UK Economy: COVID-19 Impact, Sustainable Growth & Measurement

This essay examines the macroeconomic effects of the COVID-19 lockdown on the UK economy, focusing on its impact on the labor market, fiscal policies, and various sectors. It discusses the decline in the labor market due to job losses and the subsequent impact on businesses, as well as the rise in government borrowing. The essay also explores how an economy can achieve sustainable economic growth through investments in technology and infrastructure modernization. Furthermore, it analyzes different methods of measuring economic growth, including the income approach, economic growth factors, and the output approach, providing a comprehensive overview of the challenges and strategies for economic recovery and sustainable development in the UK.

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Exam

Table of Contents
SECTION A ....................................................................................................................................1
Section B .........................................................................................................................................3
Discuss and explain the macroeconomics effects “covid- 19 lockdown has had on the UK
economy .....................................................................................................................................3
Explain how an economy can achieve sustainable economic growth and analyse the different
methods of measuring economic growth? ..................................................................................4
REFERENCES................................................................................................................................6

SECTION A
1) Monetary policy committee: This committee consists nine members such as governor,
deputy governors for financial stability, banking, monetary policy, four external members and
one chief economist. They all are appointed directly through chancellor. The MPC is based on
the development of the fiscal policy and other features of economic policies of the government
and on the other hand the chancellor is fully updated about monetary policy. Each member of
this committee has full knowledge and expertise in this area of monetary policies and economies.
(Oberholzer, B., 2020)
Impact on inflation: The monetary policy committee is accountable for setting the interest rate
of benchmark in the nation. It influence that how much value or costs are arising that is called
inflation. It is set fort the purpose to attain the target of government for maintain the inflation rate
at 2%. the less and stable inflation is found best for the economy of the UK. It is known as the
main motive of monetary policy. The central bank increase the interest rate of short term that rise
the inflation. The rule of the policies closes the circle.
2) Fiscal Policy: The objective of the treasury for fiscal policy is to assure the public finance
sustainability, value for monetary term for the taxpayer, economic growth and the strong, sustain
balance sheets. (Pullen, J., 2021)
Effectiveness of the fiscal policy: It may be effective in attaining higher growth of the economy
as spending of government, if it is utilized as a tool then it can directly enhance aggregate
demand. It basically control or manage the inflation and stability of the price.
 It helps in mobilising the considerable amount of the factors for investing their number of
projections.
 It assists in furnishing stimulus to upgrade the rate of savings.
 It provides the sufficient incentives to the private field to spread or expand their
activities.
 It's main purpose is to decline the balance of payments. It has been reduced the deficit of
the budget, unemployment and maximize the consumption of the domestic.
 It basically takes time to be executed and can provide rise to conflicts between their
objectives.
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 It increase the growth of economic because there are number of fiscal that measures a
nation employs alleviate elaboration of the national economy. For instance, if the
government of the UK declines the tax rates then the human beings and businesses will
have higher incentive to finance and lead the economy forward.
4) Effects of decreasing the interest rate:
 Decline the incentive to save: The low interest rate provide a little return from savings.
This low incentive to save will inspire customer or individual to expend rather than keep
or hold onto money.
 Less cost of borrowing: The low rate of interest make the borrowing cost cheaper even
more. It will inspire the persons and enterprise to take out the loans and borrowings to
manager of the finance greater spending and the investment.(Sawyer, M., 2020)
 Cheaper mortgage interest payments: when The interest rate falls down then it will
decline the mortgage cost payments that are based on monthly. It will remain
householders with more useable income and should cause raise in costumer spending.
 Increase in asset price: The less interest rate make it more reliable and attractive to
purchase assets like housing. It will cause raising in the cost of house as well as their
wealth. Maximizing in wealth will inspire the costumer spending as confidence will be
increase or higher.
 Depreciation: If the government of the UK decline or decrease the rate of interest then it
makes it less reliable and attractive to secure or save the money. So, there will be low
demand for the pound sterling. It helps in maximize aggregate demand.
8) Unemployment: It refers to the person who has the working age but they are jobless and
capable to do the work and actively finding the job.
Types of unemployment
 Frictional: it is caused by temporary transition in employee's lives like when an
employee moves to new state or city and has got a new job. It involves person that enter
into the labour force. For instance, graduate student who have recently completed.
 Structural: It is caused by the unmatch or mismatch in the demographic of the
employees and the kinds of jobs available.(Sen, P., 2020)
 Cyclical: It refers to the reducing the demand. When there is not proper demand in the
economy for the commodities then firm can not offer the jobs or employment.
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 Seasonal: It refers to various different industries or parts of the labour market that have
availability due to the several seasons.
Methods that used to measure the unemployment
 The establishment report: In this method, the random samples of employers is taken or
asked that how many person are on their payrolls.
 The survey of current population: It refers to the household survey.
9) Economic cycle: It refers to the business cycle that contains the circular movement of the
economy. It has four stages-
1. Expansion: At the time of expansion, the economy experiences rapid growth rapidly and
the rate of interest tend to be low, production maximizes and the pressures of inflationary
build.
2. Peak: It refers to the cycle that is reached when the growth meets wit their maximum
rate(Sers, M.R. and Victor, P.A., 2020)
3. Contraction: It consists the correction that incurs over a period of contraction when the
growth slows down.
4. Trough: It comprise the cycle that is reached when the firm hits low point and the
growth starts to retrieve.
Section B
Discuss and explain the macroeconomics effects “covid- 19 lockdown has had on the UK
economy
It has been identified that macroeconomics is the branch of economics which is dealing
with the performance, structure, behaviour an decision making of an economy as a whole. It has
been identified that there are diverse effect of the macroeconomics due to the coronavirus spread
and the lockdown in UK economy. The lockdown has adversely impacted the travel, financial
market, employment and the other number of industries. It has been identified that there was
decline in the number of funds from the charities where thousand of funds raising events were
cancelled de to the pandemic(Casey, E., 2020). The coronavirus was the most effective to the
lives of the people and as well as impacted the economy. There are various macroeconomics
effects due to the covid-19 in UK economy which is discussed below;
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 Labour market- it has been identified that the current labour market has been declined
and there is crises in the market.. as the companies either have fired the people or people
are leaving their jobs because of the fear of the spread of virus. This has impacted the
economy where there was shortage of the labour in the market and this can impacted the
companies in conducting their business operations(Oberholzer, B., 2020)
 Fiscal impacts- There was rise in the government bowstrings as a share of the economy.
As the economy was shutdown which has lead to the decline in the GDP rate and has the
various financial impacts over the government. The businesses was not able to run and
this has lead to the impact over economy in monetary terms.
 Change in policies- This is the macroeconomic effects where the government and the
other authorities need to change in the policies which has impacted the UK economy.
Due to the behavioural changes the choices and everything was changing which has lead
to change in the policies for the government and as well as for the business organisations.
 Sectors which contributed- There was the high contribution of the food services,
informations and communication which has contributed to increase within the economy
due to the lockdown. As there was fall in the health sector which was impacting the
economy and the conditions. There was decline the the GDP growth of the UK economy.
Explain how an economy can achieve sustainable economic growth and analyse the different
methods of measuring economic growth?
It is very important for every economy to achieve the sustainable economic growth in
order to be effective and efficient. As the government across the world consider implementing
the fiscal incentives in order to combat the economic downside from the pandemic and to
recover with the threats which is spread by the changes in the climate. There are several
opportunities in order to get an advantage from the sustainable revolution. An economy can
achieve the sustainable economic growth by the various ways such as :
 Invest in future- it is very important for the business organisations to invest in the new
technologies which will help for the economic growth. This can be such as in batteries,
electric transportation, hydrogen, artificial intelligence. As these will benefit the economy
to have the future develop and growth. (Sawyer, 2020)
 Modernise existing infrastructure- The facility infrastructure has been allowed to
determine how the modern infrastructure can lead to the growth and development of the
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economy. In order to meet the modern standards it is very important for the economy to
achieve the sustainable growth by adopting to the modern infrastructure within the
development of economy and the areas.
The economists use the variety of methods in order to determine how quickly the economy is
growing. Some of the various methods of measuring economic growth are discussed below;
 Income approach- this is the approach which can be used where the income which has
been earned from the production of the products and services is consider as the starting
point for the GDP income approach. It is calculated by all the factors of production in an
economy using this method. The formula to calculate is total national income , ales taxes
depreciation foreign factor income are added(Carnevali, 2022).
 Economic growth factors- This is the another approach where the economy can consider
the growth in the factors of production and improving the quality and quantity of all the
factors. It is very important to focus on the factors such as land, labour, technology,
capital which is most effective in order to measure the growth of the economy.
 Output approach- This is the approach where the monetary or market value of all the
products and services produced within the borders of the country is been calculated
considering the GDP output method. It has been analysed that GDP at constant prices or
real GDP is calculated in order to avoid a distorted measure of GDP because of the
changes in price level(Sers, and Victor, 2020).
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REFERENCES
Books and Journals
Cachanosky, N., 2021. Microfoundations and macroeconomics: 20 years. The Review of Austrian
Economics, 34(2), pp.279-288.
Carnevali, E., 2022. Competitive vs cumulative approach in teaching macroeconomics: Some
thoughts on recent popular textbooks. PSL Quarterly Review, 75(301).
Casey, E., 2020. Do macroeconomic forecasters use macroeconomics to forecast?. International
Journal of Forecasting, 36(4), pp.1439-1453.
Chakrabarti, R., Del Negro, M., di Giovanni, J. and Pilossoph, L., 2022. Climate Change:
Implications for Macroeconomics (No. 20220707). Federal Reserve Bank of New York.
Komissarova, K., 2022. Essays in Spatial Economics and Macroeconomics (Doctoral
dissertation, New York University).
Oberholzer, B., 2020. Development Macroeconomics: Alternative Strategies for Growth. Edward
Elgar Publishing.
Pullen, J., 2021. The Macroeconomics of Malthus. Routledge.
Sawyer, M., 2020. The past, present and future of evolutionary macroeconomics. Review of
Evolutionary Political Economy, 1(1), pp.37-54.
Sen, P., 2020. Macroeconomics and the Environment. In Oxford Research Encyclopedia of
Environmental Science.
Sers, M.R. and Victor, P.A., 2020. Macroeconomics and the environment. In A Research Agenda
for Environmental Economics (pp. 88-105). Edward Elgar Publishing.
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