In today’s interdependent markets, the economy of one country is inextricably linked with that of another. For instance, the collapse of the banking sector in Iceland had a substantial impact on the British economy and the currency volatilities of the Euro have had implications far beyond the Euro zone. In this essay, I will examine how British macroeconomic policies have attempted to reduce the damage of recent economic turbulence in the US on the UK economy. Macroeconomics, policies that aim to improve economic growth, maximise national income and raise the standard of living for citizens, have four main methods: full employment, inflation, balance of payments, equilibrium of supply and demand. In this essay I will look at: inflation and taxation. I will describe the policies followed, how they were put into practise and whether they have been effective at stabilising the British economy in this time of significant international turbulence.
To analyse the different policies of the United Kingdom you first have to know what all governments want from their macroeconomic policies. Research shows that all governments have 4 major targets when it comes to macroeconomics. These are: 1.
low inflation CPI=2%
Strong economic growth, but, not inflationary growth. Increasing long run trend rate of growth 3.
avoid large deficit on current account balance of payments
One of England’s policies was to nationalise a central bank (the UK has had the Bank of England set up in 1694, made independent in 1997), which sets monetary policies for the UK. Set up in 1997 one of its main goals and a macroeconomic objective of this bank was monetary (controls the supply of money into the economy and sets interest rates to control the supply and demand for money in an economy) stability. Monetary stability means stable prices, low inflation, and confidence in the currency. Stable prices are defined by the Government's inflation target, which the Bank...
Please join StudyMode to read the full document