Government Use of Macroeconomic Policy to Increase Economic Welfare

This essay discusses how the UK government uses macroeconomic policies such as monetary and fiscal policies to increase economic welfare. It covers the success of the UK government in the last 10 years, challenges faced, and the objectives of macroeconomic policies. The essay also discusses the limitations of these policies and how they impact the economy. The subject is macroeconomics and the course code is not mentioned. The college/university is not mentioned.

Essay

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Government use macroeconomic policy to increase economic welfare.....................................3
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Government plays a vital role for the success of economy, they have taken major steps to
increase welfare of economy. Macroeconomics is concerned with policies made by government
and top authority, issues, challenges and objectives that affect the whole economy. The present
report will be based on macroeconomic policy made by government such as monetary policy and
fiscal policy. The study will provide detailed information about success of UK government from
last 10 years and challenges faced by them. It has been noted that there are various types of
macroeconomics but all of them deal in some wat with how people act and what they do in the
surrounding area. Nowadays, government are taking major steps and initiatives such as increase
the jobs for people, reduce poverty and many more.
Growth of economy may be controlled in such a way that it can increase the economic
stability, control unemployment rates and finance related to international terms and value
indexes. These are the macroeconomic topics that are being addressed when talking about
policies. To conclude, this is a very detailed and deep field of financial planning that have
addressed all the previously listed challenges and problems. In addition to this, it has been noted
that the economic well-being is totally assessed by the additions or surpluses made by customers
and producers both. UK economy’s well-being is determined by knowing about surpluses related
to clients and producer. With the help of excessive demand, one can easily evaluate the influence
changes and market condition and trends. Any drastic change can be known by demand of
particular thing, in the UK, economy development may be controlled in such a way that by
adjusting taxes, inflation, interest rates and spending of government one can know about
macroeconomics.
1. Government use macroeconomic policy to increase economic welfare.
UK is a state where the top authority and government places a strong concentration on
the betterment of society and majorly focus on development and welfare of its residents. In other
words, UK government focus on promotion of resident’s social and economic well-being, which
is called as a welfare state (Loayza and Pennings, 2020). In addition to this, UK government says
that a healthy economy should be in a favour of residents or citizens. A positive and supportive
economy is built on ideals such as equality, equal access to opportunities, fair wealth
distribution, social welfare, providing benefits and social responsibilities towards poor and needy

people. The major, basic and important feature of every welfare state is social insurance and
benefits related to it. The government has taken major steps in order to offer total well-being of
citizen of UK as a whole in terms of allocation of goods and resources and market structure
related to economic welfare (Alesina, 2018). An attempt has been made by them in field of
finance to measure the advantages and disadvantages of making financial reforms so that support
can be provided to society as a whole. This can be done through informing public policies such
as fiscal policy and monetary policy. In today’s era, individual well-being and importance of
various principles, values and moral and welfare ideas are major and hot topic concerns in
economics welfare.
The foundation of welfare economics is the microeconomic utility theory to be applied.
Utility means ability of goods or services to satisfy a requirements and wants of people.
Nowadays, in competitive market where competition is more because of changing needs and
demand laws, a slight change in demand laws the will influence supply of products or service
(Ryan-Collins, 2021).
The major goal of this policies and welfare economy especially of UK, is to provide
benefits and create a positive economic environment in which people may live in harmony and
peace with each other without any issues and without promoting negative environment. years ago

poverty rose sharply in the UK, many residents were left without even the most basic necessities
such as food, shelter and social needs. Small children were not able to get food and not getting
proper education (Alesina, 2018). Many adults were not able to achieve objectives and goals
related to studies, free school, free meals and even jobs. In addition to this, pensions were
available to everyone over the age of 70 years but they need to follow rules and regulation under
legislation. In terms of jobs and insurance act, modification has been done and implemented free
medical care after few years. Now the workers have also given new perks which has provided a
lot of benefits to people. people who were employed was benefited with the national insurance
act and more than 13 million people in the country were supported and even protected by the
legislation related to it.
Since 2010, the government has successfully achieved its goals and provide benefits to
society. They have made spending cuts to save income and amount of money of people. In
addition to this, they have carried out quantitative easing which means they are more focused on
creating lots of money and benefits (Romer and Romer, 2018). While in the year 2011 GDP of
the country expanded by 0.6% and hence it marks a sharp drop in the activity of UK’s economy.
It has been noted in the year 2015 there has been a decline in manufacturing and primary
operations of industries and companies. On the other side of this situation, there has been an
increasing trend in services provided by industries. The primary goal of UK government is to
increase performance and improve productivity level so that the people living in the different
areas of UK can earn more profits and earn double money. UK has achieved a title of one of the
largest economy in the world especially in terms of GDP that is $2.83 trillion as per the survey
taken in the year 2019.
While in the year 2020-2021 the UK has faced a lot of challenges due to COVID-19
pandemic in terms of employment. People were facing jobs issues as they were not able to
satisfy their needs just because of drastic change in the companies. However, companies were
taking initiative to handle such situation but this crisis has developed financial issues for citizen
of the country and still many of them is facing challenges related to it.
UK government policy objectives
In today’s environment, the main aim of the UK government is to maintain price stability
of country, provide full employment to people living the country and focus on economic growth.
The UK’s government has taken major initiatives to fulfil the needs of clients and provide

support in every stage of their life. The primary objective is to achieve and accomplish strong
growth and maintain sustainable development and balanced growth. For achieving this
objectives, the government has focused on maintaining financial stability and price in all the
locations of the UK and other economy field (Romer and Romer, 2018). They have also operated
a range of policy such as monetary and fiscal policy in order to achieve these aims and objectives
and hence, by this one can make judgements on their success and progress.
Monetary policy is one of the typical approach to economics and macroeconomics. In the
UK economy this policy is basically a standard process. Control and economic activities of the
country are greatly impacted by the changing use of technology and innovative ideas. Based on
these measures, the central bank of the country majorly takes decisions on interest rates. Hence,
it is said this bank hopes to make decisions whether to decrease of increase rate of interest
through the implementation of monetary policy (Bournakis and Mallick, 2018). In addition to
this, people won’t be able make decision on to use or to save money as per their requirements if
interest rates are low. Due rise in rates, expenses seem more enticing hence customers won’t be
able to satisfy their needs. However, an increase in interest rates isn’t always enough to spur
development and growth of economy. In today’s business environment debt repayment is a
major concern for many people working in the industry. They make it as their priority, because
they want to satisfy their requirements and make them stable in the market. total expenditure has
increases just because of borrowing rates have fallen down by 0.5% in the UK. Due to lack of
funds, many industries and companies were unable to achieved it, plus, they were unwilling to
lend it out just because of their financial constraints which may lead to different situation. As a
result, establishing credit is next to impossible for them due to this types of scenario (Bournakis
and Mallick, 2018). Hence, it is essential for them to implement monetary policy in order to
stimulate economic development and growth. Certain type of limitations which include decrease
in interest rate must be taken into this consideration while implementation this policy.
While on the other side, fiscal policy aims to increase and boost demand, increase spending
of people and lower down taxes. Just because of this policy, people will have more power to
purchase products or services easily. for instance, if they have more money than they can easily
buy anything at whatever time they want. Due to lower tax rate policy, people nowadays are able
to buy their favourite goods or service without thinking twice. Hence, it is known as customer
buying behaviour and spending power is encouraged by this type of technology and initiation.

(O’Hearn, 2018). With the help of fiscal policy, one can easily understand the concept of how
the federal government work on spending and increase money spending so that people of the
country can stay stress free while purchasing. With the help of this policy, government ensures
well-being and safety of people of nation, and these guidelines help them to keep eye on
changing policies and spending related information. They can have idea about how government
handle spending and manage remaining money. On the limitations side, an expansionary fiscal
plan puts the burden and pressure on the government of UK borrowing sector in order to take up
additional debt. As a result, private sector or companies won’t be able to benefit themselves just
because of this type of indebtedness and can create pressure on them too. Therefore, to deal with
this factors, boosting demand is much needed when there is a decrease in private expenses and
the rate of savings should be increase in order to provide welfare.
As we all know macroeconomic policy is majorly managed in order to provide a stable
economic environment. it is conducive so that country can achieve strong development and
foster sustainable economic growth for the betterment of residents (O’Hearn, 2018). Hence, it is
noted that this policy is concerned with the economic operations as a whole. When talking to the
success of government macroeconomic policies, it has been noted that the major goal of fiscal
policy is to increase spending and reduce unemployment. As a result, poverty can also be
decreased by implementation of fiscal policy made by government. Therefore, the tools would be
a decrease in inflation rate, decrease taxes and interest rate and also increase the spending of

government. With the help of fiscal policy, government has shifted AD curve to the right side as
there is an increasing trend seen in real GDP and decreasing unemployment (Loayza and
Pennings, 2020). Despite this, due to this inflation rate has been caused which needs to be taken
into consideration while understanding about macroeconomic policies. The government has
made policies in such a manner that it can achieve both objectives or goals that is lower rate of
inflation and unemployment. They have generally achieved a lower unemployment and lower
poverty by using both of the policies such as monetary and fiscal. From last 10 years, this
government policy influences microeconomics by implementing inputs and other benefits such
as incentives that can easily foster decisions of individual person and shape their decision
making process. Since, 2010 interventions of government and focus come in the form of tariffs,
rules, regulations, legislations and interest rate.
Both of the policies have similar goals that is to maintain full employment in the country
and to achieve high rate of growth in terms of economy and stabilities both wages and prices. By
doing so, people will be able to live their life without any stress and pressure. For the betterment
of people, the government of UK focus on raising taxes and decreasing spending of government
in this way they reduce inflation rate. Hence, it is said by many economists that monetary policy
is more effective as compared to fiscal for reducing and lowering inflation rate.
As per government, it is essential to achieve the macroeconomic policy targets and this can
only be done by expanding the supply of money and regular flow of cash amount can enhance
the target of policies related to it (Summers, 2018). By doing so, economic growth can be
achieved in feasible way, government use fiscal policy to change in the taxation levels and
spending control.
Note: raising taxation or decreasing spending will not stimulate the economy while on the
other side, if tax has been reduced or spending has been increased then it can easily stimulate the
economic growth and development. With the help of policies of government, the economy can
achieve success in reducing scarcity.
As we have discussed about macroeconomic policy, a government have utilized all or a
combination of all the policies to achieve their goals related to macroeconomic. It includes stable
employment, stability in prices and sustainable growth. Apart from this, due to BREXIT UK’s
economy has faced a lot of positive and negative challenges. As per the vote given by residents
of UK, it has been noted that the decided to leave the EU and take decision that benefits of free

trade weren’t enough to offset the costs of free movement. At that time government has decided
to lowering income taxes and taken several measure on the side of supply and make contribution
to the well-being of economy (Summers, 2018). The protection of economy is totally depended
on the supply side policies because with this one can make direct connection between the growth
in employment opportunities and inflammation of UK government in low tax locations. If the
income tax rate is announced between 20%-30% then it can impact the economic condition and
living standard of UK. By managing this, they would help the citizen of country to reduce their
burden of taxation at a time of economic uncertainty and any crisis. They need to focus on
improving quality of life of people so that employment can be achieved. Due to inflexible nature
of uncertainty and inflexible nature of the business markets, the sector of economy is at high risk.
Hence, investors are enticed to make investment in long term way just because of flexible labour
markets (Loayza and Pennings, 2020). It has been said that during that time, if the market
flexibility cannot be realized due to growth in uncertainty. In addition to this, productivity is also
impacted by growth in uncertainty.
It is essential to understand about the monetary policy as an important role in the financial
sector. In addition to this, objective of inflation rate should be related to the target of keeping the
rate of inflation controlled. Plus, the financial policies of government should be set up in such a
way that they can respond effectively to deal with challenges such as financial crisis and any
kind of uncertainty. The financial sector such as institutions, banks and other needs to make top
priority for authorities like government (Stockhammer, Qazizada and Gechert, 2019). Not only
UK’s government, but every government in the world has its own unique set of difficulties and
uncertainty. They have an impact on the financial health of economy. Inflation rates is assured
by applying strategies such as control of inflation and policies like stabilization price. However,
keeping inflation rate under control is critical for overall prosperity of economy and health of
nation.
CONCLUSION
To conclude, macroeconomic policies is used by the UK government in order to provide
better life to citizen. They focus on improving economic well-being of residents, where people
can live freely. By evaluating the report, it has been concluded that government have focused on
major objectives employment and inflation. For instance, macroeconomic is concerned with how
the economy functions behave in relation to each other and how all the people living in the

economy behave. Both of the concepts needs to be taken into consideration. Macroeconomic
topic covered hot chapters like GDP, unemployment rate, economic condition such as inflation
and the various goods and services price. Uncertainty and diverse range of difficulties are being
taken into account in this field of work. However, the UK’s government macroeconomic policies
have achieved both lower levels of unemployment and lower rate of inflation over last 10 years.
Macroeconomics is concerned with policies made by government and top authority, issues,
challenges and objectives that affect and impact the whole economy and its functions. As we all
know UK is a powerful country and have economic stability in the whole world. In last few
years, the country has faced many types of uncertainty such as BREXIT, pandemic and financial
crisis due to major decision taken by government. In recent years, there is an increasing trend in
welfare spending and it has been a major source of societal and political angst which must be
taken into consideration. For example- macroeconomic welfare of the country UK contributed an
amount over the past 10 years via all the issues and difficulties mentioned above in the report
such as reform policies and regulation related to welfare and liberal policies. The government
has also focused on improving the standard of living of people and provide them welfare
programs and concentrate on GDP control. The country’s sustainable growth and development is
assessed via social welfare metrics which can give idea about the stability and condition. To deal
with difficulties government has taken support of monetary and fiscal policy and some of the
major challenges they had to deal with have been resolved immediately.

REFERENCES
Books and Journals
Alesina, A., 2018. Political models of macroeconomic policy and fiscal reforms (pp. 44-58).
Routledge.
Bournakis, I. and Mallick, S., 2018. TFP estimation at firm level: The fiscal aspect of
productivity convergence in the UK. Economic Modelling. 70. pp.579-590.
Clift, B., 2022. Technocratic economic governance and the politics of UK fiscal rules. British
Politics, pp.1-25.
Fornaro, L. and Wolf, M., 2020. Covid-19 coronavirus and macroeconomic policy.
Loayza, N. and Pennings, S. M., 2020. Macroeconomic policy in the time of COVID-19: A
primer for developing countries. World Bank Research and Policy Briefs, (147291).
MCMAHON, M., THE BALANCING ACT FOR FISCAL POLICY. Which way now?
Economic policy after a decade of upheaval, p.143.
O’Hearn, D., 2018. Macroeconomic policy in the Celtic Tiger: a critical reassessment. In The
end of Irish history? (pp. 34-55). Manchester University Press.
Romer, C. D. and Romer, D. H., 2018. Phillips lecture–why some times are different:
Macroeconomic policy and the aftermath of financial crises. Economica. 85(337). pp.1-40.
Ryan-Collins, J., 2021. Breaking the housing–finance cycle: Macroeconomic policy reforms for
more affordable homes. Environment and Planning A: Economy and Space. 53(3). pp.480-
502.
Stockhammer, E., Qazizada, W. and Gechert, S., 2019. Demand effects of fiscal policy since
2008. Review of Keynesian Economics. 7(1). pp.57-74.
Summers, L. H., 2018. Secular stagnation and macroeconomic policy. IMF Economic
Review. 66(2). pp.226-250.