BSC (Hons) Business Management: Business Environment Exam - Semester 2

This document presents a comprehensive solution to a Business Environment exam, addressing key macroeconomic concepts and policies. The assignment delves into the government's role in influencing economic situations through interest rate changes, analyzing how income tax impacts aggregate demand and supply, and discussing supply-side policies to reduce unemployment. It also explores the different types of unemployment and methods of measurement, along with the four stages of the economic cycle. Section B focuses on the macroeconomic effects of the COVID-19 lockdown on the UK economy and examines sustainable economic growth, including methods of measurement. The solution incorporates relevant examples, definitions, and discussions to provide a thorough understanding of the business environment and economic principles.

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
5) To what extent can the government improve economic situation by changing the interest rate?
Government is holding a primary role in economic market in which they can improve
economic situation by changing the interest rate. In this with the help of under taking advantage
of contradictory monetary policy under taking use of physical and monetary practices they can
change the interest rate. Along with this with the help of under taking advantage of federal
reserve and monetary policy government have tendency to stimulate the inflation price. With the
help of using physical policy government can make control over spending and taxation powers.
In addition to this with the help of reducing the unnecessary laws and regulation taxation rates
and practices government can duly change the interest rate or can improve the economic
situation in a well defined and effective manner. Furthermore it has been underlined that by
having a policy in which putting a cap on the price by taking advantage of contradictory
monetary policy will offer government strategic age to make improvement in economic situation
by making changes in the interest rate.
6. How would an increase in income tax influence the aggregate demand and the aggregate
supply in the economy? Use examples to illustrate your answer.
It has been analysed that the significant increase in the income tax duly influences the aggregate
demand as aggregate supply in the economy. In this it has been underlined that increase in
income taxes have tendency to reduce disposable individual income which further reduces
consumption. This duly shift the aggregate demand curve left in which the amount equal to the
initial change in the consumption that further make change in income tax is produced. While on
the other hand in context with the increase in the income tax influence on the aggregate supply in
the economy. It has been underline that a tax rate increase dynamically shift the aggregate
demand curve to the left which affects the aggregate expenditure supply sign. Economics prove
that in a situation if tax rates are increased then it lead towards aggregate supply will increase
such a huge amount that further make tax collection to measure increase in growth in a situation.
When income tax increases duly lower down demand by reducing disposable income. It further
lead towards reduction in consumer demand which further offset increase in government demand
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and total demand decreases. Furthermore it has been evaluated that there is direct effect of tax on
the supply demand equilibrium in which an increase in tax rate enhances the price is that a buyer
pay by less than the tax.
7) Discuss the three main supply-side policies that the government can use to reduce
unemployment?
Unemployment is a situation in which in a country the overall number of individuals with
no jobs is higher as compared to the employed once. In this government can play a major role in
which with the help of supply side policies they can reduce unemployment. In this with the help
of free market supply side policies which is inclusive of increasing the competitiveness and free
market efficiency such as lower income tax rate, privatization and reducing power of trade union
can play major role that will help government in a country to lower down unemployment. It has
been analysed that supply side policy mainly aimed towards reducing the structural
unemployment and emphasise on micro economic aspects of labour market. The public authority
could give firms endowments for taking on long haul jobless. This could give the drawn out
jobless another opportunity. Be that as it may, it will be exorbitant and there is a peril firms could
make current specialists excess to profit from the work endowments. In addition to this it also
helps in enhancing funding of programs that helps in improving the human capital of jobless
individuals. With the help of different policies and practices such as cutting taxes to boost
education and training will help government to reduce structural unemployment. Along with this
by providing geographical subsidies to significantly encourage forms to make investment in
depressed areas will also help government to reduce unemployment rate. With the help of taking
advantage of these supply side policies government can reduce the unemployment ratio and can
increase the employment rate at greater extent.
8) Briefly explain discuss the different types of unemployment and the different methods used to
measure it them.
Unemployment is defined as a situation in which individual actively looking for
employment but they unable to find work. This is defined as a situation that can affect the labour
force at a greater extent. Unemployment usually undertake place when a worker find inability to
find various jobs. It has been analysed that there are different forms of unemployment such as
clinical unemployment, structural unemployment, classical unemployment, seasonal
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unemployment, frictional unemployment, voluntary unemployment, disguised unemployment,
technical, educated and chronic unemployment. In this in context with clinical unemployment
this exist when individual lose their jobs due to downtown in aggregate demand (Seers, 2018).
While structure unemployment is a situation which under take place when certain industry
reduces due to long term change in the market condition. Classical unemployment is due to when
wages are extensively high. While seasonal unemployment exist when certain industry only
operate during a particular time in a year in the market. Frictional unemployment is a cost which
undertake when employee lose their current job and in the process of finding another one. While
voluntary unemployment cause when worker willingly choose not to work in the situation.
Disguised unemployment is a situation when more individual are doing work that actually
requirement. While educational unemployment occurs one many unemployed person is due to
their qualification which does not match with the job requirement. All these forms of
unemployment have adverse impact on individual and economic growth. In this government can
take advantage of census, count surveys and the number of unemployment insurance to track
unemployment rate.
9) Identify and describe the four stages of the ‘Economic Cycle’.
Economic cycle is defined as a fluctuation of economic among periods of expansion and
contraction. In this there are various elements such as GDP, total employment, interest rate on
consumer spending that significantly aid to evaluate the current stage of economic cycle. In this
it has been underlined that the 4 stages of cycle are expansion, peak, contraction and trough. It is
essential for business and investors to have proper inefficient insight into in economic cycle to
have growth and expansion (Diaz, Theodoulidis and Dupouy, 2016). In context with economic
expansion stage of economic cycle it has been analyse that during expansion the economic duly
experience or rapid growth in which interest rate tend to below. This increases production and
inflationary pressures build. While on the other hand in context with peak this stage is reached
when grow duly hit its maximum. Furthermore contraction stage occurs in a period of
contraction where growth slower down, prices stagnate unemployment falls. While in terms with
trough, this cycle is being reached when economy hit it slow point and further lead towards
growth to have recovery (Zhang, Wu and Chen, 2022). It is essential to have proper
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understanding of all the stages of economic cycle as it impact on the growth on many sectors of
the economy.
Section B
1. Discuss and explain the macroeconomic effects ‘Covid-19 lockdown’ has had on the UK
economy.
The sudden and dynamic outbreak of Covid 19 shaken the countries around the world. In this
United Kingdom adversely affected the country in various ways there are various macro
economic impact that has been measured by this country due to the outbreak of COVID-19.
These are inclusive of dramatic decrease in GDP income level of individual job opportunity that
lead to words 19% decrease in the GDP of country (Pedauga, Sáez and Delgado-Márquez, 2022).
Furthermore it has been analysed that decrease in the overall GDP and investments foreign direct
investments also reduces the economic growth of country. Covid- 19 lockdown created many
restriction which halt the production and reduces the manufacturing growth of organisation in the
economy (Su, Ullah and Andlib, 2022). It affected the individual income level which created
many obstacles in front of country. Along with this cancellations of bookings in hospitality
industrial sector alone with reduce in production of growth activities.
3. Explain how an economy can achieve sustainable economic growth and analyse the different
methods of measuring economic growth?
Sustainable economic growth is defined as an economic development which duly undertaken aim
to enhance satisfaction of human needs but in a way that daily sustained natural resources as well
as the environment for future generation. Furthermore it has been evaluated that economic
function in the ecosystem duly include various elements of production that fuels economic
growth such as labour, land, natural resources and capital. Sustainable economic growth is a
measure in which management of these resources is done in a way that will not be depleting
anvil remain available for next generations (Li and Lin, 2017). In this with a significant increase
in the amount of physical capital goods in the economy, growth of labour force technological and
increase in the human capital generate economic growth. It has been analysed that the aggregate
economic growth is duly measured in terms of gross national product or gross domestic product.
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There are various ways in which sustainable economic growth can be achieved by an economy in
this government with the help of this can assure higher growth.
Sustained policy commitment government can assure larger benefit. This will help
government to avoid damages to future generation along with this by providing tax benefits and
seeking investors for low carbon technology government can have a sustained commitment.
With the help of building the future economy with the help of energy saving industrial system
sustainable economic growth can be measured. It has been evaluated that humans live in
ecosystem and cannot survive without it. In this it is essential for an economy to make sure that
their practices does not destroy the environment (Sirowy and Inkeles, 2017). This increases the
responsibility of government in an economy in which with the help of regarding economic
activity they need to assure that extraction and depletion of natural resources limited in a proper
way which does not cause harm to environment. The rule of law, and political stability enhance
economic growth. Transparent, adequate, and properly enforced laws, efficient fiscal
management and resource allocation, appropriate regulatory systems, and sound public financial
systems are all essential to stable economic growth, the reduction of corruption, and making an
economy sustainable over time In which undertaking use of PPF and economic growth
government can increase economic productive potential. Along with this by measuring growth
and having an emphasise on trade growth cycle with the help of maintaining house price,
inflation, emphasise on labour shortage and overcoming trade difficulties government can have a
productive turning points through which they can assure sustainable economic growth.
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References
Diaz, D., Theodoulidis, B. and Dupouy, C., 2016. Modelling and forecasting interest rates during
stages of the economic cycle: A knowledge-discovery approach. Expert Systems with
Applications, 44, pp.245-264.
Li, K. and Lin, B., 2017. Economic growth model, structural transformation, and green
productivity in China. Applied Energy, 187, pp.489-500.
Pedauga, L., Sáez, F. and Delgado-Márquez, B.L., 2022. Macroeconomic lockdown and SMEs:
the impact of the COVID-19 pandemic in Spain. Small Business Economics, 58(2),
pp.665-688.
Seers, D., 2018. What are we trying to measure?. In Measuring development (pp. 21-36).
Routledge.
Sirowy, L. and Inkeles, A., 2017. The effects of democracy on economic growth and inequality:
A review (pp. 125-156). Routledge.
Su, C.W., Dai, K., Ullah, S. and Andlib, Z., 2022. COVID-19 pandemic and unemployment
dynamics in European economies. Economic Research-Ekonomska Istraživanja, 35(1),
pp.1752-1764.
Zhang, Q., Wu, X. and Chen, Y., 2022. Is economic crisis an opportunity for realizing the low-
carbon transition? A simulation study on the interaction between economic cycle and
energy regulation policy. Energy Policy, 168, p.113114.
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