BMP4003 Business Environment Exam 2021/22: Policy & Global Trade

This document contains the solutions to a Business Environment exam, covering topics such as the impact of the Monetary Policy Committee on inflation, the effectiveness of fiscal policy, government strategies for promoting economic growth, the effects of decreasing interest rates, and the governme...Read More

BSC (Hons) BUSINESS MANAGEMENT
SEMESTER 2, EXAMINATION 2021/22
BUSINESS ENVIRONMENT
MODULE NO: BMP4003
Exam Paper Release Date & Time: Saturday 17 September 2022 at 10:00am
Submission Cut-off Date & Time: Monday 19 September 2022 at 10:00am
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ANSWER BOOKLET
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Section A
1. Briefly describe and explain how the Monetary Policy Committee impact the
inflation rate.
In any country, the role of monetary policy committee is related with the decision-
making process of deciding the interest rate. The formation of this organisation or team
is conducted by the central level government of the country and controlled by the
governor who is appointed in the central bank of the nation. The main activity for which
this committee is responsible is to work on setting the rate which will support in
occurrence of different situation in the nation. The term repo rate which is a significant
part of the central banking system of the nation is also developed by the monetary
policy committee which is necessary for attainment of the goal in respect to the inflation
(Myovella, Karacuka, and Haucap, 2020). There is a target which is presented by
following some banking regulations and guidelines which helps in maintaining the
monetary aspects in the economy, along with accomplishing the aim of inflation. This
committee is also think for the advantages and benefits of the common people and in
this way they set up the inflation rate at such level where it does not influence the rate
of the goods and services. If there is some kind of rise in the value of the products due
to the changes in the inflation rate then it will become very difficult for the people to
purchase all such things. Monetary policy committee is that branch of the nations
economy who is liable to regulate the impact of inflation rate in the most positive
manner.
2. Explain the effectiveness of the fiscal policy in economics.
Fiscal policy is that instrument in the economy which has the compete possession
over the total number of outputs produced in a country. In this all the expenditure and
taxation framework of the government altogether affects the economy, whenever
government takes decision regarding purchase of any goods and services, types of
payment methods use by them, amount of spent by them (Malecki, 2018). Another
major role of fiscal policy that it helps in identifying the effectiveness of government
budget and how it can be useful for the general public. It also has the capability to
create some efficient changes in the overall or aggregated demand of the country.
Fiscal policy is also supportive tool for the period of recession as it can works in
increasing the demand of the product and services in the nation.
3. What can government do to promote economic growth? Use examples to
illustrate your point.
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Economic growth of the country completely depends on the different innovative and
profitable actions of the government. Installing numerous policies to ensure the
development and analysing the current trends to bring the best for the economy of the
country is the only objective for which government bodies works in the nation. To
support this process in the long run, there is one suitable way on which government
can concentrate, this is about the bringing the coordination or equilibrium among the
demands and supplies of the products in the nation. There are four major components
which are necessary for achieving the growth in the nation’s economy and these are
listed below-
 Land- It is the most valuable part of the nation’s assets in different ways, as it
offers several vital minerals and resources. On the other hand, it is enough to
depict the monetary value of any person or the region. By giving the right safety
and making up of guidelines for the utilisation of this will help the government in
the economic growth.
 Labour- Proper allocation of resources in the productive way is only possible
when there is enough amount of labour for the work. In addition to this, it is
necessary to pay the suitable wages to them, in order to appreciate and
encourage them for their jobs and performance (Hansen, 2018).
 Capital- To establish a business or running any organisation at central or local
level it is important for the government that they must have the enough amount
of funds, which are also termed as capital.
 Entrepreneurship- It is the framework which helps in generating the new
business ideas or start ups and motivates the youth to work in the betterment of
the country’s economic structure. It supports in experiencing the better changes
such as increments in the new job opportunities which automatically reduces the
situation of unemployment and poverty in the nation.
4. Identify and briefly explain the main effects of decreasing interest rate on the
economy.
Dropping down the rate of interest can result in different situation such people are
less concerned about the savings; this is because now they will get the minimal return
on the amount which is being deposited by them in the bank. And the positive side of
the reduced interest rate is that people will borrow money in very cheaper way, this will
result in the more investment activity and will rise the expenses in the economy
(Goodhart, 2022). It will also influence the monthly instalments of the mortgage and
provide the opportunity to the people to spent more on the shopping or consumer
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products. And it is because they may experience a rise in their daily disposable
income. It will also allow the consumer to move towards the assets such house and
valuable property. This will result in mounting of the value for such assets. So, it has
been noted that it is not mandatory that decreased rate of interest always have adverse
effect, it could be beneficial for some people, just like mentioned above. But it is the
responsibility of the government to look out on such situation in the country to opt the
better growth in the overall world.
5. To what extent can the government improve economic situation by changing
the interest rate?
By analysing the situation of the country, government is the one who can utilise the rate
of interest in the proper way to develop the economic situation. And for this government
can focus on maintaining the interest rate at the high level in some situation. This will
support the people to save their income and earn extra value on this saving in the form of
interest. But on the other side, providing less interest to those who wants to start their own
business will be right (Cox, and McCubbins, 2019). So, such type of condition could create
confusion for the government and to deal with these new rules and regulation could be
formed. These interests are the main source through which government can work on
controlling the inflation and deflation in the nation. The major emphasis should be on the
short- term interest rate which is basically decided by the central bank of the country itself.
While long term interest rate support in handling other major money related situation in the
nation. If the government succeed in establishing the good combination among these rates
will result in prosperity of the economy.
Section B
1. Discuss and explain the macroeconomic effects ‘Covid-19 lockdown’ has had
on the UK economy.
COVID has created so many changes in the functioning of the nation, as the country
had experienced mass lockdown during this period. It has almost stopped every other
nation to operate their economic activity, in order to support the growth of the nation.
Closure of business industry and other organisation which are the continuous source for
the growth and development of the country was no more in very good phase. And these
were the only medium of good economy as they contribute in the betterment by ensuring
the good amount of profit and revenue for their venture. The buying behaviour of the
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customers has been changes as they were focusing on getting things at mass level which
could be related to their regular consuming items. Almost every country located in different
part of the world is being affected by the pandemic as it shows such circumstances which
is quite tough to handle. Talking about the economy of United Kingdom, then there is a
severe destruction which has been faced by the country. Some of the data to show the
impact of pandemic over the country is that, after 1948, it was the very first time when the
country observed the reduction in the Gross Domestic Product of the country with a rate of
around 9.7%. In beginning of this pandemic, the overall GDP of United Kingdom is very
good, but in the month of April a sudden decline has been noticed which was nearly 25%.
Not only this, it has also adversely affected the distinct industrial sector either it is related
to the corporate sector or the tourism or hospitality sector of the nation (Amoaning, and
Ahiakpor, 2022). This has phase want not that much effective during first lockdown, but
gradually it starts becoming poor and worse. With the occurrence of lockdown on the
continuous basis has develop this drastic change in the overall GDP of the nation that it
has drop down by 1.9% almost every year. Some other factors like imposition of restriction
in conducting the business activity and least purchasing from the customers sides has
caused all these non- avoidances change in the country. This global pandemic situation
has reach to the life of general, means wide range of population in United Kingdom were
job less during this period. Due to this it was getting tough for them to survive as they did
not have anything to eat or stay. It has reduced operational areas of the service sector too.
Now, country is dealing to overcome all these negative effect of global pandemic by
introducing new business programs and providing the good work opportunities to those
people who has lost their job in the COVID period. Slowly but steady government of United
Kingdom will able to maintain the desired balance in the economy of the nation (Thomas,
and Bywaters, 2021).
2. UK officially left the EU as of 31st December 2020 to ‘trade internationally’.
Discuss the impact upon consumers and businesses of trading
internationally.
With the expansion of the business activity in the overseas market will help in exploring
the new market where the company can generate good profit. International trading such as
export or import will also give the chance through which a domestic business will get to
know about the current emerging trends in the countries which are locating worldwide. It
will also help in offering the such suitable price to them with effective quality of the product
that surely advantageous for the success of the company. In the perspective of business
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organisation then international trading provide the information regarding the existing
competitors in the market and with that it will become easy to formulate such planning
which will help in attaining the competitive advantage in the overseas market (Adhikari,
and Bisi, 2020). But companies must be aware about the policies and framework which
are prevailing in the international market and helps in governing the activities of all
business organisation which are trying to settle down in the global market. It will allow
them to get the knowledge about the new tactics and work environment that will stimulate
the growth of the business firm in the global as well as international market with the aim to
achieve the desired competitive advantage. Trading at international is also beneficial for
the consumers as they will get new products and services in very reasonable prices as
compare to the business industry which are running in their own nation. In this, consumers
will get the substitute for all those domestic products which are not afforded by them due
to certain reasons which could be associated with pricing or the quality.
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Reference List
Adhikari, A. and Bisi, A., 2020. Collaboration, bargaining, and fairness concern for a green
apparel supply chain: an emerging economy perspective. Transportation Research
Part E: Logistics and Transportation Review, 135, p.101863.
Amoaning, F. and Ahiakpor, F., 2022. Monetary policy, financial sector and economic
growth in Ghana: estimating threshold effect. African Journal of Economic and
Management Studies, (ahead-of-print).
Cox, G.W. and McCubbins, M.D., 2019. Divided control of fiscal policy. In The politics of
divided government (pp. 155-175). Routledge.
Goodhart, C.A.E., 2022. How did the first Monetary Policy Committee members pursue
their mandate?. Economics Observatory.
Hansen, A.H., 2018. Monetary theory and fiscal policy. Pickle Partners Publishing.
Malecki, E.J., 2018. Entrepreneurs, networks, and economic development: A review of
recent research. Reflections and extensions on key papers of the first twenty-five
years of advances.
Myovella, G., Karacuka, M. and Haucap, J., 2020. Digitalization and economic growth: A
comparative analysis of Sub-Saharan Africa and OECD
economies. Telecommunications Policy, 44(2), p.101856.
Thomas, D.G. and Bywaters, D.S., 2021. The Effect of the Coronavirus Crisis on the
Creators of Inside Money and the Real Economy. In The Creators of Inside
Money (pp. 195-210). Palgrave Macmillan, Cham.
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