Module code and Title: AAF045-6 Business Economics Assignment Sample
Introduction
Concerning the requirement of the given case study, it is perceived that macroeconomic policies play a great role in the nation’s economic condition to influence and attain sustainable economic growth. The further content involves necessary description in context to the aim of the implementation of the macroeconomic policies in the region.
It is further ordained that macroeconomic policies do not only help the nation to develop its economic condition and maintain sustainability. Apart from that it also obliges the country to fulfil its aim of poverty reduction. The paper further involves a description of the structured economic system of the United Kingdom and the real economic situations.
Literature review
Demonstration in context to a deep and systematic understanding of the structural economic system
According to the acquired pieces of knowledge, it is ascertained that the economic system is grouped into different types of structures. In other words, it can be said that the economic condition of the country can be demonstrated in different concepts such as traditional economy, commanding economy, market economy and mixed system (Chan et al. 2019). An economic system is further demonstrated as the factor that helps the nation to develop its society. It further helps in the organization and distribution of the available resources, and services within the territorial region and across the geographic region.
It is further identified that the economic system regulates different economic factors of the nation. The factors that are regulated by the economic system are land, labour, capital and physical resources. Apart from the management of the resources the economic system also helps in the essential decision-making process of the nation regarding the national income of the country (corporate finance institute. com, 2022).
Figure 1: Different types of economic structure (Source: Chan et al. 2019)
More illustration in context to the different sorts of economic systems or structures has been provided below:
Traditional economic system: According to the ascertained pieces of knowledge it is perceived that the traditional economic system depends on the costumes and beliefs of time-honored. In other words, the traditional economic system can also be demonstrated as the basic economic system that further reflects the custom and tradition as its core elements. The whole region further followers the same tradition of trade and commerce in the case of the traditional economic system (Vuong, 2021).
The disadvantage of the traditional economic structure is the absence of the potential to create a surplus in the economy. It is also identified as a primitive nature and highly sustainable economic system. By implementing the traditional economic policies, the nation can further optime the wastage of its resources and maintain sustainability in the nation. In comparison to the other three economic structures traditional system is considered one of the main systems through which the wastage of resources can be controlled easily.
Command economic structure or system: The intervention of government or an administration in the economic condition is referred to as the command economic system (Shaturaev, 2022). In other words, it can be said that in the command economic structure the government of the country controls the major portion of the economic structure. The command economic system is also referred to as the planned economic system in which all the activities are done as per the planning of the government. In a communist society, the planned economic condition is referred to as the most common economic structure. In case.
If the access to the resources in the economy increases in that case the government manages or controls the excessive utilization of the resources to reduce wastage. As compared to those other economic structures it is ordained that the command or planned economic structure is rigid. Moreover, because of the interference of the government and the centralization the command economic system reacts slowly to the changing condition (Ocal, 2021). Due to the slow growth, the system is also said as vulnerable to economic crisis as they do not adjust quickly to the changing economic condition.
Market economic system: It is further demonstrated as the free market concept (Tansel, 2018). In the market economic system, the involvement and interference of the administration are very little. The administration further bear very less control over the resources and it also does not interfere with respect to other crucial segments of the nation. In other words, it can be said that the market economic system runs as per the regulation and policies framed by normal people. Concerning the demand and supply condition of the business market the regulations of the market fluctuate.
It is further identified as the theoretical economic condition. Moreover, according to the point of view of the theories, it is ordained that the market economy structure helps the nation to attain sustainable growth (Darabpour et al. 2018). Hence, based on the ascertained description it is perceived that the implication of the market economic system obliges the nation to attain the highest growth.
Mixed system: The combination of the planned economic system and the market economic system is referred to as the mixed economic system and therefore it is also referred to as the dual economic system (Robinson, and Mazzucato 2019). Apart from that, the mixed-income can also be determined as the market system that works under the strict policies and regulations of the administration. It is mainly followed by the developed western hemisphere. It further combines the best feature of the planned economic system and the market economic system.
It is further identified that the mixed economic system further involves certain challenges to determine the balance between government intervention and the free market economic structure. Apart from that, it is also identified that the mixed economic structure is the comparison of capitalism as well as socialism.
In the economy, the market economic system is widely used to prevent private property and to avail economic freedom during the utilization of the capital (Boudreaux, and Nikolaev 2019). On the other hand, it is also notified that the mixed economic system further obliges the firms or the nation to achieve the social aims by the intervention of the administration in the economic activities.
An illustration regarding the theoretical economic and methodological approaches and the result of an application of such theories
Business economics also referred to as managerial economics is mainly designed to be implemented in business activities (Lüdeke‐Freund et al. 2019). It is also referred to as the business methodology as the essential business decisions somehow depend upon the methodology of the business economics. Furthermore, four different sorts of economic theories are identified that are the supply side theory of economics, new classical economics, Keynesian economics and monetarism.
Further, it is identified that applied economics is also referred to as an application of the theory of economics to recognize the outcome that is associated with the activities of the economy in the real world. Concerning the provided case scenario, it is advocated that through the identification and implementation of the different macroeconomic theories the nation can easily gain sustainable economic growth and can also reduce the issue of poverty (Adedoyin et al. 2022).
Moreover, it is determined that the theory that emphasizes the supply of resources and the services to work efficiently and to produce goods is referred to as the supply-side theory of the economy. The factors that are focused on by the supply side economics theory are the different production factors that ate land, labour capital and entrepreneurship (Birner et al. 2021). In business, the supply-side economics theory is implemented to create a better and more favorable climate for business activities. It is further used as a tool to reduce tax rates and deregulate tax policies.
According to the theory by enhancing the supply of commodities the growth of the economy can be attained easily. Moreover, if the economy attains growth, then the issue of poverty in the nation decreases. The fiscal policy of the supply side economic theory further emphasizes the reduction of the borrowing rates, deregulation of the industrial policies and enhancing the production level (Zuhroh et al. 2022).
It further creates a positive impact on the nation as it provides the benefits of lower inflation, reduces unemployment issues, improves economic growth, and improves the trade and balance of payments.
On the other hand, the new classical economics theory is identified as the theory that depends on the assumptions of Walrasian (Podczeck, and Yannelis 2022). The maximization of the utility is further based on the rational expectation of the assumptions of Walrasian. According to the framed theory the economy is articulated as a unique equilibrium or potential output that is attained by adjusting the price and wages.
The theory mainly focuses on the significance of the punctilious foundation based on macroeconomics and rational expectations. Concerning monetarism and Keynesian economic theory, it is ordained that the monetarism theory emphasizes strategy through which the supply of money can be controlled to control the economic condition of the nation (van’t, 2021). On the other hand, the Keynesian economic theory creates focuses on the intervention or the expenses of the administration to control the economy.
Moreover, it is ordained that as per the belief of the monetarism theory the issue of inflation can be reduced by adjusting the circulation of money in the nation. On another note, the Keynesian economic theory states that the demand for the commodity enhances the supply and a healthy economy invests and spends more than the actual savings.
The economic growth in the United Kingdom is remarkable in terms of growth and restabilising after the global pandemic COVID-19. In spite of this economic growth and the boost in the gross domestic product, almost 22% of the population of the United Kingdom is suffering from the deadly trap of poverty. The number is as large as 14.5 million people, who are suffering from the issue of poverty.
Among all these people who are suffering from poverty 4.3 million are minors or children. On the other hand, 8.1 million are in poverty in spite of working. In addition to this 2.1 million people are prisoners who are suffering from poverty.
The rising amount of child poverty is threatening the future of the children and the future of the United Kingdom as well. From the latest data published, it can be identified that one-third of the children population, which is almost 31% of the whole children population, is in the grip of poverty. Among these nearly 50 per cent of the children belong to a lone-parent family.
In contrast to the prior findings, the richest persons are getting richer in comparison with the rest of the population in the country.
COVID-19 has caused a drastic change in the economy of the United Kingdom. The death rate from COVID-19 was twice that of the normal death rate, especially in the poorest region in the UK. On the other hand, the rate of death in the wealthy part of the United Kingdom was much lower in comparison to the poorer part of the UK.
This signifies the role of wealth for humans to survive in today’s time. The corona virus has affected the income of one-third of the households, almost 9.74 million households. 10per cent of households faced a serious financial crisis. In addition to this, 16 per cent of the population were struggling to survive and meet their end needs.
Analysis & Discussion
The survey of the Food Foundation identified that 4.9 million adults are food insecure compared with 2 million pre-lockdown and 18% of the 8 to 17-year-old population almost 1.4 million have suffered from the scarcity of foods over holidays of the summer. In addition to this, 11% of children, almost 850,000, and aged 8 to 17 have reported that their families had to visit the food banks to survive during the holidays of the summer.
This number was higher by an extraordinary margin of 60 per cent, which is higher than the “non-White” ethnic groups of Britain. A survey found that one-third or 33 per cent of the employees, who were at the bottom of the weekly earning scale, had lost their jobs and the reductions in terms of hours coupled with the cut in the salary.
Figure 2: Proportion of adults whose financial situation has worsened due to Covid-19 (Source: London, FCA, 2022)
The survey of “Financial Lives” has identified that one-fifth of the adults availed of reduced amounts of essential goods and services, such as clothing, medical support, food or hiding. Some structural factors such as lack of jobs, lower levels of wages, and the lack of state-provided compensation are the primary cause of poverty in the UK.
There is a significant group of people who are poor caused of “indolent”, “feckless”, “skiving” or “criminal alike behaviour”, 27% of the adults in the UK between March and October of 2020 with low financial resilience. The numbers are from 3.5 million to 14.2 million UK adults.
The challenges of the pandemic are the following.
The outbreak of the corona virus can result in an increase in inequality and “relative poverty”. In the United Kingdom these levels of Welfare of the introduction state.
The population with poor economic status were hospitalized and the death rates are almost twice as high as the death rate of the rich people.
In the current scenario, the government of the United Kingdom does not have any policies which can help to reduce the inequalities in terms of severe coronavirus infections and death rates.
Role of Different Macroeconomic Policies
The economic increase is the unmarried most essential issue influencing economic condition. Varied applied mathematics analyses have ascertained a sturdy affiliation country-wide to keep with capita earnings and country-wide poverty indicators, the usage of every earnings and non-earnings measures of poverty. Economic science balance is the cornerstone of any a hit arrange to boom personal region improvement and money increase.
Regressions of the usage of a colossal pattern of states propose that increase, funding, and fruitfulness are doubtless related to macroeconomic balance. Though it is arduous to point out the trail of causation, those consequences affirm that macroeconomic instability has commonly been involving a negative increase in overall performance. While not economic science balance, home and overseas traders can live away and sources may well be entertained elsewhere.
In fact, political economy proof of funding behaviour suggests that additional to plain parts which might be on the far side increase economic activity, actual hobby rates, and private region credit. economic science balance exists while key financial relationships are in stability—for example, among home incorporation and output, the soundness of payments, economic sales and expenditure, and financial savings and funding (Adelowokan et al, 2019).
These relationships, however, need not perpetually be in actual stability. Imbalances inclusive of economic and gift day account deficits or surpluses are cleanly like-minded with money balance provided that they will be supported in an exceeding property manner. There is not any precise set of thresholds for each economic science variable among balance and instability. Rather, there is also a time of various mixtures of degrees of key macroeconomic variables that might counsel macroeconomic instability.
whereas it is terribly clean to understand a country in a country of macroeconomic instability or balance, there may be a considerable “grey area” among which nations expertise a certificate of balance, but wherein macroeconomic overall performance should in point of fact be improved. Finally, economic science balance depends upon currently not handiest at the macroeconomic management of a financial set-up but in addition at the form of key markets and sectors (Galvin, 2019). To beautify macroeconomic balance, nations need to help macroeconomic coverage with structural reforms that reinforce and enhance the functioning of these markets and sectors.
Fiscal Policy
Fiscal coverage could have an instantaneous impact on the negative, both via the government’s basic money stance and via the spatial arrangement implications of tax coverage and public spending. Structural financial reforms in finances and treasury management, public administration, governance, transparency, and responsibility can also gain negative in phrases of additional inexperienced and better-centred use of public sources. As indicated above, there is no rigid, pre-decided limit on what may well be the appropriate financial deficit.
Associate in the analysis might wish to be based totally on the precise things coping with the country, its medium-time amount economic outlook, and also the scope for outside monetary fund assistance (Faria-e-Castro, 2021). The phrases that outside assistance are to be had are also important. There’s a strong case, for instance, for allowing higher presents to translate into better outlay and deficits, to the amount that those presents will fairly be anticipated to preserve within side the future, and equipped that the sources could also be used effectively. Tax coverage is one of the most effective policies, it targets the shifting device with basically administered taxes with giant bases and marginal costs which are moderate.
Monetary and Exchange Rate Policies
Monetary associate’s degree trade price tips to goal those variables over that they need to be got the utmost control, specifically the long-term result of inflation at the value of growth. loosely speaking, this could be dead with the helpful resource of exploitation golf stroke one goal for monetary and trade price guidelines, the attainment and preservation of a coffee and solid price of inflation. In exercise, this means choosing, and firmly committing to.
An inflation price goal internal to the context of the final economic condition discount approach and therefore the connected political economy framework; adopting the desired guidelines to amass the goal and now not the utilization of economic and trade value tips to pursue, overtly or otherwise, further or change objectives (Onder, and Villamizar-Villegas, 2018). Developed and dole out in this way, financial and trade price guidelines will form the premise for a solid political economy environment.
Conclusion
This report talks about the different methods and economic strategies that will aid the economy of the United Kingdom to resolve the issues of poverty. More than the one-fifth population of the United Kingdom is under the poverty line. An increase in the growth of this can be seen in the economy of the UK, especially after the outbreak of COVID-19 throughout the globe.
Discrimination between the poor and the rich is identified regarding the treatment of patients with COVID-19 and the death rate of the population under the poverty line is also higher than the death rate of the rich population. The Government of the United Kingdom needs to address the issues and adopt different macroeconomic policies to resolve them for the betterment of welfare and economic sustainability.
References
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