The Uk Government Uses Both Fiscal and Monetary

Topics: Monetary policy, Inflation, Unemployment Pages: 13 (3221 words) Published: August 26, 2009
The UK government uses both Fiscal and Monetary
Policy in its control of the economy:
Analysis and Discussion.

‘The Business Environment Report’ submitted to
The College of Technology London.

Submitted By: Max Pereira
Enrolment No: 083799-84
Section: MEP 2
Email: Word Count: 3000 words

Under the Guidance of
Lecturer: George Olusoji

1. Abstract

We are all aware of the present world crisis and the recession period in which United Kingdom is progressing. Any individual may be inquisitive about what the government of UK is doing in this case and how the government is tackling this issue.

This report aids in understanding the UK Government’s purpose of the using the Fiscal and Monetary policies, in addition to analyzing and discussing the justification for the government using these policies.

The report identifies the macro-economic in the wide context and attempts to identify the government’s role in the economic and the strategies government uses to manage the economy. The study makes an attempt in making relevance of the present world crisis and certain situations where the fiscal and monetary policies have come into picture.

An effort is made towards analyzing and discussing the government actions in permutation to these policies. Towards the end of the study, certain recommendations are made in relevance to literature and concluded with perception.

2. Contents

1. Abstract ---------------------------------------------------2

2. Contents---------------------------------------------------3

3. Introduction---------------------------------------------------4

4. Methodology---------------------------------------------------6

5. Discussion and Analysis---------------------------------------------------7

6. Recommendations---------------------------------------------------12

7. Conclusion---------------------------------------------------13

8. References---------------------------------------------------14

3. Introduction

The Businesses environment reacts to economic environment in turn has direct or indirect influence on the businesses. Palmer and Hartley (2002) explain that the effects of changes in the economy of a country including the international economy on individual organization, referred as macroeconomic analysis. As the macroeconomic analysis is affected by interrelated forces, most counties try to have a policy, the objective in managing their national economy.

According to Palmer and Hartley (2006), UK’s national economy is visualized as a complex systems integrated with variables which co-relate directly or indirectly. The UK government plays a vital role in balancing the economy through its policy objectives.

From government policy objectives, we come to talk about the strategies through which the objectives can be achieved. Certain vital objectives are: Maintaining Employment, Stable prices, Economic Growth, Distribution of wealth, Stable exchange rate, Government borrowing.

Considering the views of Palmer and Hartley (2002), emerges the concept of Business Life cycle in relation to the nation’s economic development. The variations and fluctuations levels in injecting and extracting activities over a period of time describe illustrate the Business life cycle of a nation’s economy. According to Palmer and Hartley (2006), most developed economies go through cycles that have been described as: (i) Recession-Prosperity (ii) Expansion-Contraction (iii) Stop-go (iv) Boom and bust.

The UK government analyzes the economic environment using indicators such as warning signs and relating the economic status in the business cycle. Some of the leading indicators are Gross Domestic Product, Unemployment rates, Output levels, Average Earnings,...
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