Impact of Fiscal and Monetary Policies on the UK Economy: A Report

This report provides a comprehensive overview of fiscal and monetary policies within the United Kingdom. It begins with an introduction that highlights the importance of these policies for economic growth and stability, particularly in the context of past financial crises. The report then details the roles of fiscal policy, including government spending and taxation, and monetary policy, focusing on interest rates and credit control, within the UK economy. It analyzes the impacts of these policies, such as tax policy, government expenditure, and the effects on the economic cycle, including the influence of factors like Brexit. The report uses graphs and data to illustrate the effects of these policies on GDP growth and other economic indicators. The conclusion emphasizes the vital role of both fiscal and monetary policies in maintaining a strong economy, while also acknowledging the potential for negative impacts due to political instability or improper implementation. The report is supported by references to academic sources.

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Cover content
• Introduction
• Role of Fiscal policy in UK
• Role of monetary policy in UK
• Impact of Fiscal and Monetary policy on the economy
• Conclusion
• References

Introduction
Growth of economy is totally depended on fiscal and monetary policy of the
country. Economy of United Kingdom faced problems through financial crises
in the past time period. In order to come out with this situation they are put
several efforts and appropriate strategies. Below mention presentation is
defining role of fiscal and monetary policy in United Kingdom. Thus, along
with their impact on the economy because these are the terms impacts
effectively in both positive as well as negative manner.

Role of Fiscal policy in UK
Fiscal policy includes changing the level of government spendings and
taxation for influencing the rate of economic growth. In simple term it can be
said that, fiscal policy refers how government of United Kingdom utilise the
budget which affect economic activities, income distribution which is
generated from several sectors and allocation of resources.

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To achieve economic stability
Stabilisation of price level
 To attain maximum welfare of the people.
 Enhancement in savings

Impact of Fiscal and Monetary
policy on the economy
A fiscal and monetary policy are essential tools which bring an impact a
country's as well as authorities to influence the economy of United Kingdom
which is based on various issues such as tax policy, government expenditure
and business cycle and forecasting where economy is moving that is recession
and boom period of an economy. The monetary authorities needs to make an
appropriate predictions based on past records to regulate the money flow and
the rate of interest.

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As per the above mention graph, this level of borrowing give an economic
stimulus to the depresses economy. Although, there is high level of political
cost for borrowing several legal permissions or rights for gaining specific
authority. At the time of recession go vernment can rise aggregate demand
by enhancing their spendings on various goods and reducing taxes. Such
practices result in increasing economic growth and reducing unemployment.
From the above graphical presentation, it can be analysed that percentage of
GDP growth increased by 9.9 percent in year 2010 and then declined
respectively.

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Below mention is that how Fiscal policy is used by government for trying to
accomplish their goals and objectives-
Basis Fiscal Policy
Tool Tax and government spending
Effect Budget deficit
Distribution Depends which taxes raise
Exchange Rate No effect on exchange rate
Supply-Side Higher taxes may affect incentives to work
Politics Changing tax and government spending
highly political
Liquidity Trap Fiscal policy advised in very deep recession

Role of monetary policy in UK
Monetary policy is the part of macro economics which is arranged down by
central banks. There are three major tools which is employs by the same
policy : buying and selling of national debts, changing the rate of interest by
modifying reserve requirement and changing credit restriction.

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The legal bodies only fixed the inflation target of 2% inflation. Whereas, in
some exception case conventional monetary policy is used by bank of UK. For
example, in between of 2009 and 2017 interest rate is low which was not
sufficient to restore normal level of economic growth, thus bank pursued
quantitative easing, it is an policy involved increasing money supply and
purchasing government bonds.