shkromyda, Gnatiuk and Shkromyda,
2022).
 A number of statistical issues were cited by the OECD as affecting GDP. Its
approach was to use multi-factor productivity (MFP) to indicate how much technical
and organisational innovation contributed to aggregate expenditures, which
theoretically approximates the contributions of labour and output, and to use GDP
to assess aggregate expenditures.
 Moreover, economists also make use of the GNP primarily to understand the total
revenue earned by a country's citizens over a specific time period and how those
citizens spend their earnings. GNP measures the overall income that the population
receives over a predetermined period of time. Like GDP, it is just a measure of
productivity and is not meant to be used as a gauge of a nation's welfare or
happiness. However, unlike gross domestic product, it does not take into account
revenue accruing to non-residents within that country's borders.
Q2. UK officially left the EU as of 31st December 2020 to ‘trade internationally’.
Discuss the impact upon consumers and businesses of trading internationally.
In accordance with Article 50 of the Settlement of the European Association, the details
of the UK's systematic withdrawal from the EU are outlined in the withdrawal of the
agreement reached between the European Association and the Assembled Realm. A
period of transition from 1 February to 31 December 2020, during which the EU viewed
as the Unified Realm as if it were a Part State, with the exception of cooperation in the
EU's fundamental and administrative organisations. The European Union and the United
Kingdom organised the Collaboration and Engagement understanding throughout these
months. Commerce with non-EU nations will be impacted by the loss of authorisation for
the EU's ongoing, streamlined business plans, as well as any practises that impede them,
while relationships with central European suppliers or clients would also be impacted.
Additionally, it is possible to discuss how this important move will impact buying groups
and consumers in general;
 A significant impact was acknowledged by the exit on rule. The UK frequently
makes suggestions for the high standards in many contexts, and given everything,
UK law will continue to conform to those standards without having any influence
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over the reasoning behind them. UK could take into account the typical
circumstances that exist throughout this time (Sun and et. al., 2022).
 This could cause delays and higher costs for the country's supply networks.
Reviewing your store's layout and drafting suitable overall investment contracts are
two further benefits of consulting the largest global resource of sound planning.
Entities need to be aware of how the UK's transition to new IP rules after leaving
the EU would affect them.
 The UK's exit from the EU resulted in a trial of loosening the regulatory framework
for the government and parliament. Brexit quickly affected associations by changing
how the law is applied. As the cycle combines amending appropriate EU
recommendations into UK guidelines, courts should assess whether they use recent
decisions announced in regards to the court's points of view.
Reference List
Anand, S. and Mishra, K., 2022. Identifying potential millennial customers for financial
institutions using SVM. Journal of Financial Services Marketing, pp.1-11.
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Baltagi, B.H., Moscone, F. and Tosetti, E. eds., 2022. The Economics of COVID-19.
Emerald Group Publishing.
Hosseini Tabaghdehi, S.A. and Kalatian, H., 2022. Trust in the global value chain in the
digital era. Strategic Change, 31(1), pp.129-135.
Idris, B., Saridakis, G. and Khan, Z., 2022. The effect of outward and inward
internationalisation on different types of innovation: evidence from UK SMEs.
Journal of International Management, 28(2), p.100903.
Sánchez-Fung, J.R., 2022. Institutions for macroeconomic stability: a review of’Monetary
policy in low financial development countries’. Macroeconomics and Finance in
Emerging Market Economies, pp.1-5.
Shkromyda, V., Gnatiuk, T. and Shkromyda, N., 2022. Evaluation of Indexes of Dynamism
of Corporate Reputation in Conditions of Behavioral Economy. Corporate
Reputation Review, 25(2), pp.81-93.
Sun, L.Y., and et. al., 2022. Justice climate and employee creativity in the work uncertainty
context: a cross-level investigation. Asian Business & Management, pp.1-29.
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