Brexit and Macroeconomic Policy: Impacts on UK Economy and Standard of Living

PRINCIPLES AND
APPLICATIONS OF
MACROECONOMICS

Table of Contents
Introduction......................................................................................................................................3
Main Body.......................................................................................................................................4
Description of methodology........................................................................................................4
Background of UK economy before Brexit referendum.............................................................6
Presenting major opinions and prediction around BREXIT during the key stages of process........7
CONCLUSION................................................................................................................................9
References......................................................................................................................................11

Introduction
The report of principles and application of macroeconomics will comprehensively illustrate
the Brexit. The united kingdom government's move to take an exit from the European union is
popularly known as the Brexit. European union is an economic and political union of the 27
member states which are located primarily in the Europe. European union was formed in 1993
for the purpose of having an aim within its boarder to offer security, freedom, justice without the
internal boarders. Also, to combat and prevent the crime and take care of the immigration. On
31sat January 2020 Britain took an exit from the EU and it was termed as the Brexit. United
kingdom joined European union for the trade restriction removal in the territory to ease the
movement of goods, also to have friendly and dominate relationship in the Europe. But it
rejected to use the common currency which was euro and continued to use the pound as the
currency of trade. There were factors which led to the BREXIT such as immigration,
sovereignty, trade polkicies, anti establishment policies, the economy etc. were the factors which
highly influenced this move. It was the outcome of the non binding legal referendum which led
to the 51.8% votes were actually supported the movement of leaving the European union.
The Brexit has been come out as the most significant move till date that UK government has
taken. As it has highly impacted the economy so far in both positive and negative ways. The
impacts of Brexit lead to the declination in the trade between the EU and the UK because of non-
tariff and high tariff barriers, as a result, UK won't be integrating with the EU any more in the
future and won't be able to derive benefits in the near future. Reduced trade will also lower the
productivity of the country. The report will further cover the deep issues of the methodology of
the Brexit which has impacted the macroeconomic factors such as fiscal, monetary policies. The
arguments in favour of the Brexit have been elaborated. Report will also include an overall
background of the united kingdom economy in the context of the Brexit. At last a review of the
major predictions and opinions concerned with the Brexit as a significant move. The pre and post
Brexit era has been illustrated and the pro and anti sentiments of the referendum has been
established.

Main Body
Description of methodology
Identification of key terms & concepts with their concrete examples
Here the macroeconomic policy analysis will be done along with concrete examples by including
the concepts and key terms such as macroeconomic policy, monetary policy, policy objectives,
fiscal policy and economic welfare.
Macroeconomic policy refers to the study concerning with the operation of the entire
economy (Odell, 2018). The basic goal of framing macroeconomic policy includes the provision
of stable economic environment which is advantageous for fostering sustainable & strong growth
of economy and in turn leads to the creation of jobs, improved standard of living and maximized
wealth of the citizens. Monetary policy & fiscal policy is considered as the key pillars of
macroeconomic policy. The macroeconomic policy usually revolves around five goals that is,
low inflation, fair distribution of income, non-inflationary growth, equilibrium in BOP and Full
employment or low unemployment within the economy. The example of macroeconomic policy
can be quoted as government cutting the rate of taxes applicable on individual income. This
could be done for raising aggregate demand in an attempt to enhance growth of an economy &
thus the employment resulting lowered tax rates.
Fiscal policy includes the policy pertaining to the income & expenditure of government.
The policy revolves around the composition & level of government spending, type & level of
taxes the government has levied and the form & level of borrowings does the government has
made. There is a direct influence of government capital & recurrent expenditure over the
economic activity of the nation along with the indirect influence of taxes, spending, private
consumption, net exports and investment (Barreiro-Gen, 2020). Accordingly, in order to
influence the economy, government adjusts its level of spending & tax rates. The fiscal policies
are also of three types that is, expansionary, neutral and contractionary which are adopted giving
the situation within the economy. For instance, government may resort to subsidising several
items through enhancing their spending. By doing so, government is able to enhance the
aggregate demand within the economy which in turn contributes towards the budget deficits as
well as drawing down of budget surpluses.
Monetary policy is adopted by nation’s authority responsible for controlling the monetary
aspects of the nation. With the help of monetary policy, the monetary authority attempts to