Individual Written Exam: Business Environment

This exam covers various topics related to business environment such as Monetary Policy Committee's impact on inflation rate, methods to promote economic growth, effects of decreasing interest rate, types of unemployment and measuring methods, stages of economic cycle, and macroeconomic effects of Covid-19 lockdown on UK economy.

Business Environment

Table of Contents
SECTION A.....................................................................................................................................3
1) Briefly describe and explain how the Monetary Policy Committee (MPC) impact the
inflation rate?..............................................................................................................................3
2) What can a government do to promote economic growth? Use examples to illustrate your
points...........................................................................................................................................3
3) Identify and briefly explain the main effects of decreasing interest rate on the economy?..4
4) Briefly explain discuss the different types of unemployment and the different methods
used to measure it them...............................................................................................................4
5. Identify and describe the four stages of the ‘Economic Cycle’..............................................5
SECTION B....................................................................................................................................5
1. Discuss and explain the macroeconomic effects ‘Covid-19 lockdown’ has had on the UK
economy......................................................................................................................................5
2. Explain how an economy can achieve sustainable economic growth and analyse the
different methods of measuring economic growth?....................................................................7
REFERENCES................................................................................................................................9

SECTION A
1) Briefly describe and explain how the Monetary Policy Committee (MPC) impact the
inflation rate?
Monetary policy committee is the responsible for setting the benchmarks for the interest rate
in the nation. This committee is build by the central government and lead by the governor of the
central bank of the country. The monetary policy committee is responsible for fixing the rate
such as short term rate bring the inflation. The committee generates the repo rate which is very
important in respect to achieve the inflation target. Inflation target is the banking policy that
adjust the monetary term and achieve the annual rate of the inflation(Wannapan, Chaiboonsri
and Sriboonchitta, 2018) . Monetary policy committee mainly focuses that they set the rates so
that there is no higher increment in the prices of the commodity. Managing the rates effectively
and controlling the impact of the inflation is the major impact that monetary policy committee
can make on the inflation rate. This committee consists members who takes the important
decision in respect to setting repo rates and statutory rates. These members are the 3 deputy
governors and other senior officials.
2) What can a government do to promote economic growth? Use examples to illustrate
your points
A government use various measures to promote economic growth in the country one of the
common way of promoting economic growth is maintaining balance between demand sides and
the supply sides policies. In respect to promote economic growth government focuses on four
major aspects that are land, labour, capital and entrepreneurship(UKA, FEJZA and ISMAJLI,
2018) . The development and use of these are discussed below:
 Land- A land is not only refers to the natural resources but it has the value in terms of
commercial real estate. So a land provides two benefits one is having a renewable
resources an another is real estate value. Government implements measures in respect to
protect the forests.
 Labour- They are the people who are responsible for creating goods and services . These
individual are workers, managers, sales person, engineers and many more. Having hard-

working and intelligent workforce brings innovation in the country. Government
providing various training program for their development.
 Capital- In respect to enrich the economy it is important to for the corporations to have
enough amount of capital so that they can spend and make investment in making profits.
Government enhances the manufacturing plants and equipments that increase the
production process and generate capital.
 Entrepreneurship- This is the factor which is makes innovation behind the whole
production process. The entrepreneurs merger the factors that conceptualize and produce
the product and services. These are the integral part of production process. Government
supporting the business plan of the new entrepreneurs in respect to enhance innovation in
the country.
3) Identify and briefly explain the main effects of decreasing interest rate on the economy?
Lowering rates makes the money cheaper for the borrowing process. The decrease interest
rates encourages the buyers to spend and invest in the assets and increase their asset prices.
Decrease interest rate have both the positive and negative impact on the economy which is
mentioned below:
Positive impact- This makes the customers to pay less interest and give them power to spend
more , this brings the effect of increased spending in the whole economy(Кulakovskaya, 2022) .
Businesses and the farmers are are also get advantage of because they gave them power to
equipment purchases with low cost.
Negative impact- The negative impact of decreasing interest rates is that foreign investor who
invest in our country get lower returns on the invest they make. And the lower returns leads to
decrease in the demands of the domestic currency and reduction on the exchange rates.
4) Briefly explain discuss the different types of unemployment and the different methods
used to measure it them.
The four major types of unemployment are discussed below:
 Frictional unemployment- It is the temporary unemployment caused by movement of
worker from one place to another.

 structural unemployment- This type of unemployment is due to mismatch in the workers
requirements and the type of work available in the market. The skills didn't match the
type of job available.
 cyclical unemployment- It is caused by decrease in the demand , there is not enough
demand in the economy for the services.
 Seasonal unemployment- This happens by as different industries and labour are
available in the different seasons.
The measuring methods that can be used to measure the unemployment is direct method which
includes direct counting and estimating the number of unemployed people in the country.
Another method is indirect method which estimated by the reduction in the number of the
unemployed people at a specified time period.
5. Identify and describe the four stages of the ‘Economic Cycle’.
Economic cycle refers to the fluctuations in the economy between the time period of growth
and recession. Economic cycles helps the investors and the organisations to understand when to
invest and what are the points when they have to pull their money out from the market(Lewis,
2022). The four stages of the economic cycle are discussed below:
 Expansion- In the expansion m the economy experiences rapid growth, production
enhances, rates of interest rates low.
 Peak- The peak hits when the growth reach to the maximum rate . It brings certain
imbalance in the economy which need to be rectified.
 Contraction- This the time period where growth slows down, employment of the country
falls and the prices of the commodities stagnate.
 Trough- This is said to be the lowest point where economy reached its lowest point and
after that the growth begins and the things are recovering in the economy.
SECTION B
1. Discuss and explain the macroeconomic effects ‘Covid-19 lockdown’ has had on the UK
economy.
Macroeconomic effects arise due to the macroeconomic factors which basically is the influence
of fiscal, natural and geopolitical event that has the impact on the regional and national economy.

The recent pandemic of COVID-19 lockdown has majorly affected the economy adversely of not
only one country but the impact was worldwide(Liang and Yang, 2019). The rise in cases of
COVID-19 that was seen in December 2021 has led the government of UK to pose the
restrictions in order to limit the transmissions. The economy of UK get shrunk at the fast speed
within a period of lockdown. Below mentioned are the major economic effects that were
imposed due to the pandemic-
 The GDP declined by 9.7% in 2020, this is the sheer drop among the records that began
in 1948.
 When first lockdown was imposed, UK GDP was 25% lower in April 2020 that it was
only two months earlier than February.
 The pandemic has therefore affected various sectors such as social, hospitality and
entertainment.
 The decline was not so severe during first lockdown.
 When the continuous lockdown was imposed, it reduced the annual UK GDP by further
1.9%. the impact on the economy was the impose of robust restrictions which was worse
than the actual lockdown policies.
 The implementation of social distancing guidelines affected the service sector in an area
where the proximity matters(McCann and Vorley, 2021).
 The pandemic has therefore affected the self employed individuals more than the
employed and also the small business.
 The economy gets contracted due to the impose of restrictions
 most of the people have become job less and claims were made five to seven times than
the normal rate.
 The GDP report also showcased that services fall down sharply because of the decline of
5.6% in the health spending. The activity in context to test and trace fell almost 70% in
April.
 The energy bills in April hiked by 54% and also the payroll taxes went up unexpectedly.
 The manufacturing industry fall down by 1%, as the report suggest and shortages in
supply was also seen. The construction fell down by .4%
 The scenario of pandemic also showcased that the economy status was the headache for
the bank of England and governor.

2. Explain how an economy can achieve sustainable economic growth and analyse the
different methods of measuring economic growth?
The term sustainable economic growth is the wider term that is defined as rate of growth that is
maintained without creating other important economic problems for the population of emerging
world. It takes into account the human wants and needs but in way that sustains the natural
resources and also the environment of the upcoming generation(Webber and Dymski, 2021). The
economic growth includes the production of economic goods and services and also the services
to satisfy the needs of human. Also the economic growth aspires for sustaining the resources for
future generations. The sustainable economic growth also means the rate at which the growth
should not emphasize any significant pressure on the prices of goods and services and does not
lead to the depletion of natural resources. This includes the consideration of several aspects-
 the environment gets harmed mainly due to the extraction and depletion of human
resources
 An ecosystem is important for the people to live and if destroyed, it would means
destroying ourselves
In economy, if the amount of capital goods get increased that some ways to generate the
economic growth are improvement in the technology, growth of the labour force and increase in
the human capital. There are various methods to measure the economic growth like-
1. Gross domestic product- it measures the economic growth in monetary terms or the
expenditures. Considering an example of the steel industry, where the productivity of the
output needs only the tracking of dollar value all all steel for a particular period. But this
method suffers from the number of statistical problems. In order to show the contribution
of technical and organizational innovation. It has been observed that reason behind
becoming the productive economy is not the movement of dollars around it but the
utilisation of the resources more efficiently. Concluding this, a relationship is to be
maintained between resource inputs and total economic outputs.
Gross national product- it is used to assess the total income of the resident of the country in a
given period of time and its utilisation by the residents of that particular country(Wang and
Zhang, 2020). It calculates the total income which accrue to the population over particular period
of time. It does not consider the income that arise to the non resident of the country. It is only
associated with the measuring of productivity.

REFERENCES
Books and Journals
Lewis, M.A., 2022. Employment and Unemployment: Macro Social Work Perspectives.
In Encyclopedia of Social Work.
Liang, W. and Yang, M., 2019. Urbanization, economic growth and environmental pollution:
Evidence from China. Sustainable Computing: Informatics and Systems, 21, pp.1-9.
McCann, P. and Vorley, T. eds., 2021. Productivity and the Pandemic: Challenges and Insights
from Covid-19. Edward Elgar Publishing.
UKA, A., FEJZA, E. and ISMAJLI, A., 2018. CENTRAL BANK OF KOSOVO IMPACT INTO
ITS ECONOMIC CYCLE. Journal of Academic Research in Economics, 10(1).
Wang, Q. and Zhang, F., 2020. Does increasing investment in research and development
promote economic growth decoupling from carbon emission growth? An empirical
analysis of BRICS countries. Journal of Cleaner Production, 252, p.119853.
Wannapan, S., Chaiboonsri, C. and Sriboonchitta, S., 2018, January. Macro-econometric
forecasting for during periods of economic cycle using bayesian extreme value
optimization algorithm. In International Conference of the Thailand Econometrics
Society (pp. 706-723). Springer, Cham.
Webber, D. and Dymski, G., 2021. How will the effects of Covid-19 on macroeconomic demand
and supply affect firm-level productivity?. In Productivity and the Pandemic (pp. 237-
249). Edward Elgar Publishing.
Кulakovskaya, D., 2022. Social insurance against unemployment: belarusian and international
experience.