Business Economics Report: Evaluating the UK Economic Environment

This business economics report provides a comprehensive analysis of the UK economy, examining the roles of the government in managing inflation and unemployment. It evaluates the significance of economic data within the business environment, including the use of techniques like the Consumer Price Index (CPI) and Retail Price Index (RPI) to measure inflation. The report further delves into the political and economic factors affecting the UK, such as changes in government policies, interest rates, and GDP. It highlights the inverse relationship between inflation and unemployment, the impact of monetary and fiscal policies, and the effects of recessions and the COVID-19 pandemic on employment rates. The report concludes by emphasizing the importance of economic data and government intervention in stabilizing the economy and fostering business growth, referencing various academic sources and statistical data to support its findings.

BUSINESS ECONOMICS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Evaluating a government’s role in the economic arena on Inflation and unemployment...........3
Significance of economic data within the business environment and be able to use appropriate
techniques....................................................................................................................................4
Political and economic Factor of UK economy:..........................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
Business economics is a study of related issues of marketing, organization and
environment basically it includes all the problems related to economy (Čepel, et. al., 2018). The
report will evaluate the roles of government in the economy and who they perform there
responsibility to deal with inflation and unemployment than it will evaluate the significance of
economic data inside the business environment and use of techniques to deal with that. It will
further evaluate the issue related to political and economic due to inflation and unemployment in
UK and the factors affecting the business and economy.
MAIN BODY
Evaluating a government’s role in the economic arena on Inflation and unemployment.
The economy of UK has been change very many times with recession to inflation which
results in change in employment and unemployment in the country many times. The inflation
and unemployment is inverse related to each because as they are indicator of the economy and
affect the economy of the UK country. The wage inflation or change in wage rate in the inflation
on the economy which create the high employment labour work in the market with access supply
of labour is greater than the demand of labour. Exceed of jobs are available in the market and the
demand of the jobs are not that enough. In high unemployment the rate of wage is same without
any increase in the wage. Whereas, at the time of low employment the demand for the labour is
more than the labour supply in the market. At that time when the employment supply is low the
organizations have to attract the employees for the jobs and pay the higher wages which results
in increase in inflation in job (Ghafari, Safaei Shakib, MOSIVAND, 2017). The government
plays very key role at the time of inflation and unemployment where, at the time of inflation
government increases the taxes rate and reduces the expenditure in the UK country. Where the
borrowing become very expensive as the inflation bring with high rate of interest and taxes,
people start to save more and reduces their spending on the products and market. Inflation brings
high cost on all the factor and increase the prices of the product in the market. These increases
the spending of the citizen by purchasing at the high prises which leads to decrease in savings in
the households and bring back to the balanced level of the economy. The government have
control the inflation by using the various tools like monetary policy and fiscal policy where the
government changes their and decreases the expenditure and tax rate at the time of inflation and
same with the at a time of deflation government increases the expenditure and reduces the tax

rate in the market which results in increase in spending by the citizens and investment in the
market to gain the inflation point is called the fiscal policy of the government whereas, decrease
in the supply of money in the market and interest rate is called monetary policy which results in
the less investment and more spending by the household fall back to the balanced economy of
the country. These tools are used by the government and the Central bank of England
(Holtfrerich, 2017).
Significance of economic data within the business environment and be able to use appropriate
techniques.
The data provide with the inflation and unemployment of UK economy in last few years when
the government and people of country are facing the problems to overcome it.
Inflation period of the UK economy
The consumer price index is the key tool to measure the inflation in the country. This is
measured by Bank of England with the international standard with 2% inflation target. The
Retail Price index is older techniques used by the government earlier which does not meet the
international standard. The CPI rate shows the 0.3% which decrease in the month of November
and from the month of October art 0.7% whereas the RPI index shown at 0.9% on November and
Illustration 1: Inflation period of UK

which was at 1.3% in October 2020. the major or CPI is comes from the recreation and culture
like clothing, food and beverages have the largest downward contribution.
Through the graph shown above, the UK economy faces the huge recession in the year 2016 and
rises from that points with the help of government and central bank by using fiscal tools and
monetary policy and start grow in the year 2017 which reached the target and efficiently and
continue to grow in the year of 2018 with the high inflation period results in increase in the
prices and employment in the country and where the people are more spending power at that
time and investing the market. Government increases the tax rate and decrease the money supply
in the market and also decrease in expenditure by the government. With the effect of monetary
policy and fiscal policy UK economy start decreasing the high inflation rate and decreases to
their inflation target in 2019. by the time of 2020 due to pandemic arises in the world the
economy start decrease from their target inflation and recession had arrived again in the country.
This results again in the unemployment where large number of people lose their jobs due to lock
down.
Unemployment period of UK economy.
The above graph indicate that the UK economy the unemployment rate at 2001 is very
low with 4.7% in the country (Meo, And et. al., 2018). At that time the UK economy is well
Illustration 2: Unemployment rate of UK economy

running and maintain the economy balance but as we can see it arises from 2001 and increases to
8.4% in 2011 when the UK economy hits the biggest recession again and the people of the
country have to suffered again with their jobs and spending. But as the recession covered by the
economy and achieve the target inflation the unemployment rate again decreases in the country
in 2019 but after that the pandemic hits the world economy and suffer the lot of people jobs and
money to survive the year. The UK country hits the most and recession starts again where the
government and the citizen have to suffered from huge lack of money (Visnja, et.al., 2016). The
country have taken certain steps to achieve the target inflation again and back to normal running
of the economy. Where unemployment rate in 2020 rises with 4.12% which was increases
compare with 2019 is 3.85% .
Political and economic Factor of UK economy:
Political Factor: The UK economy crises faces by them with the result of change in
political parties which result in change in policies, rules and regulation of the country and doing
of business. This affect the businesses which is created the rule and regulation on import and
export, development of the country, social factors, budgets etc. which affect the businesses
working and the economy of the country. Every party change the fiscal policy and monetary
policy according to their way of look out. The change in interest rate and investment affect the
economy where everyone is affected by the changes. This changes can be positive or negative
impact on the economy and increase or decrease the risk of the business to suffer lose or to earn
the profits. Political environment changes because of the policies and steps taken by the
prevailing government on every level in the country and include federal, state and local
authorities of the country (Vermeulen, 2017).
Economic factor: This factor effect the financial state of the business and can be local
level or global level. include the goods and services, production, income level, GDP and
unemployment in the country which is affected by the interest rate fix by the government,
exchange rate of the currency, due to recession and inflation, government changes taxes which
also affect the economic factor and with demand and supply of the goods. UK's economy is one
of the highest GDP in the world. The UK government is focusing on the foreign direct
investment to filling the effects with the highest recession faced by them at the time of 2008-

2009 and to reduce the unemployment rate and achieve the target inflation set by the
government. Hence, economic factors are the environmental factors which are affected
externally to the business and operation of the business and create the unemployment in the
country.
CONCLUSION
This report had concluded that the business economics involve study related to
organization, marketing and other factors affecting the economy from inflation and
unemployment side. The government play a vital role in economic to solve the problem of
inflation and unemployment. The economic data have their significance in business environment
in different factors and there issues in political and economic of inflation and unemployment
problem in the economy. Where in country, many of them start saving their money as a result of
losing the jobs and recession in the economy (Moşteanu, Faccia, Cavaliere, 2020). The
government have taken certain steps that help the country to bring back at the target inflation and
maintain the employment in the country and enough amount of saving due to changes made by
different parties.

REFERENCES
Books and journals
Čepel, M. and et. al., 2018. Business environment quality index in the SME segment. Journal of
Competitiveness.
Ghafari, H., Safaei Shakib, A. and MOSIVAND, M., 2017. Optimal rate of unemployment in
Iran: Dynamic Optimization Approach. Journal of Applied Economics Studies in
Iran. 6(23). pp.117-136.
Holtfrerich, C.L., 2017. Germany and the International Economy: The Role of the German
Inflation in Overcoming the 1920/1 United States and World Depression. In German
Industry and German Industrialisation (pp. 265-285). Routledge.
Meo, M.S. And et. al., 2018. Asymmetric impact of inflation and unemployment on poverty in
Pakistan: new evidence from asymmetric ARDL cointegration. Asia Pacific Journal of
Social Work and Development. 28(4). pp.295-310.
Visnja, I., and et.al., 2016. Economic Factors Affecting Business Decision Making.
Moşteanu, N.R., Faccia, A. and Cavaliere, L.P.L., 2020, August. Digitalization and green
economy-changes of business perspectives. In Proceedings of the 2020 4th International
Conference on Cloud and Big Data Computing(pp. 108-112).
Vermeulen, J.C., 2017. Inflation and unemployment in South Africa: Is the Phillips curve still
dead?. Southern African Business Review. 21(1). pp.20-54.
Online
Inflation: Key Economic Indicators. 2020. [Online]. Available through:
<https://commonslibrary.parliament.uk/research-briefings/sn02792/>
Unemployment rate in the United Kingdom (UK) from 1999 to 2020. 2020. [Online]. Available
through: <https://www.statista.com/statistics/263709/unemployment-rate-in-the-united-
kingdom/>.
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