Economic Report: UK Economy, Fiscal & Monetary Policies Analysis

This report provides an overview of the UK economy, beginning with an introduction to key economic terms and different economic systems. It then delves into the key features of the UK economy, highlighting its position as a globalized market-oriented economy. The report further analyzes the current macroeconomic issues faced by the UK, particularly the impact of Brexit on economic growth, business investment, and consumer spending. It also examines fiscal and monetary policies, including the role of the Bank of England in managing interest rates and influencing public spending to achieve macroeconomic objectives like low inflation and sustainable GDP growth. The conclusion summarizes the importance of economic analysis in understanding market conditions and developing effective strategies for economic improvement.

Economics

Table of Contents
INTRODUCTION...........................................................................................................................1
Explanation of key economic terms............................................................................................1
Different economic system..........................................................................................................1
Key features of UK economy......................................................................................................1
An analysis of current macroeconomic issues faced by UK economy........................................2
An understanding of fiscal and monetary sources of information...............................................3
Conclusion.......................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Economics refers to one of the social science concept, that mainly concerns with production,
consumption, distribution and transfer of wealth (Khan, 2020). It entails the financial growth
condition of a country, region or a particular in terms of material prosperity. A study is
conducted present report to identify key features of numerous economic systems, with
explanation of economic policies of UK. A discussion is also made on current macroeconomic
issues which are facing by economy of this nation.
Explanation of key economic terms
Economic terms are considered as the main key concept of conducting an analysis of a
marketplace, which includes supply and demand factors, to different types of policies (Charteris-
Black, 2019). Getting knowledge about such terms helps in understanding the situation of
market, more deeply. Through analysing terms like economic growth, scarcity or availability of
resources; condition of employment or unemployment; per capita income and more can be
determined. Along with this, these key terms also aid Economists to formulate GDP (Gross
Domestic Product), CPI (Consumer Price Index) and more. In general, economic subject is
mainly divided into two wider concepts – microeconomics (focuses on individual behaviour) and
macroeconomics (examine overall market at regional, national or international level).
Different economic system
Economic system can be defined as a way a society or an organisation organises the
production and distribute it, for meeting demands and basic desires of people (Garretsen and et.
al., 2019). It mainly concerns on type of goods or services that need to be produced, including
quantity and way to produce. In general, economic system is classified into market economic and
command system. In market economic system, only private firms are included, who are having
own factors of production, like labour, land, capital and other resources for producing goods.
While command economic system, includes those production factors which are publicly owned,
such as land and capital which are controlled by state government.
Key features of UK economy
Economy of UK is considered as highly developed as well as market oriented, that enables this
nation to stand on 6th largest position in the world in terms of GDP (Khan, 2020). The
composition of major countries like Scotland, England, Norther Ireland and New South Wales,
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has made UK as one of the most globalised economies. After Brexit, its economy is mostly seen
in the global spotlight, where leaving EU countries, resulted in sent the pound of UK on a roller
coaster ride. The other key features of UK economy include – 5th largest GDP of the world
currently; 3rd biggest exporter of crude petroleum in 2018; despite having 21st position as highest
population, it still is not 5th highest no. of billionaires. This nation also levies around 20% sales
tax on almost all goods and services, that helps in boosting economy much efficiently (9 mind-
blowing facts about the United Kingdom's economy, 2019). So, all these facts indicate good
economic condition of the United Kingdom despite of having large population.
An analysis of current macroeconomic issues faced by UK economy
Apart from key facts of good economic condition, a number of issues are facing current by
UK. After Brexit, it has predicted that there may be less or no improvement will be seen in
growth of The United Kingdom’s economy in 2020 (Charteris-Black, 2019). However, a slightly
increase may be seen within GDP growth by trading activities, but it will not boost the public
spending much higher (Economists predict little change for UK growth in 2020. 2019).
Figure 1: Economist survey, 2020
As per FT survey, a no-deal Brexit has sent the economy of UK into much deeper recession
as compared to last recession period of 2008. Due to uncertainties from British exit from UK, it
is continue curb the business investment, where its organisations face difficulties to retain both
foreign and national investors in their corporations (Garretsen and et. al., 2019). So, this leads to
ultimately create condition for increasing intense recession period in upcoming days. However,
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considering the report of 2019, it has seen that consumer spending also offset the slump within
business investment, with steady wage growth and strong employment, where low inflation rate
might help household finances. But poor productivity, decreasing interest of foreign investors
and recent volatility within labour market, arise economic issues for UK, in worst manner.
An understanding of fiscal and monetary sources of information
As currently UK economy face issues due to Brexit, therefore, its current macro-economic
objective is to achieve low rate of price incentive (Khan, 2020). For achievement of this goal, its
main instrument will be changes in interest rates monetary policy, which is set by BoE (Bank of
England). This policy (monetary policy) can be defined as changes within interest rates, values
of exchange rates, supply of money and credit etc. which directly influence public spending.
While fiscal policy includes changes within government spending, taxation and borrowing etc.,
which would also help in achievement of macro-economic objectives of a nation. The other main
objectives that UK Government is willing to accomplish includes – Stable low inflation (targeted
as 2.0% for CPI), sustainable growth of real GDP, Productivity improvement (increase in
competitiveness as well as global trade performance, raise living standard of people by giving
more employment and help companies to overcome from Brexit impact.
Conclusion
It has been summarised from this entire report, economy is one of the main aspect that not
only helps in evaluating present condition of market, but also helps in predicting the future also.
Through application of number of key concepts of economy, it becomes easy for government of
nation to take steps before the condition of market become more worsen. It helps public
authorities of economists to develop effective strategies for improving and increasing growth of
national, regional or individual economy.
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REFERENCES
Books and Journals
Charteris-Black, J., 2019. Metaphors of Brexit: No Cherries on the Cake?. Springer Nature.
Garretsen, H. and et. al., 2019. The relevance of personality traits for urban economic growth:
making space for psychological factors. Journal of Economic Geography, 19(3), pp.541-
565.
Khan, S. U., 2020. Interest rate and inflation nexus, an application of Granger causality test
empirical investigation: A case study of UK. International Journal of Economics and
Management, 2(1), pp.13-26.
Online
Economists predict little change for UK growth in 2020. 2019. [Online] Available Through:<
https://www.ft.com/content/7c0be33e-28d8-11ea-9305-4234e74b0ef3>.
9 mind-blowing facts about the United Kingdom's economy. 2019. [Online] Available Through:<
https://www.businessinsider.in/stock-market/9-mind-blowing-facts-about-the-united-
kingdoms-economy/articleshow/69965313.cms>.
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