How Economic Factors Shape Business Activities in a Global Economy

This essay explores the multifaceted impact of economic factors on business activities within the global economy. It begins by examining the role of the Monetary Policy Committee (MPC) in managing inflation and interest rates, followed by an analysis of the effectiveness of fiscal policy in achieving economic goals. The essay then discusses the effects of decreasing interest rates and outlines the four stages of the economic cycle. Furthermore, it identifies three main supply-side policies that governments can implement to reduce unemployment. Section B delves into the macroeconomic effects of the COVID-19 lockdown on the UK economy, highlighting issues such as inflation, employment, international trade deterioration, and supply chain breakdowns. Finally, it explains how an economy can achieve sustainable economic growth through smart technologies, new trade opportunities, and improved competitiveness, while also analyzing different methods of measuring economic growth, including GDP, NDP, growth rate, CPI, and PPP. The essay concludes by emphasizing the importance of sustainable growth in addressing economic and environmental challenges.

How economic factors can
affect business activities and
challenges facing business in a
global economy

Table of Contents
SECTION A.....................................................................................................................................3
Answer 1......................................................................................................................................3
Answer 2......................................................................................................................................3
Answer 4......................................................................................................................................3
Answer 9.....................................................................................................................................4
Answer 7......................................................................................................................................4
SECTION-B.....................................................................................................................................5
1) Discuss and explain the macroeconomic effects ‘Covid-19 lock-down’ has had on the UK
economy-......................................................................................................................................5
3) Explain how an economy can achieve sustainable economic growth and analyse the
different methods of measuring economic growth? ....................................................................6
REFERENCES................................................................................................................................8

SECTION A
Answer 1
Monetary Policy Committee (MPC) impact the inflation rate
Monetary policy committee help for determining policy repo rate in order to required
achievement in order to target on the basis of inflation. Also, monetary policy impact by
persistently in order to attempt for short term in real rates that low will lead eventually higher
inflation and higher nominal interest rates can be impact by no permanent increases in profit as
well as it is based on growth which decreases in unemployment. Also, monetary policy can bne
responsible for fixing the benchmark interest rate (Wolff, Pauling and Baumbach, 2020). Also,
meetings of MPC are held at least four times a year in order to publish its decision after that kind
of meeting. The aim is to maintaining perspective liquidity management in order to facilitate
transmission of repo rate which change on the basis of entire financial system. In fact,
contractionary monetary policy is more popular on the basis of method which is related to the
reducing money supply within an economy in order to increasing interest rates.
Answer 2
The effectiveness of the fiscal policy in economics is help for maintain the growth of economy in
order to certain economic goals which can be achieved. Also, price stability is help to control
price level of country in order to focus more on inflation is too high and price can be regulated
accordingly. The effect of fiscal policy is related to adjust the government in order to spend by
which revenue influences the broader economy. Then on the basis of adjustment the level of
spending tax revenue affect government in order to increase or decreasing economic activity by
short term. That is why fiscal policy is one of the important tool in order to manage in economy
because the ability that affect the total amount of output produced which is said as gross
domestic product. Also, the first impact of fiscal expansion is help for rising the demand of
goods as well as services and greater demand leading for increasing in both output and input.
The effectiveness of fiscal policy that is largely depended on the balance between taxation and
spending.
Answer 4
The main effects of decreasing interest rate on the economy
Low interest rate are supposed to help spur growth and this theory depend on lows rates
will encourage government, consumer and business in order to borrow and spend more freely.

This is help for providing the higher demand by consumer and investment by corporations in
order to lead to higher GDP growth and job creation. The lowering rate make borrowing money
cheaper in order to encourage consumer and then spending business and investment that can
boost asset price (Dolan, Lamontagne and Edmonds, 2021). On the other hand, lowering rates
make borrowing money cheaper and this is encouraged consumer where business and investment
and can boost asset price. Then, lowering rates can creates problem in order to impact on
inflation and liquidity traps that help for undermine effectiveness of lows rates. Also, when
interest rates goes down it become cheaper in order to borrow money as well as on the basis of
companies it will more likely to take out loans. On the basis of increased spending it help for fuel
economy that create more jobs. It is also increasing the disposable income and limit of growth in
consumer spending. Then high rates of interest rates tending in order to reduce inflationary
pressures that can cause an appreciation in exchange rate.
Answer 9
The four stages of the ‘Economic Cycle’
Economics cycle refers to fluctuation of economy between periods of expansion in order
to focus on expansion which means growth and contraction that means recession. There are four
stages of business which include on the basis of expansion, peak, contraction, trough. During
expansion, it is refers to the experience of economy which is relatively paid growth and interest
rates tend to low, production increases and at that time inflationary pressure build. Then peak
time is related to the cycle which reached when growth hit its maximum rate also it this growth
can be related to typical rates which imbalances the economy that is necessary corrected. Further,
on the basis of contraction it can be said that it is depended on correction which occurs on the
basis of period of contraction in order to growth slow, employment falls and price stagnate.
Lastly, stage is related to trough which is related to cycle that reached economy on the basis of
hits a low point and growth begins to recover.
Answer 7
Three main supply-side policies that the government can use to reduce unemployment
 Better educations and training- this is help for providing skill in order to focus on long
term unemployed in order to retain and finding job accordingly by fast changing labour
market. Also, this is help for reducing structural unemployment. On the other hand it is

depend on government that provides skills which employs that really need by no
guarantee in order to solve skills gaps.
 Training for unemployed- This is help for presenting CVs in order to give student
confidence in job interviews as well as it is mainly targeting long term unemployment
which is related to become discouraged from job markets (Comerio and Strozzi, 2019).
 Better job information- This is help for reducing the frictional unemployment when
people like to find jobs. Then, due to better to job availability that help for reducing
unemployment.
SECTION-B
1) Discuss and explain the macroeconomic effects ‘Covid-19 lock-down’ has had on the UK
economy-
ANSWER-
At present UK is having an economy of around 2.83 trillion USD. The nation is mainly
engaged in secondary activities to hike its overall economy. Covid-19 came as an immense
catastrophe which changed the direction and degree of the economy. There has been range of
impacts on the economy due to pandemics. Macroeconomic effects can be articulated as the
impacts which bring larger changes in the performance of an economy.
Inflation has been one of the most horrendous impact came into action. The economy was
going well but the pandemics changed entire game. Earlier in the years 2015, 2016, it was
0.37%, 1.01% which was showing increasing trend but in the years 2018, 2019 it has been 2.29%
and 1.74%. The market experienced severe fall in demand factor which ultimately led to this
issue and entities failed to align with the market needs (Alradhawi, et. al. 2020)
Employment issues were the another perils. Due to lock down it became very difficult for
manufacturing organizations to carry out their business. Since there were severe restrictions on
their performance. It not only impacted production but also brought unemployment to a huge
group of people. As labour market data is suggesting in the year 2018 around 4.77 million people
lost their jobs.
International trade was heavily deteriorated. Since the economy of UK is opened and the
nation is famous for its exports. Lock-down has impacted manufacturing sector which is sharing
a substantial part of the overall economy. This macro factor not only reduced GDP but also
toppled the ability of monetary flow in the nation. Supply chain breakdown was one of such

instance. In the year 2018 and 2019 the nation was going thought the toughest time. In such
predicaments the only way to deal with the situations was to be highly proactive. But supply
chain got broken and it became so difficult for those manufacturing industries which were
relying on specifically imparts (Nicola, et. al. 2020)
3) Explain how an economy can achieve sustainable economic growth and analyse the different
methods of measuring economic growth?
ANSWER-
For an economy it is quite essential to achieve the aim of sustainable economic growth
since with the progress of time it is experienced that there are range of economical or
environmental issues are taking place. In such predicaments the only way to be progressive along
with keeping resources sustained is hiking sustainable growth of economy. It can be achieved by
these ways-
Expansion of smart techniques is one of such ways. As sustainable economic growth
believes that there must be growth without creating any economic issue. If smart technologies
are used then maximum outputs can be driven it would reduce economic cost and will make an
economy quite productive, growing and being lucrative (Biswas, et. al. 2021)
Hiking new opportunities for trade. Since the market dynamics are quite fluctuating so it
is an inevitable need to look for new trade opportunities. It would not only reduce dependency on
certain trade field but would also bring better scope to strengthen the economy. Over the period
many economy failed due to less expansionism in term of business realms.
Improving competitiveness would be another better manner to get sustainable growth. As
it is known that if there is competition then the market players would perform on their merit. It
will somehow make them hike their productivity and proper utilization of resources so can make
the growth sustainable (Armeanu, Vintilă and Gherghina, 2017)
There are range of methods used to gauge economic growth. Some key methods are as-
Gross Domestic Product- GDP is one of the most used method to evaluate the growth of an
economy. Since this method gives deeper insight of all different segments and the way they are
adding on to the economy.

Net Domestic product- This method is quite significant which shows net value added to an
economy. It gives more information about the way an economy is going.
Growth rate- Sometimes growth rates are also used by economists to decipher the growth since
it gives them ability to make better comparison with kind of other convictions.
CPI- It is known as Consumer Price Index which is also used to see the way consumer prices are
going in an economy. It is highly useful since better ideas can be generated by using this method
due to its greater coverage and ability to drive perfect outcomes (Fomina, et. al. 2018)
Purchase Power Parity- this method is also being used by many economists since it gives them
idea of the way customers are being empowered in certain economy.

REFERENCES
Alradhawi, M., et. al. 2020. Effects of the COVID-19 pandemic on mental well-being amongst
individuals in society-A letter to the editor on “The socio-economic implications of the
coronavirus and COVID-19 pandemic: A review”. International journal of surgery
(London, England). 78. p.147.
Nicola, M., et. al. 2020. The socio-economic implications of the coronavirus pandemic (COVID-
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Biswas, A., et. al. 2021, February. The impact of COVID-19 in the construction sector and its
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Armeanu, D. Ş., Vintilă, G. and Gherghina, Ş. C., 2017. Empirical study towards the drivers of
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Comerio, N. and Strozzi, F., 2019. Tourism and its economic impact: A literature review using
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Dolan, F., Lamontagne, J. and Edmonds, J., 2021. Evaluating the economic impact of water
scarcity in a changing world. Nature communications, 12(1), pp.1-10.