Macroeconomics and Market Structures: A Study of UK's Monetary and Fiscal Policies

Business Environment

TABLE OF CONTENTS
Section A..........................................................................................................................................3
Section B..........................................................................................................................................4
REFERENCES................................................................................................................................8

Section A
1
The monetary policy committee of UK is responsible for setting up of standard rate for
interest in the country. The committee is consisting of nine members which includes The
Governor, Deputy Governors, Chief Economist if UK, Financial stability and Banking &
Markets, and also the four members that are external whom Chancellor appoints. Inflation is
controlled by the policies of the committee, the most common policy is known as contractionary
monetary policy (Mitchell, Wray and Watts, 2019). Such a policy aims at reduction of money
supply in the economy of UK, by the way of offering bonds into the market at lowered prices.
Further the interest rates are increased to curb the amount of money that is borrowed by the
people in the economy. Hence, by doing so the money consumption of people falls which is
related with the slowing of inflation in the economy.
2
The term fiscal policy means using the expenditures and tax policies by the government
to impact the macroeconomic conditions of UK. The elements that are included in the
macroeconomic conditions namely are aggregate, inflation, employment, & growth of economy.
During the situation of recession in the economy the government lowers down the rate of taxes
or increase its spending with the aim of encouragement to the demand in the economy and
development of economic activity (Hommes, 2021). In an alternate situation of inflation
government rises the tax rates or cut its expenditure for controlling the situation of economy.
This is the effectiveness of fiscal policy of government in economics.
3
The British Government has been successful in maintaining good relations in the areas of
education, healthcare, welfare along with the promotion of growth of the economy. For example
to promote the economic growth after the world war II completion the government was sure that
the US role in the economy of Britain will be acting as a great protector. This though of welfare
state where the needs of the people are mainly seen by the government appealed many. The plan
was followed for decades after which the need to lay more importance on the economic growth
of the state highlighted (Eichenbaum, Rebelo and Trabandt, 2021). After this the government
shifted to the privatization that helped in the development of the economy to a great extent. The