UK Government's Response to Rise of Inflation: A Study

Global Business Environment (CW1)
Document Title
The UK Government Response to the Rise of Inflation within the Economy
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Part 1: Inflation and its socio-economic impacts-
INTRODUCTION
Inflation is the rate of rose in price over a period of time. It increases the overall cost
of living in the country (Shelupakhin and Kuznetsov, 2021). There are several reasons behind
the rise in price that must be monitored. The UK government take necessary actions that
helps them to reduce the inflation such as Interest rates, changes in tax regime, lower
government expenditure etc. There are various problems in the national and international
market that take place due to inflation. The nature of business environment is dynamic and it
keeps on changing. There are various external factors that change and impact the working of
businesses
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Part 2: UK Government actions
What is the government target of inflation rate .Consider the reasons for high inflation in
the UK. Choose ONE of the following government policies/practices/actions to reduce
the inflation rate according to the set target.
One of the important measure taken is rise the interest rate. Due to inflation the rates
of products and services becomes expensive (Morrison, 2020). . The people are not able to
make purchases with the money them have. So the individuals go to bank and borrow money
and the government takes action on enhancing the rate of interest. This is a cycle due to
which the borrowing capacity of the citizens of UK reduces. It is seen that people are left
with less money to spent and make purchases. There will be less flow of money in the nation.
This leads the prices to fall and inflation also comes down. The higher interest rate reduces
the buying power of people and this is problematic situation for the citizens.
The rising interest rates majorly helps to control the rate of inflation. The changes in
monetary policy help the citizens to manage their working and carry on the work in suitable
manner (Andrade and et.al., 2018). The managed inflation rate motivates the people to start
new business and carry on new work. There is good flow of money in the economy and stable
position. This reduces the risk in economy as well. The government is also able to manage
their debt and there is debt reduction. It is necessary to provide better standards to the people
as the cost of living is normalised. The small businesses are also able to carry on their
operations. It enhances the opportunities for the people to carry on new outlet and get
successful as the prices are normal and people have ability to consume them.