Analyzing Macroeconomic Policy, GDP, and Sterling Devaluation Impact

This assignment delves into the significance of Gross Domestic Product (GDP) in macroeconomic policy and analyzes the impact of sterling's devaluation on the United Kingdom's current account. It discusses the limitations of GDP as a sole indicator of economic well-being, highlighting its inability to account for income disparity and the distribution of wealth. Furthermore, it explores the elasticities model of devaluation to understand how the fall in the value of sterling affects the UK economy, particularly after Brexit. Factors such as interest rates, uncertainty, and political instability are examined as drivers of sterling's devaluation, along with the consequences for foreign goods prices, inflation, exports, and economic growth. The assignment references various books and journals to support its analysis of these complex economic issues.

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Table of Contents
Question: 3.......................................................................................................................................3
Explain the given statement and the suggestion that the macroeconomic policy markers
should abandon GDP...................................................................................................................3
Question: 5.......................................................................................................................................4
What does the elasticities model of devaluation analyse the impact of sterling's devaluation on
the current account of UK...........................................................................................................4
REFERENCES................................................................................................................................7

Question: 3
Explain the given statement and the suggestion that the macroeconomic policy markers
should abandon GDP.
GDP is the acronym which is commonly use in the economic world and it is gross
domestic profit and it has some of the impact on the global business and all the start ups and it is
used for the understanding of the size of the business. It is the compiled force which is very
helpful for the country growth and it is the criteria on which the policies of the market is made.
And it is also considered the major part of the study of the economic world.
GDP is the force which is also related to human welfare and it is the best display option for the
policy makers that they use gross domestic product as the indicator which helps the country to
know the best about their working of the business and considering the company growth with the
human welfare(Fooks and Godziewski, 2022). It is also interconnected with the different factors
that are very important for the business. And in affirmative manner it is concerned with life
expectancy and it is then negatively correlated
if there is proper analysis about GDP then there is a concept which can be explained and that is
the issue of roper distribution. As GDP has always been measure of output, with utilizing the
present prices it evaluates the main value of commodities and products that are here for the final
utilization. Turning the same prices makes it possible that there is proper calculation of GDP
growth.
GDP is the monetary value of the final commodities and services. It calculates all the factors
that are there within all the borders and not all the activities are properly are that appropriate so
that they can be used for the calculation of the gross domestic product. Fiscal policy is the major
considered point which is used by the company when they are making the policies for the
company and they need to put force on having more profit in their company so that they can give
their part for the calculation of good GDP growth development. When the economist want to
compare the living standard of the people with the country wealth then they are analysing the
gross domestic product of the country so it is important for the policy makers that they are
examining all the things in the best way. According to the study calculating the goods and
services of the country does not display the country productivity and contribution in GDP and

the amount which is earned by the society by making some of the effort of the capital and the
labour. Also this process has helped the policy makers to determine the impact of different tax
and using the policy to have good monetary policy in the respective company. According to
some economists, is GDP's inability to account for income disparity(Granda-Carvajal and
García-Callejas, 2022). Since GDP is measured as an average of per capita output, it reflects
increases or decreases in overall economic production but not changes in specific segments of a
population. Poorer populations within a single economy can be getting poorer, even though
GDP is increasing. In turn, increasing wealth inequality. It is the total study which is totally
concerned with the growth of the society by the use of GDP and it is important that al the factors
are justified in the best way. And this is believed by all of all economist that performance of the
company is determined by the amount of the contribution that has been given by the company to
the improvisation of the gross domestic product. And the policy makers should abandon the GDP
as a goal of economic policy as it is not something to put that much consideration to and this has
been discussed in the descriptive study of the economist that they are very basic.
Question: 5
What does the elasticities model of devaluation analyse the impact of sterling's devaluation on
the current account of UK.
When the United Kingdom have leave the European Union, There is the major impact on
the value as the GBP is abbreviation for the British pound sterling, it id the official currency of
united Kingdom. Since the Brixit vote in 2016, the overall exchange rate of sterling against the
leading currencies has fallen significantly(Cui and et. al., 2022). It is being analysed to reflect the
negative outlook in the international investors for the economy of UK. Over the last five years,
Brexit has been one of the major factor which is influencing the overall exchange rate volatility
and the given value of the sterling against the other leader countries. This is basically happened
as due to the rise in the overall expectation of the trade frictions among the the UK and the
largest trade partners. Also the rise in the uncertainty and the huge impact of government
instability which leads to financial association to sell their sterling in less value. There are other
more organisation which are sold-denominated assets which also leads to reduce the overall
value of sterling in comparison to the other currencies.

According to the elasticities model of devaluation, it can be said that the when the
prices of sterling is reducing then there is the demand of the goods as the people are easy to buy
the gods which are affordable to them who are residential outside the UK as it leads to reduce
the interest on export by which trade deficit can be maintain by the country and it be further
estimated with the help of demand elasticity. There are various aspects which enlist the factors
due to which there is the down -fall in the value of the sterling's due to the impact of leave EU.
Following factors are explained as follows:
 Interest rates: change in the interest rates is the primary driver for the exchange rates
and this is due to the huge impact of domestic interest rates on the relative return on
given assets in various nations. For example the bank of England has cut down its interest
rate in August 2016 from 0.5% to 0.25%. The major fall in the value of sterling can not
there be explained by reaction of the financial market participants to this specific event.
 Uncertainty and political instability: Change in the overall risk also affect the expected
returns and it leads to influence the investors decisions. Increasing uncertainty around the
various factors that includes the future performance of the company, the outlook of the
economy and the interest rates. These all aspects can make political stability to hold all
the assets in the particular currency which is more risky and this leads to reduce the
delaying the overall flow of investment within the economy(Cristea and et. al., 2022).
 There is the huge risk in the overall consideration by substantial and the presentist
political instability in the United Kingdom that is surrounded by the depends uncertainty
post-Brexit trading relationships and liking to the economic output.
There are following consequences of fall in sterling are given below:
 Due to the immediate consequences of fall in the sterling, there is the rise in the prices of
foreign goods and services and this is become more expensive for the people who are
residential in UK. This leads to have inflation and huge living cost.
 Weaker currency can Leads to have more exports by reducing the overall cost of
domestic goods and serveries to the people who are residential outside the UK. This
potentially have the positive consequences for the country's trade deficit and the overall
aggregate economic growth.
There are following expectations of the investors which are incorporated quickly into
currency markets and due to the speed of the trade. Any of the information which affects the

expectations related to the currency which will quickly be reflected in the given exchange rates.
When the market participants shows the negative future effect on the overall investment in the
currency which will sell the currency and this is leading to cause fall in the prices of sterling.

REFERENCES
Books and Journals
Cristea, M. and et. al., 2022. European Insurance Market Development under the Economic
Welfare: Advanced Econometric Approaches. In Insurance and Risk Management for
Disruptions in Social, Economic and Environmental Systems: Decision and Control Allocations
within New Domains of Risk. Emerald Publishing Limited.
Cui, L. and et. al., 2022. Exploring the role of renewable energy, urbanization and structural
change for environmental sustainability: Comparative analysis for practical
implications. Renewable Energy. 184. pp.215-224.
Fooks, G.J. and Godziewski, C., 2022. The World Health Organization, Corporate Power, and
the Prevention and Management of Conflicts of Interest in Nutrition Policy: Comment
on" Towards Preventing and Managing Conflict of Interest in Nutrition Policy? An
Analysis of Submissions to a Consultation on a Draft WHO Tool". International
Journal of Health Policy & Management. 11(2).
Granda-Carvajal, C. and García-Callejas, D., 2022. Informality, tax policy and the business
cycle: exploring the links. International Tax and Public Finance, pp.1-53.
Kalinina, A.E., Inshakova, A.O. and Elkhina, I.A., 2022. ANALYZING STRUCTURAL
SHIFTS AND ASSESSING STRUCTURAL DIFFERENCES IN ECONOMIES OF
DEVELOPED AND DEVELOPING COUNTRIES. The Transformation of Social
Relationships in Industry 4.0: Economic Security and Legal Prevention, p.51.
Mayhew, K., 2022. Brexit and UK higher education. Oxford Review of Economic Policy. 38(1).
pp.179-187.
Possantti, I. and Marques, G., 2022. A modelling framework for nature-based solutions
expansion planning considering the benefits to downstream urban water
users. Environmental Modelling & Software, p.105381.