Importance of Fiscal and Monetary Policy in UK's Economic Growth

This report examines the role and importance of fiscal and monetary policy in the economic growth of the UK. It discusses how fiscal policy promotes macroeconomic stability and how monetary policy influences consumer spending. The report also highlights the significance of automatic fiscal stabilizers and the impact of interest rates on household spending.

GLOBAL BUSINESS
ENVIRONMENT
PORTFOLIO

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION ...............................................................................................................................2

INTRODUCTION
Emerging economies are markets which are moving in direction of becoming developed
markets and are more engage with world market as it is growing. Nations categorised as
emerging economies have characteristics of developed market and its progress it becomes
integrated global economy (Destek and Aslan, 2017). It is important because it has impact on
global trade as they are are growing market with several opportunities. As they grow faster than
developed countries thus investing in such market is beneficial for trade and global economies.
China was known as emerging economy few decades ago with GDP of £305.35 billion in 1980
and recent GDP of China is £13.41 trillion. This shows that emerging markets are tend to
become strongest economy in world (Emerging markets: Statistical Profile, 2019).
MAIN BODY
There has been successful inflow of Foreign Direct Investment (FDI) in China as it has
received 20% of all investment in last 10 years. FDI has played one of the important role in
economic development and export. With the helps of technology China is earning 22% profits
with just 10% labour which indicates higher productivity. Different policies of FDI like
liberalisation has helped China to grow its GDP with the help of many multinational corporations
are are investing in the country (Foreign Direct Investment – the China story. 2020).
There are some countries which are appropriate for FDI and provide better returns like
Singapore is a country which lacks in natural resources and thus one of best region for business.
It is one of the important financial centres in the world for Asian countries and thus have
developed as gateway for favourable region for FDI. Another country is Ireland which offers
positive tax system for multinational investment and other resources. Low cost labour force
which are educated, fluent in English. It also provide supportive environment for innovation and
funding as well. Thus this makes Ireland favourable for FDI with higher returns for multinational
companies (Top Countries For Foreign Direct Investment, 2020).
The two major companies that have tremendous growth in China is General Motors (GM)
and Coca Cola which entered in market and their share is growing till now. GM entered into
China's market in 1995 and had joint venture with company. China became world's biggest
vehicle market and gave growth to auto-mobile sector and GM (The Secret to GM’s Success in
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China: “We Listened”, 2019). Another multinational company is Coca Cola which entered
China's market in 1979 and since then has established 45 manufacturing units with more than
51,000 employees. Country has become third largest market for company and market size is
£83.7 billion in 2017 and company will introduce new 60 products (Coca-Cola embarks on
'healthy' growth route, 2018).
CONCLUSION
Emerging economies is the market which has potential for growth and development and
able to provide return on investment. Such markets are importation for global trade and market
as it provide several opportunities for multinational companies to invest and have growth in
international market. Foreign Direct Investment provides growth in GDP which leads to future
development of country.
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REFERENCES
Online
Coca-Cola embarks on 'healthy' growth route. 2018. [Online]. Available through:
https://www.chinadaily.com.cn/a/201808/30/WS5b87454ea310add14f388906.html
Emerging markets: Statistical Profile. 2019. [Online]. Available through:
<https://www.nationmaster.com/country-info/groups/Emerging-markets>
Foreign Direct Investment – the China story. 2020. [Online]. Available through:
<https://www.worldbank.org/en/news/feature/2010/07/16/foreign-direct-investment-
china-story>
The Secret to GM’s Success in China: “We Listened”. 2019. [Online]. Available through:
<https://www.uschina.org/member-profiles/secret-gm%E2%80%99s-success-china-
%E2%80%9Cwe-listened%E2%80%9D>
Top Countries For Foreign Direct Investment. 2020. [Online]. Available through:
<https://www.gfmag.com/magazine/april-2018/alchemy-fdi>
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Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
CONCLUSION................................................................................................................................5
4

INTRODUCTION
The UK government has proposed new regulations for companies of social media which
will result in blockage of sites, prosecution of upper level management and fines. These are
applied in context when company will not be able to protect their users and regulatory will be
form for police online platforms which will include penalties (Fuchs, 2017). It will be funded by
industry as this is one of their corporate social responsibility to protect users across the globe but
they are lacking in it. It is important as this regulations will cover online material which includes
harassment, sale of illegal products, trolling, cyber-bullying, fake news, terrorist content, etc.
(UK proposes sweeping new social media law, 2019)
MAIN BODY
Major social media companies like Facebook, Twitter, Google, SNAP, etc. which are
responsible for transforming the sphere of public. All social platforms provide opportunities to
connect users around globe but are also attacked by misinformation and encourage different type
of illegal activities (Hjorth and Hinton, 2019). But now there are regulations which will regulate
activities on these platforms and upper level management will be held accountable. The new
proposed law for social media will have different impact on companies and their operations.
Some of them are as follows:
Transparency to government: Till now social media companies work with less scrutiny but
after this law it will be more transparent to government. So that state have access to their systems
and data in order to provide benefit to society (Einwiller and Steilen, 2015). Police online
platforms will create mechanisms and framework so that in-depth research can be carried out.
This is one of major impact on social media companies as they have to be transparent in their
processes and operations and share data with government so that unjust activities can be
regulated.
Accountability: Before the law there were no identity which can be held responsible for misuse
of these social media platforms and thus misinformation were widely spread. After this new law
of UK government there are fines, site block and even senior management of the company will
be held liable for such activities (Milosevic and Livingstone, 2017). This is biggest change by
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this new regulation which has direct impact on the companies as senior management will be held
liable in case of not protecting their users across the globe.
Responsibility: It is duty of social media companies that they invest in regulatory that are
framed to protect users. Thus they new regulations are also funded by industry so that it impacts
their operations and they become responsible in their operations. This will have impact on profits
of company and thus have major impact. Funding such regulatory will make them for
responsible towards corporate social responsibility and thus they will put more efforts to protect
their users (Regulate social media, 2018).
CONCLUSION
Social media are best platforms for people to stay connected and gather information
about activities which are going on across globe. Such sites are also used to spread bad and
misleading information which provide harm to users. Thus to avoid this government has
purposed new regulations for social media companies so that they will be held liable for their
operations and protecting users.
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REFERENCES
Books and Journals
Einwiller, S. A. and Steilen, S., 2015. Handling complaints on social network sites–An analysis
of complaints and complaint responses on Facebook and Twitter pages of large US
companies. Public Relations Review. 41(2). pp.195-204.
Hjorth, L. and Hinton, S., 2019. Understanding social media. SAGE Publications Limited.
Milosevic, T. and Livingstone, S., 2017. Protecting children online?: Cyberbullying policies of
social media companies. MIT Press.
Online
Regulate social media. 2018. [Online]. Available through:
<https://www.regulatesocialmedia.org/>
UK proposes sweeping new social media law. 2019. [Online]. Available through:
<https://www.forbes.com/sites/kateoflahertyuk/2020/01/02/apple-ios-13s-security-and-
privacy-features-risk-unexpected-consequences/#dec690a3b210>
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Contents
INTRODUCTION...........................................................................................................................7
MAIN BODY...................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9
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INTRODUCTION
Fiscal policy is term which is used to define level and allocation of government expenses
and taxes so that economy can be stabilise. Main objective of this policy is to achieve economic
growth and maintain employment rate (Hansen, 2018). Monetary policy uses interest rate and
other financial tools so that consumer spending can be influence and inflation is kept low (UK
Monetary Policy, 2019). In this report UK and its fiscal and monetary policy will be examine
along with its importance in growth of economy.
MAIN BODY
There are different role played by fiscal and monetary policy in economic growth of UK
and have great importance, are as follows:
Importance of Fiscal Policy: It can promote macro-economic stability with the help of
sustainable aggregate demand and income of private sector during recession. It also regulates
economic activity during growth in economy so that equilibrium can be maintained. One of most
important role of fiscal policy in operating economic growth is “automatic fiscal stabilisers”.
This operates to impact fluctuations in economy and on the government budget and thus long -
term decisions are framed by policy makers (Braun, 2018). There are number of advantages of
Automatic stabilisers such as Firstly, they are effective in responding on time and in
unpredictable manner. This also helps economic growth agents to forecast correct and adequate
expectations so that their confidence are enhanced. Secondly, they are capable to react with
intensity which is applicable to size of deviation that are occurring in economic conditions from
set standards and budget that were approved. Thirdly, automatic stabilisers operate have ability
to react in symmetrically over economic cycle, medium overheating in time span of growth and
supports economic activity during recession without affecting budgetary positions framed by
fiscal policy (The role of fiscal and monetary policies in the stabilisation of the economic cycle,
2020).
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Importance of Monetary Policy: interest rates which is one of tool of this policy have direct
and powerful effect on spending of household this can be understood by that the interest rate is
elastic in context of UK consumers (Jawadi, Mallick and Sousa, 2016). This policy in UK is
framed by The Bank of England’s Committee is which is independent from UK government and
make decisions free from any type of political interference. Changes in interest rates are
modified on monthly basis and in accordance with changes in fiscal policy as modifications in
latter policy can be made frequently (Monetary policy. 2019).
CONCLUSION
Fiscal policy is related with establishing economy with government expenses and taxes
paid by citizens so that economic growth can be enhanced. On the other hand, monetary policy is
concern with regulating interest rate so that inflation and deflation can be managed so that
growth can be enhanced.
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REFERENCES
Books and Journals
Braun, D., 2018. Fiscal policies in federal states. Routledge.
Destek, M. A. and Aslan, A., 2017. Renewable and non-renewable energy consumption and
economic growth in emerging economies: Evidence from bootstrap panel
causality. Renewable Energy. 111. pp.757-763.
Fuchs, C., 2017. Social media: A critical introduction. Sage.
Hansen, A. H., 2018. Monetary theory and fiscal policy. Pickle Partners Publishing.
Jawadi, F., Mallick, S. K. and Sousa, R. M., 2016. Fiscal and monetary policies in the BRICS: A
panel VAR approach. Economic Modelling. 58. pp.535-542.
Online
Monetary policy. 2019. [Online]. Available through:
<https://www.economicsonline.co.uk/Global_economics/Monetary_policy.html>
The role of fiscal and monetary policies in the stabilisation of the economic cycle. 2020.
[Online]. Available through:
<https://www.ecb.europa.eu/press/key/date/2005/html/sp051114.en.html>
UK Monetary Policy. 2019. [Online]. Available through:
<https://www.economicshelp.org/macroeconomics/monetary-policy/>
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