Analyzing Macroeconomic Principles, UK Challenges, and Applications

This essay provides an overview of macroeconomics, its objectives, and its application to improve economic welfare, focusing on the United Kingdom. It defines macroeconomics and discusses key concepts like GDP, balance of payments, and exchange rates. The essay elaborates on macroeconomic policies, including monetary and fiscal policies, used to address economic challenges such as inflation and unemployment. It also highlights the challenges faced by the UK government in the last ten years, including the impact of the pandemic on output, unemployment, and international trade. The essay concludes by briefly mentioning potential solutions and the role of government policies in addressing these challenges, emphasizing the importance of economic well-being and stability.

Principles and
Applications of
Macroeconomics

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Defining macroeconomics and its objectives.....................................................................1
2. Application of macroeconomic policies to improve the economic welfare.......................3
3. Elaborating the challenges faced by the UK government in last ten years........................5
4. Describing the solutions of the challenges addressed above..............................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Micro economics and macro economics are the 2 main branch of economics that
analyzes the overall functioning of economy. Micro economics is basically analyzed that
demand and supply within the within the market where is macroeconomics analyses the
aggregate demand mountain supply and the economy as a whole (Bunn, Pugh, and Yeates,
2018)Macro economics has a wide range of application and consideration in the field of gross
domestic products And that is defined as a entire amount of products and services which are
being generated within given accounting year. This basically includes the economic structure of
United Kingdom. In this given assignmentThe topic of economics well being will being will be
discussed and and also analyze the surplus of the consumer and the producer which is referred to
the well being of economy. This also covered the government macroeconomics that the
government bodies of UK has been encountered ovencountered over the last 10 years also also
the recommendation for the further improvement.
MAIN BODY
1. Defining macroeconomics and its objectives.
Macroeconomics is the journal study of the economy that cover the demand and supply of
market and also manage the business cycle such as depressions and recessions. Macroeconomics
can be used to analyze the overall national income of the country and the theory of income and
employment employment moreover the theory of general prices level and the inflation and the
theory of economic growth and development the theory of investment functions the theory of
consumption functions all are the part of macroeconomics. There are various policies that the
government can implement with Indonesian soldier within the nation so that they can meet out
the objective of various policy. For having a effective and corrective judgment for the market,
The government predefines and analyze such macroeconomics in an appropriate manner. The
main purpose of such policy is to keep the stable and growing economy in the world and also
analyze how they can create jobs and enhance the living standards of the people around the
nation. It also seek to close the economic divide between the people who are poor and wealthy.
These assistants functions which can be used by the government for attaining their objectives
and aim in context to macroeconomics. As there are various goals of macro economics that are
discussed further.
Gross domestic product refers to that total number of goods and services which is being
produced in the accounting year. Macroeconomics approaches for attaining such necessary level
of GDP so that they can expand their economy in the world. There is a big problem with
unequal wealth distribution in the economy which leads to create the problem because of
wealthy people become more wealthier while people who are poor become more poorer this
resulting in Is slower economic growth in the country. The analysis of all the financial
transaction which are being done during the accounting year is called as the balance of payment.
Current account capital account and the financial account are the 3 key sections of balance of
payment. This policy helps in achieving the equilibrium in economics.
When the economy increases its size the income of people increases which lead to improve
their buying behavior and purchasing power. They also allow them to spend more portion of
their income for improving the quality of life. This is defined as a rate in which one nation
currency is valued to the currency of another country. This is being determined with the
exchange rate with the help of demand and supply that are essential to analyze the real exchange
rate within the economy. With the good results using microeconomics helps in attaining the
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eclithe equilibrium level of exchange rate in the market(Wen, and et.al., 2019). Long term
economic growth is being analyzed by using potential GDP Rather than the real GDP of the
country. It also helps in analyzing how much the economy is capable for reducing with the help
of available resources where is the real GDP uses the fixed prices by using the quantity and the
price of the base year. The macroeconomic economics helps the nation in achieving longterm
economic growth.
Economic system of UK.
The economic system refers to the technique pie which the government body or the society
give their resources and the economy so that they can get a best utilization in utilization in
possible manners of such resources. Command economic system traditional economic system
makes economic system market economic system are the 4 types of system. In a nation such as
United Kingdom, Vera mixed economic system is being utilized and it is defined as a hybrid of
plant plant or command economy and the market economy. The government analyzes lizes the
command economic system in which the production and the prices are fixed by the government
and the operations are being carried out for the advantage of the nation. Furthermore market
economic system is being controlled controlled by the forces of demand and supply.
2. Application of macroeconomic policies to improve the economic welfare.
Economic well being is the process of enhancing the use of economic resources which leads
to have economic growth and social welfare and type mommy. There are certain policies of
macroeconomics that are being made to increase the economic welfare. There are 3 types of
macroeconomics policy which are discussed further.
Conservative approach is the method that is being used to analyze the concern such as
shortfall or the inflation in the given budget(Zhang, and et.al., 2020). The central bank of the
nation fixed the monetary policy. Expansionary and contractionary monetary policy Are the 2
types of monetary policy in which the interest rate Is being minimized and and which leads to
increase the overall supply of money within the economy and enhance the public expenditure. In
other policy interest rate are being raisedWhich leads to reduce the quantity of money in the
market and also minimizes the overall buying capacity of the people.
There are 2 basic strategy that is being used by this approach and these are standard
keyesian and hetrodox approach in which The standard approach is being used to analyze the
problem of unemployment and the recession in the economy. The main concern of this approach
is to increase the buying behavior of the people so that they can contribute to the economic road.
Heterodox approach is the one which is used for regulating stability and employment in the
economy.
The United Kingdom is an autonomous country with England covering the majority of its
territory. There are numerous ways to promote economic wellbeing by utilising the monetary,
fiscal, and supply sides. The following are the major points in economic wellbeing that can be
articulated - United Kingdom is the autonomous nation and covering the majority of it's territory
and there are certain ways by which they can promote their economic well being by make the
best use of their supply sites monetary and fiscal policy. There are certain points of economic
well being that are illustrated below. Labor market defined as a employment market in which
the demand and supply for employees may be met is met in this way. The another advantage of
hiring the employees is that they are producing more jobs in the economy which can we which
can control the poverty.
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Stabilizing the Inflation, In January 2020, annual inflation in the United Kingdom rose to
5.5 percent, beating market predictions of 5.4 percent. Housing and commodity prices both had a
role (7.1 percent vs. 6.9%), with gas (28.3 percent vs. 28.1%) and food (4.3 percent vs. 4.2
percent) accounting for the majority of the rise (7.1 percent vs. 6.9%). (United Kingdom
Inflation Rate,2021). The government bodies of United Kingdom is restricting the flow of money
so that they can attain their policy such as inflation and the central bank of England is in charge
of this.
financial inclusion define total provision of financial services to all the industry of
technology and not doing any discrimination in long term basis. Financial inclusion can be
enhanced by Financial services can be delivered to most remote location which help in
economic wellbeing(Angelina, and Nugraha, 2020). Reducing gender gaps - On the basis of
cast creed and color there are numerous people who are insisting in the country. Economic
wealthy it's to feel the gap between the female and male member in the society so that there
cannot be any business among the distribution of wealth.
Wage differentials are define as the difference in the earning for the people who have the
same talent but living in different location. Wage disparities are the term which is being used for
this. This also helps on the overall forecast of GDP. This also result in that the idea of economic
well being impact the salary of the individual. In the Communist society, there are type of
behavior that is not acceptable and compromises must be made within the pay policy and wages
differentiation and this can be very in the form of occupational differentiation in the form
differentiation and more.
3. Elaborating the challenges faced by the UK government in last ten years.
There are certain issues That the government of United Kingdom has been encountered
in thencountered in the coming years that are discussed.
Pandemic
The pandemic has an impact on people's health, companies, and trade activities all across the
world. There are numerous effects on the UK economy that may be explained as follows: There
is a huge impact of pandemic on the lives of the people and trade activities in the world there are
certain effect on the economy of UK that are further discussed. A big drop out in the output, As
the average economy needs various production activities so that they can enhance the flow of
goods and services for analyzing the national revenue in the financial year. As the whole world
was analyzing the national revenue within the financial air and also going through a strict
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lockdown which prevented the supplier from delivering raw material to the manufacturer and
and impacting the overall production process. Because they are doing work from home which are
not feasible for the company as a result the overall output output in each industry come to a
minimum ratio.
Unemployment is defined as the condition in which the people have lost their job and the
economy earnings which leads to reduce the overall income in the economy. Unemployment are
of various types that include frictional cyclical technical structure under employment and more.
It is a type of unemployment in which people leave their job to look for another another is called
fractional unemployment in the United Kingdom. Frictional unemployment defined to the period
of time between job replacement.
As per the given graph, The unemployment rate is reducing due to the bank of England is
increasing the overall flow of money in the economy and also given permission to their potential
investors to withdraw their cash from the bank so that they can have the fight opportunity of jobs
and people can also apply for employment in the various sector in which they are interested.
There is a reduction in the foreign commercial activities and it is critical to analyze on
International business so that they can improve the economic growth. The number of exports and
import has been reduced which results in a covid 19 and the currency flow is being destructed.
And the worldwide shutdown has impacted the free flow of good sense services in the other
nation.
In United Kingdom the budget is being prepared by the chancellor and the Parliament of United
Kingdom makes certain items that includes forecasting of unemployment prices and the balance
of payment with the better discussion on the physical and monetry policy. Government need to
give a percentage of their resources for the social welfare. During the time of pandemic the
government has spent money for giving medical services to the people and feeding the hungry
which residents which result in outweigh of the expenditure and the revenue.
Brexit
This is the scenario in which United Kingdom exit from the European Union. The United
Kingdom has various repercussions that are given below. This is the time of Britain Leave, The
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various number of people get unemployed but Employment level reduces to greater amount.
Although the Trade and Cooperation Agreement (TCA) helps for the greater flexibility in the
taxation and the quotas so that they can deal with the various customs check that helps and
problems solving for the local residents.
The level of GDP fell as there is a big drop in the overall industrial activities and this activities
and the reduction in the output. Inflation is being increasing day-by-day with the rise in the price
level and reduction in the buying behavior of the people (HUANG, and et.al., 2022).
Monetary policy
The bank of England and make a monetary policy in the United Kingdom. It is necessary to be
framed by the center bank of various nation. They organize meetings 8 time every year. This
involves the changes in the interest interest rate which can be used to regulatetor overall supply
of money. And when it comes to make the monetary policy in the United Kingdom there are
some of the obstacles to analyzed and overcome which are given below.
They does not provide support to the local people as the monetary policy is being executed
around the contract and not applicable to any particular region or the state. It might generate the
certain issue which leads to increase or decrease the overall supply of money.
This process take month to execute the monetary policy once it's been prepared. The result
this is the another problem of the monetary policy because of the rapid application ofSuch
instruments for removing the difficulties in the monetary policy.
The economy's growth is hampered by this problem with monetary policy implementation.
The extremely high inflation is being explained as a hyper inflation. This minimized the board of
actual currency since the prices of all the product and services begin to climb fast. The value of
the currency is Reducing with the results of its circumstances. It is basically caused by
increasing in the supply of money and not meeting the economic growth in the country.
4. Describing the solutions of the challenges addressed above.
There are certain approaches that are being analyzed in order to sort the raised issue.
Every nation has the scarcity of resources since the resources are limited in the economy and
the yet there are alternative views for such resources. It is the obligation for the government to
deal with such problem of limited resources by making the best use of them that can lead to
increase the overall economic growth of the country(Yang, and et.al., 2019). Contractionary
monetary policy Is the type of policy in which the overall interest rate is being increased and the
supply of money is reduced which leads to minimize the buying behaviour of the consumer. In
United Kingdom the government the government utilized the prices and the visas so that the
current problem of excess inflation can be minimized.
The government of United Kingdom choose to implement a various training sessions so that
they can increase the knowledge of household. Transferring family savings to the investment
centhe investment sector is important for every economy so that they can contribute to the
overall GDP of the country. Increasing an investment also held in gaining the public trust by
launching certain awareness campaign about the shifting of household fund to the investing
sectors or the industries. Increasing aggregate demand and supply which may leads to increase
the overall investment. On other hand, demand can enhance the purchasing power of the people.
When the government of UK minimizes the interest rate and taxation in the country it will help
in boosting the public expenditure and also minimizes the it's the buying part of the economy.
CONCLUSION
From the above mentioned sources, Macroeconomics is defined as the study of aggregate
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demand and supply. The major role of macro economics is to help in achieving the price
stability And attaining that sufficient amount of production within the economy so that they can
meet the state of a equilibrium in the market. In United Kingdom the government use a different
instrument that includes physical policy and monetary policy so that they can improve the overall
growth domestic product of an economy. The report report and banquet are 2 monitoring tools
which helps the various nation in increasing decrease in the tax rate as well as the borrowing
from the different country. The government must must analyze various issues that influence the
overall functioning of the economy as every problem has a solution so the government has taken
various steps to increase employment and balance the educate demand and supply in the market.
REFERENCES
Books and Journals
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impact of monetary policy on CO2 emissions in Asian economies. Sustainable
Development, 28(5), pp.1331-1346.
Bunn, P., Pugh, A. and Yeates, C., 2018. The distributional impact of monetary policy easing in
the UK between 2008 and 2014 (No. 720). Bank of England.
Wen, F., and et.al., 2019. Crude oil price shocks, monetary policy, and China's
economy. International Journal of Finance & Economics, 24(2), pp.812-827.
Angelina, S. and Nugraha, N.M., 2020. Effects of Monetary Policy on Inflation and National
Economy Based on Analysis of Bank Indonesia Annual Report. Technium Soc. Sci.
J., 10, p.423.
Zhang, D., and et.al., 2020. The impact of US monetary policy on Chinese enterprises’ R&D
investment. Finance Research Letters, 35, p.101301.
Brunner, K., 2018. Money Supply Process and Monetary Policy in an Open Economy 1.
In International trade and money (pp. 127-166). Routledge.
HUANG, C.Y., and et.al., 2022. Monetary Policy in a Schumpeterian Growth Model with
Vertical R&D Sectors. Journal of Money, Credit and Banking.
Epstein, G. and Schor, J.B., 2019. Corporate profitability as a determinant of restrictive monetary
policy: Estimates for the postwar United States. Chapters, pp.185-197.
Glocker, C. and Piribauer, P., 2021. Digitalization, retail trade and monetary policy. Journal of
International Money and Finance, 112, p.102340.
Falck, E., Hoffmann, M. and Hürtgen, P., 2021. Disagreement about inflation expectations and
monetary policy transmission. Journal of Monetary Economics, 118, pp.15-31.
Yang, L., and et.al., 2019. Chinese shadow banking, financial regulation and effectiveness of
monetary policy. Pacific-Basin Finance Journal, 57, p.101169.
Chava, S. and Hsu, A., 2020. Financial constraints, monetary policy shocks, and the cross-
section of equity returns. The Review of Financial Studies, 33(9), pp.4367-4402.
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