Achieving Sustainable Economic Growth and Measuring Economic Growth

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. Explain the effectiveness of the fiscal policy in economics....................................................3
4. Identify and briefly explain the main effects of decreasing interest rate on the economy......4
8. Briefly explain the different types of unemployment and the different methods used to
measure them...............................................................................................................................4
9. Identify and describe the four stages of the ‘Economic Cycle’...............................................5
SECTION B.....................................................................................................................................6
Q. 1. Discussing and explaining the macroeconomic effects ‘Covid-19 lockdown’ had on the
UK economy:...............................................................................................................................6
Q.3 Explain how an economy can achieve sustainable economic growth and analyse the
different methods of measuring economic growth?.....................................................................9
REFERENCES..............................................................................................................................12

SECTION A
1. Briefly describe and explain how the Monetary Policy Committee (MPC) impact the inflation
rate?
The Monetary Policy Committee (MPC) is generally made up of the 9 members that is
the Governor, there must be three Deputy Governors for the Financial Stability, Monetary Policy
and also Markets and Banking, the Chief Economist as well as four external members
particularly appointed directly by Chancellor. The Monetary Policy Committee is generally a
committee of the bank of England, which particular meets for the three and a half days, and
eight times a year, particularly to decide the formal rate in the United Kingdom (Martin and
Milas, 2018). MPC basically decides what are the monetary policy actin that to be taken. The
Monetary Policy Committee before make any decision or decide what action to be taken, they
generally hold the various meeting to look how an economic is mainly working. One of the bank
of England are responsible, as the central bank of United Kingdom. Inflation is occurs when the
price rise in the economy, decrease the purchasing power of the money. The three main causes
of the inflation are demand pull inflation, build in inflation and cost push inflation. The
Monetary Policy Committee is determines the policy that is repo rate that is required or need to
be achieved the inflation target. Monetary policy generally affects as how many prices are
particular rising is called rate of inflation. If the central bank increase short term interest rates
then it will increase inflation and economy is mostly overheating and lower, basically it is in
presence of the economic slack.
2. Explain the effectiveness of the fiscal policy in economics
Fiscal policy objective is to make sure the sustainable public finance, value for money
particular for taxpayer, economic growth as well as stability, intergenerational fairness and
strong balance sheet. In other words, the fiscal policy is generally use of the government
spending as well as taxation particular to influence the economy. So the government usually use
the fiscal policy to not only promote the strong growth but also for sustainable growth and also
reduce poverty. The fiscal policy Is mainly considers with good range of the literature but
effectiveness of this policy is generally seen its impact on growth of economy as well as long
term sustainable development (Romer, 2021.). The fiscal policy can used for influence both
contraction and expansion of the GDP thus it measures the economic growth. It is a tool that is
used by the government mainly to influence economy. So to stimulate the growth, they can make

taxes low as well as spending increase. So by simply adjusting the level of tax revenue and
spending the government affect the outcomes of economy by either decreasing or increasing the
economic activity. The main objective of fiscal policy is to make full employment in the country.
It generally reduces the poverty in the country and also if the employment increase then it will
give positive impact on the economic growth, which is good. So the fiscal policy play an
important role in economic growth.
4. Identify and briefly explain the main effects of decreasing interest rate on the economy
Generally high interest rate attract foreign investment and increase demand for as well as
value of home country currency. Whereas low interest rates means to unattractive for the
investments from the foreign and also decrease current relative value. The main effects of
decreasing interest rate on the economy is it generally encourage business, government and
customers to borrow as well as spend money freely (Ha, Kose, and Ohnsorge eds., 2019). This
will generally result in the higher demand by the customers as well as investments by the
corporations, even leading higher GDP growth as well as job creation. But low interest rate can
also lead to issue or problem like liquidity traps and inflation which generally undermine
effectiveness of low rates. So decrease in interest rate generally causes increase in the quantity
demanded. It is also depended on the inflation, if there is too low inflation then the government
usually decrease the interest rates for stimulate economy. Even, if the interest rate is low so the
customers think that they have to pay less interest, so they spend more money that create effect
of the increasing more spending throughout the economy. It generally encourages customers to
make big purchase such as cars and house which will improve economy. Even the businesses
also get benefits such as it encourage them to male their large equipment purchase because low
cost of the borrowing. So this also creates situation when the productivity and output increase.
8. Briefly explain the different types of unemployment and the different methods used to
measure them.
There are many types of unemployment such as follows:
Frictional unemployment:
This is generally occurs when the individual are between the jobs. It can also called search
unemployment. It will also occur when the individual are generally switching between the jobs
that is because they have made redundant or even looking for new job (Carrere, Grujovic, and
Robert-Nicoud, 2020).