BSC (Hons) Business Management: Business Environment Exam, 2021/22

This document provides a comprehensive solution to the Business Environment exam (BMP4003) for the BSC (Hons) Business Management program, Semester 2, 2021/22. The exam covers key macroeconomic concepts, including the different types of unemployment (cyclical, structural, and frictional) and methods to measure it. It analyzes the effects of decreasing interest rates on the economy and discusses supply-side policies to reduce unemployment. The solution also explores government strategies to promote economic growth, using examples to illustrate points, and describes the four stages of the economic cycle. Furthermore, the document compares and contrasts monopoly and perfect competition market structures, analyzing which is more desirable. It also discusses the impact of international trade, specifically focusing on the UK's departure from the EU (Brexit) and its effects on consumers and businesses. References are included at the end of the document.

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
Q1. Briefly explain the different types of unemployment and the methods used to
measure it them.

The most popular measure for assessing the state of the labour market is the rate
of unemployment. The unemployment rate is a crucial consideration when evaluating
monetary policy since it can offer information about how the economy is doing more
generally. Cyclical, structural, and frictional unemployment are the three basic categories.
With shifts in economic activity throughout the economic cycle, cyclical unemployment
emerges. A common description of cyclical unemployment as being of a medium-term
character (one to 12 months) (Abuzayed, Al-Fayoumi and Bouri, 2022). When there is a
discrepancy between the jobs that are available and the persons looking for work,
structural unemployment results. This mismatch may exist because the accessible jobs
are far away from the job seekers or due to the jobs available demand multiple abilities
than the ones the job seekers possess. Frictional unemployment happens when people
enter and exit the labour force, change jobs, or transition between jobs in the labour
market. This kind of unemployment is typically of a shorter duration (less than one month).
Like structural unemployment, frictional unemployment is expected to exist over the whole
business cycle and is unlikely to have an impact on wages or inflation. The proportion of
unemployed people in the labour force is known as the unemployment rate. As a result,
figuring out who is employed is necessary for calculating the unemployment rate.
Individuals who are either employed or jobless make up the labour force. Making practical
decisions, such as determining how much paid work someone must perform in order to be
deemed to have a job, as well as physically counting how many individuals have
employment or do not, are both necessary when determining who is employed or jobless.
Q2. Identify and briefly explain the main effects of decreasing interest rate on the
economy?
Alterations in the present interest rate could have either positive or detrimental
effects on certain business sectors. In reaction to monetary activity, banking institutions
frequently modify their goal loan pricing, inadvertently raising interest rates during periods
of economic development and mistakenly lowering rates during those of sluggish
economic growth. Lower interest rates mean less expensive borrowing. This can minimise
asset expenses and stimulate customer and corporate expenditures. Nevertheless, this
can also contribute to difficulties like elongation and financial deceits, which weaken the
applicability of bond yields that are closer to the ground. The financial markets might be
affected by a change in interest rates right away, but the economy might not start to feel
the effects of that change for up to a year. Customers who pay less in commission have
much more funds to spend, which may have an intense effect on longer burning through
throughout the economy in terms of its impact on buyers generally. Decreased borrowing
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costs also benefit businesses by enticing them to invest extensively in equipment due to
the low cost of procurement. Productivity and competence upsurge as a result of this (An
and et. al., 2022).
Q3. Discuss the three main supply-side policies that the government can use to
reduce unemployment?
In an effort to try and minimise the extent of unemployment, the paramount officials
can conduct supply-side interventions like offering training and growth options for
the aspirational youth or they can try unlimited economy game plans like extending job
market variety. The tasks could entail providing the teenager with better facilities for
education and preparation. This leads to the development of suitable skills that will help
those who have been unemployed for a long time retrain and find employment in a tight
labour market. This could help to lessen hidden unemployment. There is no guarantee that
organisation expenditures will be required to close the capacity gap; it depends on the
public authority's competence to provide the resources that organisations actually need.
The public authority could really use business endowments or work appropriations in terms
of the government-funded subsidies. Businesses that agree to long-term unemployment
may get gifts from the group. It's possible that the absurdly long unemployment now has a
different option (Bennett and Vines, 2022). In any event, it will be striking, and there is a
possibility that employers would terminate current workers in order to benefit from higher
earnings.
Q4. What can a government do to promote economic growth? Use examples to
illustrate your points
Economic expansion is gauged by increases in GDP, which calculates the total cost
of all goods and services produced in a nation during a specific year. The employment of
some measures by the government, such as the results of tax reductions and refunds
intended to increase consumer spending, is permitted. Because of the increased
productivity brought on by this particle activity, the economy expands. Consumers'
increased purchasing can benefit the economy if they receive refunds or expect price
reductions. There is yet another method for boosting the economy, such as the idea of
deregulation. One way to express it is the loosening of restrictions placed on a business or
a certain sector of the economy. Deregulation proponents contend that restrictive
restrictions prohibit companies from expanding and performing to their full potential. In
consequence, this slows the GDP economy's expansion by lowering employment and
output. Similar to this, building infrastructure improvements to support an economy's
overall growth can assist increase a nation's relative prosperity. Infrastructure spending
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produces jobs since workers are needed to complete the approved projects. It might also
lead to fresh economic expansion. The construction of a new roadway, for instance, or
other initiatives that will help the nation's economy grow, may lead to additional
investments (Celik and Karadağ, 2022).
Q5. Identify and describe the four stages of the ‘Economic Cycle’.
According to the conclusions of the economic cycle, the economy expands between
stimulative (refining) and recessionary phases (collapse). The colloidal suspension of the
financial cycle may be defined using indicators such as the gross domestic product (total
national output), loan costs, cumulative companies, and consumer purchasing power. The
central four phases of the cycle are the growth, peak, retraction, and depression phases.
The Extension or Progressive stage, which is the first stage of the cycle, is when the
economy changes direction relatively quickly, borrowing rates are typically low, production
increases, and inflationary pressures increase. Then comes the Summit or Peak. A cycle
is at its height when growth accelerates at its most incredible rate. Oftentimes, top
enhancement causes a financial blight that needs to be repaired. When the economy hits
a low point and development picks up, the phase of Contraction follows the phase of
Trough. Advancement is hampered by the recession, as the business and costs both
declines.
Section B
Q1 Monopoly and perfect competition are two market structures at the opposite end
of the spectrum. Compare and contrast the two structures to influence our view of
which structure is most desirable. Critically analyse this statement.
A market structure with perfect competition is one in which numerous small
businesses compete with one another. A single company does not have much market
influence in this circumstance. Since none of the enterprises can affect market pricing, the
industry as a whole generates the level of output that is socially ideal. The stock market is
probably the best illustration of a market with nearly perfect competition that we can find in
the real world. In contrast, a monopoly is a market system in which a single company
dominates the entire market. Given that consumers have no other options, the company in
this situation has the highest amount of market power. As a corollary, monopolies
frequently cut back on production in order to raise prices and boost profits. Often these
conglomerates are undesirable from a societal standpoint since they lead to poorer
production and higher prices as compared to competitive marketplaces (Dias, Pereira and
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Carvalho, 2022). As a result, the government frequently regulates them. Furthermore,
industries with perfect competition provide efficient results, whereas monopolies generate
inefficient results. So, reducing monopolistic power and promoting competition in
the exclusive markets would be a suitable policy with the aim of increasing efficiency.
Because there are many producers and customers competing with one another in this type
of environment, perfect competition is the optimal type of market structure where all
producers and consumers have complete and symmetric knowledge and no transaction
costs. Any business will maximise its economic profit (π) when Marginal Revenue (MR)
Equals Marginal Cost since the price in perfect competition is always lower than the cost in
a monopoly (MC).
Q2. UK officially left the EU as of 31st December 2020 to ‘trade internationally’.
Discuss the impact upon consumers and businesses of trading internationally.
The disengagement of the agreement reached between the European Association and
the Assembled Realm specifies the parameters of the UK's systematic exit from the EU in
accordance with Article 50 of the Settlement of the European Association. The
Consolidated Sphere was treated as a Part State by the EU during the transitional period,
which lasted from 1 February through 31 December 2020, with the exception of
cooperation with the EU's fundamental and administrative institutions. The EU and the UK
tried to establish the Collaborative effort and Participation stances for a
better understanding throughout these months. Relations with non-EU nations will be
impacted by the loss of authorization for the EU's ongoing, streamlined business plans, as
well as any kind of tactics that impede them, while relationships with central European
suppliers or clients would also be impacted (Ena and Saputra, 2022). Likewise, it is
possible to talk about how this important move will impact buying groups and consumers in
particular;
 A substantial affect could be experienced because of the exit from the rule. The UK
frequently makes suggestions for the high standards in many contexts, and given
everything, UK law will strive to conform to those norms without having any
influence over the reasoning behind them. This thereby will take into account the
normal circumstances throughout the transitional phase.
 This could cause delays and higher costs for the country's distribution network.
Reviewing the store's layout and drafting suitable overall investment arrangements
are two further benefits of consulting the largest global resource of sound planning.
Sponsors need to be aware of how the UK's transition to new IP rules after the EU
referendum would affect them.
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 The UK's departure from the EU will result in a trial of loosening the regulatory
framework for the government and parliament. Brexit quickly affects associations by
changing how the law is applied. As the cycle combines amending appropriate EU
recommendations into UK guidelines, courts should assess whether they use recent
decisions announced in the European Magistrates as their noteworthy opinions in
terms of the potent viewpoints (Holland and te Velde, 2022).
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Reference List
Abuzayed, B., Al-Fayoumi, N. and Bouri, E., 2022. Hedging UK stock portfolios with gold
and oil: The impact of Brexit. Resources Policy, 75, p.102434.
An, X., and et. al., 2022. Brexit Spillovers: How Economic Policy Uncertainty Affects
Foreign Direct Investment and International Trade (No. 202208). University of
Kansas, Department of Economics.
Bennett, A. and Vines, D., 2022. The EU–UK Trade and Cooperation Agreement: lessons
learnt. Oxford Review of Economic Policy, 38(1), pp.68-81.
Celik, O. and Karadağ, M., 2022. Economic integration, spatial interaction and labour
income share: evidence from the EU-13 countries and the UK. Applied Spatial
Analysis and Policy, 15(1), pp.265-287.
Dias, R., Pereira, J.M. and Carvalho, L.C., 2022. Are African Stock Markets Efficient? A
Comparative Analysis Between Six African Markets, the UK, Japan and the USA in
the Period of the Pandemic. Nase Gospodarstvo: NG, 68(1), pp.35-51.
Ena, Z. and Saputra, I.G.N.H., 2022. Impact of Covid-19 on Macroeconomics in
Indonesia. Budapest International Research and Critics Institute (BIRCI-Journal):
Humanities and Social Sciences, 5(3).
Holland, D. and te Velde, D.W., 2022. The Macro-Economic Effects of UK Aid Returning to
0.7 per cent of GNI (No. 535). National Institute of Economic and Social Research.
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