Economic Policy Analysis: Brexit's Impact on UK Living Standards

This essay provides an economic policy analysis of the potential positive and negative effects of Brexit on the standards of living in the UK. It begins with an introduction to the topic, followed by an explanation of relevant economic policies and theories, including monetary and fiscal policy, and their application to the Brexit context. The essay then presents historical and current data related to Brexit's impact on UK living standards, examining trade prices, unemployment, and the circular flow of income. Applying these policies and theories, the essay predicts the expected effects of Brexit, considering both optimistic and pessimistic approaches. The analysis highlights the challenges and opportunities presented by Brexit, concluding with a comprehensive evaluation of its impact on the UK economy and the living standards of its citizens.

“Using Economic Policy analysis, outline and evaluate the possible positive
and negative effects of BREXIT on standards of living in the UK.''”
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Contents
1. INTRODUCTION..................................................................................................................3
2. An explanation and Analysis of policies and theories...........................................................4
3. Historical or current relevant data regarding the effects of BREXIT for UK living
standards.....................................................................................................................................7
4. How the policies and theories can be applied and their expected effects..............................9
5. CONCLUSION....................................................................................................................12
REFERENCES.........................................................................................................................13
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1. INTRODUCTION
Economic analysis is based on the fundamental approach in order to identify the
multi-dimensional problem that goes beyond the economic. Economic Policy is defined as
program offered by the government, department of economics. It relates to the topic- using
economic analysis, identifying the positive & negative effects of Brexit on the standard of
living in UK.
Economic analysis considerations are one of the best questions that will weigh on the
minds of individuals. The essay summarises what are different long term economic impact of
Brexit on the standard of living. Brexit has been increased the significant change in UK’s
relationship with other nations. In this essay, it will examine the evidence and explain the use
of Economic policy analysis, prediction that have been made about the impact of BREXIT on
the standards of living in UK.
The attack of plan is to estimate the potential economic impact of UK from European
Union. Using economic analysis approach that exclusively looks at Brexit effect to the
standard of living in UK. It also used the economic theory, policy to predict the level of real
income by 6.3% to 9.5% (Abbass & et.al., 2022). The study will explain the effect of Brexit
on the standards of living in UK, identify uncertain challenges during crisis. It helps to
maintain or stabilize the economic condition. It will be eliminating the different kind of
problems and supports to UK during Brexit crisis.
The purpose of the essay is understand the concept of economic policy analysis,
evaluating the possible negative & positive effects of BREXIT on standards of living in the
UK. It will consider the different tools that helps to determine abnormal times such as
recession, recovery. In this essay, Furthermore, it will determine the different factors which
plays an important role in economic policy analysis.
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2. An explanation and Analysis of policies and theories
To determine the economic policies and theories such as monetary policy, Fiscal
policy & economic theory. In this section, it has been discussed the use of policies, theories
in context of BREXIT on standards of living in the UK
Monetary policy is based on the approach that helps to control quantity of money
available in an economy level. It also helping to manage and control supply chain of new
money procedure (Nanda, Xu & Zhang, 2021). If it is possible to manage the level of money
supply, aims to influence the macro-economic factors. It including consumption rate,
economic growth, inflation and liquidity.
In context of effect of Brexit on the standard of living in UK, the government should
be used the monetary policy as tools. For example- it setup the interest rate that helps to
charge bank to borrow money. On the other hand, it also buying bond to lower interest rates
on savings, loan with the help of quantitative easing.
Monetary policy is not consider as tool or platform for managing aggregate demand in
the context of goods & services (Flaschel, Galanis & Veneziani, 2021). In UK, the
government have been used the suitable policy and reduce the level of global crisis such as
BREXIT. In this way, it helps to manage the standard of living in UK.
Statistical data prove the claim and addressed the challenge by UK government-
Figure: 2 Crisis damage youth employment during Brexit
(Source: BREXIT damage youth employment, 2021)
However, it takes some time to implement proper policy, legislation tax and spending
changes. In some case, it is difficult to control the political problems during Brexit. It directly
affecting the standard of living in UK. Therefore, it can be used the monetary policy in terms
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of exchange rate, money supply. These are influenced by the government because they can
easily understands the importance of monetary policy. It helps to stabilize the economy at the
time of down-turn. The expectation can be identified in different countries with maintain a
fixed exchange rate.
The effect of Brexit on the standards of living in UK, the government is focused on
implementing a monetary policy which means that simply change the size of money supply.
This kind of change can be done by open market operations. In short, it is debt to exchange
rate with private sector. For example- People can be purchased goods & services. It required
to add some cash to account, that banks are required keep with it. Therefore, it helps to
expand the money supply chain.
For example- central banks have been targeting companies for purpose of money
growth. It has become much less common. This is why because of establishing a strong
correlation between prices, costs and money. It is harder to handle the stability in price
fluctuation. Many central banks have been focuses on the switches to the inflation as directly
targets.
Fiscal policy is defined the use of government spending, taxes procedures or policies
to influence condition of economic. Especially macro-economic condition such as aggregate
demand for goods & services, economic growth rate and inflation.
In context of effect of Brexit on the standard of living in UK, fiscal policy can be used
by the government for purpose of spending, taxation to influence the economy. Typically, it
promote the strong & sustainable growth to reduce the level of poverty.
For Example- fiscal policy such as tax cuts, increased the spending of government.
Both kind of policies such as fiscal, monetary are intended to increase the aggregate demand.
It also majorly contribute to the deficits or drawing lower budget. In this way, it can easily
improve the living standards of people, and also minimising the level of poverty.
By using fiscal policy, it has been focused on three key areas such as scheme spend to
fund private sector, cash injection, delay in the tax collection. These kind of challenges are
minimised by fiscal policy (Abbass & et.al., 2022). During post BREXIT, it outlook the
empirical evidence which is limited to measure the effectiveness of financial demand.
Similarly, it required to estimate or calculate the debt to GDP. For emerging market
level and UK, large population have faced the poor economic situation. It is very challenging
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for people to implement, reforms economic policy (Talha & et.al., 2021). It will support as
strong and sustainable growth once identified the recession or crisis. Basis of capital income,
it is contracting in the terms of largest fraction globally since 1870.
By using Economic theory, it suggests that identifying the greater trade, could boost
not only the demand for UK profitability or productivity (Varona & Gonzales, 2021). It also
dependent on the standard of living in UK. Brexit has been developed the uncertain situation
and also minimised the economic growth in UK. Majorly, it effects on the living standards of
people in UK.
For Example- the attitude, behaviour of people in buying and using appropriate goods
& services (Bishop, 2021). Typically, it focuses on the buying behaviour and understanding
the demand of consumers. It is the main part of behaviour, perception of individuals and
cannot be separated from it. Due to BREXIT crisis, the people are unable to pay higher taxes.
So, it would be identified that minimised the purchasing power of people. But government
focuses on the consumption while increasing the rate of purchases but it keeps remain
maintain taxes.
On the other hand, it also increasing the rate of demand directly. In another way, if the
government cuts their taxes and increases the transfer payments, disposable of households. It
will be spending a lot of consumption and turn into the increases of AD.
In contexts of economic theory. Behaviour of people are directly affecting the
economy and down turn the spending of client. In some cases, it drops off and slow down the
growth of economic level such as dropping prices, creating the deflation. If in case, it slow
down the consumer spending nations and relates to the developing economy.
Moreover, BREXIT affect the economy while decreasing sales rate, retain quality &
incentives. On the other hand, it also increasing the expectations of client in terms of loyalty,
trust. In fact, it also identified the determinants which plays an important role in the
consumption. It relates to the income, preference of buyers, taste, prices or costs of several
commodities. In some cases, it include the time intervals under specific considerations,
understanding the different patterns of income distribution. These are considered the
important components which plays an important role in terms of aggregate demand concept.
Furthermore, it also identified the contribution of aggregate demand in context of economy. It
supports to lower the interest rate which make borrowing the cheaper.
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For example- Many people will be spending more time on the credit cards. This is
why because of cheaper process in mortgage payment. Another contribution of economic
policy in UK budget, and produced a high amount of goods & services. As a result, it will be
showing high price level during recession.
3. Historical or current relevant data regarding the effects of BREXIT for
UK living standards
To estimate the effects of Brexit on the UK’s living standards, it must have assumed
about the total trade prices change. It is also identifying how the UK’s relations with EU. The
intra-trade prices fall 10%-20% than in rest of the world. It also examined the EU trade prices
which will be continued to fall 40% faster than its rest of the world. But due to the recession,
The UK make 0 contribution in the EU budget. That’s why. It can be minimised the UK’s
contribution and falls by 17%.
In the current scenario, it has been examined that fall income of 1.28%, largely driven
by future or current changes. At that time, Non-tariff barriers are common approach which
plays an important role in terms of restricting the trade services. Therefore, it would be
increased major loss 2.61%.
Table: 1
After Brexit, the United Kingdom would have no longer bound by European Union
external based tariff. This kind of changes will help to reduce the prices or costs of imported
goods. This kind of approach is positively impact on the standard of living in UK through
economic policy.
To analyse the economic condition of UK living standards. It should be consider the
optimistic & pessimistic approach after including the beliefs, assumption. At that time,
Economic policies are helping to maintain a proper regulatory differences in terms of
services. Moreover, it relay on the international based agreement.
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The effects of Brexit on the UK living standards
Table: 2
Apart from that, it should be focused on the circular flow of income. It is defined as
model in terms of economy in which major exchanges are showing as flows of money, goods
& services. It is always supports in level of economic agents. In some cases, the flow of
money and product can be exchanged through process of close circuit. It is corresponded in
the value but running in opposite direction or path. In contexts of UK economy, it can be
determined the consequences of Brexit by using C+I+G + net trade. In 2020, it has been
developed the situation of unemployment in UK due to crisis.
The negative effect of Brexit on the standards of living in the UK is to develop a
situation of poverty. Many people are unable to maintain their living standards in proper
manner.
The positive effect of Brexit on the standards of living in the UK such as control the
level of democracy, helping people to use appropriate resources. It provides the freedom for
everyone to gain advantage in business success. In contexts of economic analysis, Brexit has
expected to effect of minimising exports to European Union. It also reduced the level of
competitive Britain economy.
In order to focus on the economic policy and consider the different components such
as consumption, government spending, investment and exports. Whenever it can be used the
consumption as change aspects, including movements in terms of taxes, expectations of
consumers, future income. These kind of procedures will be changing the demand of
individuals in regards of wealth levels.
The government support the living standards of UK, launching better employment
opportunity during Brexit. It also promoting the demand of new technologies (Forster &
et.al., 2021). These kind of things are helping to maintain a price of key inputs, incentives. In
some cases, it also changing the interest rates that are increased or decreased in proper
manner. The government spending & taxes are identified with the help of political
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considerations. Several kind of exports, imports changes can be done according to the growth
rates, prices between two economies.
4. How the policies and theories can be applied and their expected effects
Based on the evaluation, it has been discussed two economic policies such as
monetary policy and Fiscal policy. These are considered the important policies in terms of
economic analysis because it helps European Union during Brexit, improve standards of
living in UK.
Monetary policy has been applied by UK government and consider the interest rate,
expectation of inflation, net export effect and real balances. These kind of factors are rising or
failing the interest rate. It will directly affecting the decision which has been made by the
potential consumers (Hammond, 2022). If in case, it will be rising the household wealth and
automatically increases level of aggregate demand. At certain point, it also declined the
demand of aggregate during Brexit. In this way, it can be analysed the positive effect of
Brexit on the standard of living in UK.
On the other hand, monetary policy is directly affecting the economic growth during
Brexit. The significant effect of Brexit impact on the standard of living in UK. For example-
the both outcomes & prices of goods were increased at certain level. There are different ways
to focus on the economic policy actions and helping to transmitted in real economy.
Traditionally, Individuals are focused on the interest rate and used as interest rate channel.
Central bank is the best example in terms of borrowing prices or costs (Palley, 2021).
Aside from the factors like interest rate and inflation. It is one of the most important
aspect to understand the situation of economic health at the time of Brexit. Undoubtedly,
Exchange rates play an important role in order to handle the trade, and consider as critical
think. For this research, it is needed to focus on the exchange rate, analysed and manipulated
economic measures. But in some cases, exchange rates maters a lot and directly impact on the
investor’s portfolio.
Apart from that, it focused on the Fiscal theory which can be applied by executive &
legislative branches of the government. At the time of Brexit, UK congress has been passed
the laws, appropriate spending by its power of purse. In this way, it has been found that use a
Fiscal policy during Brexit and always maintain economic growth. As a result, it supports to
enhance the standards of living in UK.
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On the other hand, Economic theory can be applied at the time of Brexit because it’s
significant impact on the trade and wealth. Especially, it applicable on the living standard of
people in UK. For example- If the price or cost of a nation’s exports rises by greater rate than
its other imports. In case of trade, it can be improved the demand of export’s, which turn into
rise the revenue from exports.
Once, it has been applied the economy theory in UK at the time of Brexit. It
automatically increases the demand for developing nation and its currency. If in case, the
price or cost of exports rises by lower rates. As a result, it support to enhance the capacity,
efficiency related to standard of living in UK. This can be possible through economic theory
which plays an important role in term of economic growth and development.
Based on the research, it has been examined the importance of Economy policy and
used by the UK government to stabilize or maintain low vitality in terms of economic growth,
interest rates, trade and investment. It is directly propositional to the effect of Brexit on the
standard of living in UK.
Figure: 1 Actual & Forecast growth for UK economy
(Source: Actual & Forecast growth for UK economy, 2020)
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Diagrams AD Aggregate Demand
To determine the AD contraction and expansion by using graphical representation.
Figure: 2 Expansion of Aggregate Demand
(Source: Expansion of Aggregate Demand, 2020)
In figure-2, it represents the general price level which causes the expansion of Aggregate
Demand.
Figure: 3 Contraction of Aggregate Demand
(Source: Contraction of Aggregate Demand, 2020)
In figure-3, it represents the increases the general price level which causes a contraction of
Aggregate Demand (AD).
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5. CONCLUSION
From above discussion, it has been discussed the effects of Brexit on the standards of
living in UK. Usually, it has been considered the points of economic policies and theories
such as monetary policy, fiscal policy and economy theory. Based on the evaluation, it has
been identified that European government has been used economic policies and theories in
order to identify the positive & negative outcome of Brexit, especially focus on the effects of
BREXIT on the standards of Living in UK.
Analysing the economic policy, predict how much smaller or larger the UK economy.
Once, it is also linked to the topic- “Using Economic Policy analysis, outline and evaluate the
possible positive and negative effects of BREXIT on standards of living in the UK”.
Apart from that, it has been produced the historical relevant data, theories and policies
to measure the condition of Brexit crisis at UK. Moreover, it has been evaluating the crisis &
current conditions, which explained the immediate and near term outlook for identifying the
significant impact of crisis. By considering economic theories and its factors, it was
extremely showing higher level of global recession in current scenario. Furthermore,
analysing the effects of BREXIT on standards of living in the UK by using economic policy.
On the basis of evaluation, it has been developing idea, assumptions on the basis of economic
policies & theories. Thus, it has been measured the expected results or outcomes. Usually, it
has been analysed the positive and negative aspect of brexit on the standards of living in UK.
On the other hand, it has been summarised that Brexit impact on the economy and
reduced trade openness, inflow, foreign direct investment, immigration growth. The
economic policies such as Fiscal, monetary helps to recover shock of Brexit crisis, which are
more slowly than its current situation of Europe. It has been examined economic objectives
that are implementing to handle medium & long term in post-recession crisis. To improve the
effect of Brexit on the standard of living in UK.
On the basis of discussion, it has been analysed that economic policy reduced the
level of poverty because of managing the interest rate, taxes in UK. It has been examined the
different challenges which have been handled by economic policy, theory to maintain or
overcome the issue of prices or costs of living. It supports to eliminate or remove unnecessary
challenges and examined the positive, negative effect of brexit on the living standards in UK.
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REFERENCES
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bias. Social media+ society. 7(1). p.20563051211003066.
Flaschel, P., Galanis, G. & Veneziani, R., (2021). Pandemics and aggregate demand: A
framework for policy analysis (No. 62). FMM Working paper.
Forster, E.J. & et.al. (2021). Commercial afforestation can deliver effective climate change
mitigation under multiple decarbonisation pathways. Nature communications. 12(1).
pp.1-12.
Hammond, A.M. (2022). Financing sport post-COVID-19: using Modern Monetary Theory
(MMT) to help make a case for economic recovery through spending on sport and
recreation. Managing Sport and Leisure. 27(1-2). pp.40-44.
Nanda, A., Xu, Y. & Zhang, F. (2021). How would the COVID-19 pandemic reshape retail
real estate and high streets through acceleration of E-commerce and
digitalization?. Journal of Urban Management. 10(2). pp.110-124.
Palley, T. (2021). Financialization revisited: the economics and political economy of the
vampire squid economy. Review of Keynesian Economics. 9(4). pp.461-492.
Talha, M. & et.al. (2021). Impact of oil prices, energy consumption and economic growth on
the inflation rate in Malaysia. Cuadernos de Economía. 44(124). pp.26-32.
Varona, L. & Gonzales, J.R. (2021). Dynamics of the impact of COVID-19 on the economic
activity of Peru. Plos one. 16(1). p.e0244920.
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Online
BREXIT damage youth employment, 2021 [online] Available through: <
https://www.weforum.org/agenda/2021/07/brexit-damaged-youth-employment/>
Actual & Forecast growth for UK economy, 2020 [online] Available through: <
https://www.tutor2u.net/economics/reference/macroeconomic-objectives-and-macro-
stability>
AD contraction & expansion, 2020 [online] Available through: <
https://www.tutor2u.net/economics/reference/the-aggregate-demand-curve >
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