Business Environment BMP4003: Economic Cycles, Policies, Covid-19

This document provides solutions to a Business Environment exam (BMP4003), focusing on key economic concepts and their application to the UK economy. It covers economic cycles, including expansion, peak, contraction, and trough, and discusses the circular flow of income. The solutions also address unemployment, exploring measurement methods and types such as demand deficit, frictional, structural, and voluntary unemployment. Supply-side policies aimed at reducing unemployment are examined, along with the role of the Monetary Policy Committee in managing inflation. Furthermore, the document analyzes the impact of the Covid-19 lockdown on the UK economy, focusing on the labor market, financial well-being, and trade. Finally, it discusses sustainable economic growth strategies, including investing in people, building economic foundations, and growing businesses. Desklib offers a platform for students to access this and many other solved assignments.

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
All the pages of the answer booklet should be submitted including blank ones.
Please type your answers in the spaces provided.
Insert additional pages where required.
Student Name
ID Number
Section A
[There are 10 ‘short answer’ questions, you need to answer only 5 of them. You can
choose any 5 questions out of these 10 questions. All questions are worth equal marks
(10x5=50 marks). For each question, use separate heading such as “Answer to the
Question no. 1” or “Answer to the Question no. 2” etc.]
Start Writing your answers here
Answer of question no. 9
The economic cycle can be described as the business cycle which is of the fluctuating
stage of the economy based on the market. It is a term that is used for purpose of
describing the set of products as well as consumption activities used for purpose of
identifying of ways in which resources are allocated. There are four stages of economic
cycles including the peak, contraction, peak and trough. Explanations of these stage are
mentioned below:

 expansion stage: The expansion stage is one the initial stage of the economic cycle
in which the economy is getting high growth and also there is a low-interest rate that
will be increased with the maturity of the expansion stage (Kutsygina and et. al.,
2018). In this stage, the production of the economy also increases and the rate of
inflation is also increased.
 Peak stage: When the growth rate of the economy reaches to its peak, then the
economy reaches to peak stage in the economic cycle. It can be characterized with
the high rate of inflation.
 Contraction phase: It is the stage in which correction is made in the which growth of
the of economy is also get slow, rate of unemployment rises and also inflation rates
started to decrease. This decrease in growth is continued till the economy does not
teach to trough stage.
 Trough stage: It is one that is consisting a lower level of the economy from that a
person can enter into the expansionary phase.
Answer of question no. 10
The circular flow of income is one of the economic model which is reflecting ways in which
goods, money and services are moving among different sectors of the economic system.
The flow of money which is circulated among different sectors are tacked for purpose of
measuring of the national income of the country.
The concept of the model was introduced by Richard Cantillon in the 18th century and also
it can be developed by Marx, Keynes, Quesnay and other economists. It is a model which
simplified the ways in which the economy runs as the flow of two cycles is in the opposite
direction. One cycle is for goods and services which is flowing from the different
businesses to the individual and the individual provides different resources for the
production of the businesses (Reisman, 2018).
Other direction includes the flow of money from the individual to the business as
expenditure of the consumer on different goods and services and the flow back from the
business to the individual as their personal income in form of dividend and wages for the
labour force offered. It is considered as the basic model for the circular flow of model for
the economy.
Answer of question no. 8
Unemployment can be defined as the number of people who want to and waiting to return
to a job after their discharge from work and it does not include the individual who does not
look for work in the past weeks due to different reasons like retirement, high education
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rate, personal issues and disability. There are two types of methods to measure
unemployment and explanation of these methods are mentioned below:
 Claimant Count: It is one of the methods in which the unemployment figure can be
calculated with the tracking of the number of people in the county who are claiming
for benefits of job seeking (Measuring Unemployment, 2022).
 Labour Force Surveys: It is a method in which a survey is shared round to the
household in a proportion in the country in which asking to people if they are
employed currently and seeking for work actively.
There are different methods for purpose measuring unemployment. Explanations of these
methods are mentioned below:
 Demand deficit unemployment is one which occurs due to recession as with a
reduction in demand for the product and service, company reduce the work force.
 Frictional unemployment is the one which includes worker who is between job and
is looking for the job. These candidates are not facing recession.
 Structural unemployment is one in which skills of workers is not enough to match
the demanded skills by the available jobs.
 Voluntary unemployment is one when a worker leave the job as they are no
financially compelling.
Answer of question no. 7
Supply-side policy is aiming to reduce unemployment in the focusing by focusing on
microeconomics aspects of the labour market. One of the supply side policies is increasing
funding program that helps to improve the human capital for jobless people. The
government of the UK is introducing the apprenticeship levy on the employers of the UK in
order to offer to fund to the new apprenticeship. Its main aim of it is to increase in the
resources for purpose of vocational education and also for purpose of equipping people
with the new skills required for the changing economies (De Lannoy and et. al., 2020). It is
also important for the skills mismatch helps to reduce structural unemployment.
Another supply-side policy is one which is measuring to improve the geographic mobility of
the labour. It is linked with the cost of moving to new areas in the search of work. It is a
strategy which also helps to take resources for the rent that make it affordable.
Improving the performance of the firm by making it more competitive and efficient in the
global market as it helps them for purpose of creating employment opportunities for the
people living in the country.
Answer of question no. 1
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The monetary policy committee is one which is creating direct impact over the inflation rate
as different types of advantages are possess by this committee in form of different tools to
control on the inflation like facility of liquidity adjustment, bank rate, repo rate, marginal
standing facilities, reverse repo rate, operation schemes, cash reserve rate. These tools
provide assistance for different monetary policies which is essential in order to ensure
economic balance. This committee is also responsible for purpose of setting of the
benchmark rate of interest.
There are different meeting conducted by this committee and also different choices are
considered for purpose of attaining the targets of inflation. The objectives of this committee
is to maintain transparency and accountability for the price stability along with maintaining
the profitability in the exchange rates.
Section B
[Answer any two questions from section B, all questions are worth equal marks (25x2=50
marks). For each question, use separate heading such as “Answer to the Question no. 1”
or “Answer to the Question no. 2” etc.]
Answer to the Question no. 1
Covid-19 comes with one of the threats to the world economy. It does not only create an
impact on the UK economy but also on the economy of many countries. Due to the control
of the outbreak of this disease, the government of the UK announces the Lockdown. It
results in the shutdown of businesses and also created a negative impact on economic
activities. Businesses need to face a huge loss in the economy and due to this, they
terminate the employees from their organization (Chedid and et. al., 2020). It increases the
unemployment rate in the economy. It also creates a negative impact on the trade
activities in the economy and also it results in a reduction in productivity in the economy. It
decreases the purchasing power of people as they are not able to earn sufficient.
Explanation of some of effective of Covid-19 lockdown on the economy of the UK is
mentioned below:
The labour market: There is a job crisis that occurred in the UK during the lockdown
announced by the government of the UK. It results in an increasing rate of unemployment
in the UK. Despite of schemes in government The Job Retention Schemes, there is
increasing in the claims for the benefits. There is an increase in the number of people who
are claiming the job-seeking allowance. There are different changes that occur in the
market during the lockdown period in this economy. It includes the number of people who
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are leaving their job in place of reducing the level of hiring. This makes the JRS more
important in order to prevent the rises in the unemployment rate (Brewer and et. al., 2020).
Figure 1: New declaration to Universal Credit: GB
Source: https://www.resolutionfoundation.org/publications/the-economic-effects-of-coronavirus-in-
the-uk/
Financial well-being: Government is providing support to the economy but still financial
wellbeing of the country has deteriorated continuously. It is identified that it has been a
largest fall occur in the perceptions of people related to financial well-being since 2009
(The economic effects of coronavirus in the UK, 2022). There is a decrease seen in the
household of the UK in context the of earnings from employment as well as job security. It
is resulting in the dropping confidence of the consumer. There is also a market divergence
occur among the expectation of the households for personal finance in comparison to their
prospect’s perception of the economy. For purpose of economic activities, the expectation
of the households for a future period of time in the economy and their personal finance are
important.
Trade: There is a decrease in the weekly data of the shipping volumes in context to the
number of visits at the port of the UK. Travel restrictions also created an impact on flight
traffic as it decreases sharply. There is also a decrease in the air cargo volumes which is
around 62%. It is estimated by the World trade organisation that there will be fall of around
13 & 32% which is more in comparison to the financial crisis. Reduction in trade is
reflecting the slower level of production growth in the UK which is also limiting the ability of
the economy in a quick manner.
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Answer to the Question no.3
Sustainable economic growth can be described as the rate of growth to be attained without
creating an economic problem for future generations. It consists of different elements
which are essential for purpose of attainment of a high rate of sustainable growth. It
includes accountable government, infrastructure, effective and open market, effective
management of the environment, equal opportunities ad also capable human capital.
There are different types of approaches to be adopted by a person for the attainment of
sustainable economic growth. CIDA is one of the strategies which allow an economy to
get long-term economic growth for increasing revenue generation, leading to the reduction
of poverty and also creating employment in countries (Zhang and et. al., 2021). According
to this strategy, there are three ways in which economic growth can be attained.
Explanations of these paths are mentioned below:
 Investing in people: It is also important for them to make improvements in the
employment potential of individuals for increasing access and also benefits from
different opportunities for the formal and informal business sectors.
 Building economic foundations: For attainment of sustainable economic growth,
it is essential to provide support to the government that is willing to build the
required legislative as well as regulatory business, financial and industrial
framework.
 Growing business: It is also important for the economy to enhance the financial
viability, competitiveness and productivity of different enterprises in order to
increase employment opportunities.
Economic growth can be described as the increase in production of goods and services in
an economy and a nation for over a long period. It can be measured with the increase in
the percentage in the real GDP (gross Domestic Product) adjusted on basis of inflation.
There are different ways in which a person can measure economic growth. Some of the
ways to measure economic growth are mentioned below:
Income approach: It is a method that includes income earned on basis of the production
of goods and services. It is a part of the GDP income approach. It calculates earned
income by consisting of different factors of production of the economy. All the inputs
required for making the final products are considered as a factor of production. Factor
production includes labour management land and capital within the domestic boundaries
of the country.
GDP= Total national income+ sales taxes, depreciation+ net foreign income factors
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Expenditure approach: It is an approach that includes money spent on the products and
the service instead of income. This method consists total amount that can be spent on
different products in service by different entities within the domestic boundary of the
country (What is Economic Growth and How to Measure it?, 2022).
GDP= consumer expenditure + investment expenditure + government expenditure +
(export - import)
Output approach: It includes the monetary value of different products and services to be
produced within the boundaries of the country.
GDP= Real GDP- taxes+ subsidies
Reference List (if Any)
Chedid, Y., and et. al., 2020. What about BAME? A letter to the editor on'The socio-
economic implications of the coronavirus pandemic (COVID-19): A review'. International
Journal of Surgery (London, England), 81, p.105.
Brewer, M., and et. al., 2020. Jobs, jobs, jobs: Evaluating the effects of the current
economic crisis on the UK labour market. London: Resolution Foundation.
Zhang, D., and et. al., 2021. Public spending and green economic growth in BRI region:
mediating role of green finance. Energy Policy, 153, p.112256.
De Lannoy, A., and et. al., 2020. Why is youth unemployment so intractable in South
Africa? A synthesis of evidence at the micro-level. Journal of Applied Youth Studies, 3(2),
pp.115-131.
Reisman, D., 2018. Circular Flow and Social Class. In Thomas Robert Malthus (pp. 185-
208). Palgrave Macmillan, Cham.
Kutsygina, O., and et. al., 2018, December. Technical and economic aspects of energy
saving at the stages of the building life cycle. In Energy Management of Municipal
Transportation Facilities and Transport (pp. 36-44). Springer, Cham.
Online
The economic effects of coronavirus in the UK, 2022. [Online]. Available through:
<https://www.resolutionfoundation.org/publications/the-economic-effects-of-coronavirus-in-
the-uk/>
What is Economic Growth and How to Measure it?, 2022. [Online]. Available through:
<https://www.analyticssteps.com/blogs/what-economic-growth-and-how-measure-it>
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Measuring Unemployment, 2022. [Online]. Available through:
<https://www.mrbanks.co.uk/measuring-unemployment>
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