Policies of UK in Country and Measure of Government during Different Economic Situations

ECONOMICS FOR
BUSINESS

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
PART 1............................................................................................................................................3
PART 2............................................................................................................................................4
CONCLUSION................................................................................................................................6
REFRENCE.....................................................................................................................................7

INTRODUCTION
The essay shows the policies of UK in country and measure of government during
different situation in economy. The major focus in this essay would be two parts. The forest part
of essay shows the Credit creation theory of banking and quantity theory of credit and their
factor that affect the future banking crises (Gabor, 2020). The second part of essay will shows
about the Interest rate that is decline from 5.75% to 0.5% by Bank of England and various
theories to improve economic condition in country.
MAIN BODY
PART 1
The Economic condition of UK is not much strong after the recession that hit economic so bad
that are take major of time to recover losses. The UK economic is very dynamic and changes
with high rates in inflations and recession too in country. Bank of England is using certain
theories that help them to working and losses from consumers (ISMAIL, 2020). The Credit
creation theory and quantity creation theory. The Credit creation theory states that, individual
bank can create money while bank do not solely provide their deposits that is being provided to
bank. In spite of this, bank deposits as a significance of bank lending. The actual act had created
with bank deposited when there is any loan agreement is pass or overdraft facilities is provided
to any customer. The bank make deposited to their account and provide with finds to market to
enhance the market purchasing power.
On the hand, quantity theory of credit shows at a time of increase in supply as
importance of new credit money creation by each banks exceed the country’s GDP. This
transactions are done mostly in inflation condition. This theory is applied with same line of
sector of GDP for lending money. For example, Bank lending transaction will depend on the
purpose of lending. It means lending is depend on consumers credit that enhance demand and
results in increase in consumers price inflation as an outcome of expanding aggregate demand
comparative with the aggregate supply.
Through this theory, bank of England help economy to get funds in market that increase
the spending power and more investment are made in country. The government had taken
various initiate that increase money spending form consumers in market to recover economy
from recession. The government of UK is working to save economy as well to Banks of country
by creating different rules and regulation for them that help to work more and provide with high
loans to consumers (Gadimaliyev, 2020). The government is providing with programs that leads
increase in incomes of consumers that help them to spend their money in market to increase the
economy of country. However, Banks are always in danger whenever economic condition effect
in country. The future of bank can be impacted with change in market condition. There is high
chances of consumer’s debts to repay loan to bank as market condition are not improved