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UKs Economic Issues - Essay Example

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Question 1a Unemployment in the UK Economic Performance for the Past Five Years The state of unemployment in any given country has a number of impacts in a country’s economy. Uk has not been spared on this issue either. …
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Download file to see previous pages These effects have been not had a positive impact on the economy of UK. Policies have been developed to curb the situation but still it has continued to persist. As per now in accordance to the latest labour statistics from the office of statistics shows that the rate of unemployment stands at 7.8%. This percentage is still deemed high having in mind the fact that UK is one of the most developed countries, which translates to its economy. Its economy ought to be depicting a no or very low unemployment rate. With the population of several millions unemployed, you definitely expect some difficulties in the economy (Clegg, 2013:1-58). This is not only to the directly affected people but also to the government and society at large. The government is deprived of the very income tax it majorly relies on to fund its projects. When people who are both able and willing to work lack the job to do, they do not stop using the resources available. The strain is direct on the people being dependent upon and the government. The government ought to continue offering security, basic healthcare, education and other social needs with nothing in return inform of income tax. The government needs money to run and if this money is not available, the business is bound to go down. The government being a major player in any market, it loses strength and this is what UK had been struggling to fight. The deficits on the budgets have partly been influenced by unemployment as people enjoy services they are not paying for through payment of income tax. In the year 2011/12, the expenditure exceeded the earning collections by ? 1.8 billion. With continued increase of this figure, the population of UK may be subjected to national debt. The purchasing power of the people of UK has gone down. This is primarily because the fluctuations in the unemployment rates have set grounds for uncertainties. For the last five years, the dependency ratio has fluctuated though in average the trend has been diminishing more because of the creation of part-time jobs. It is automatic that when one is not employed, he has no power to purchase anything even if he is willing to do so. This effect has seen the internal demand of goods produced locally go down a bit. Fallen demand has seen the industries reduce their operational capacity some to as low as 75% and this have gone to the worse edges of even risking more people to unemployment. The trend has though gained momentum of improving and the true state of matter today is not what it was five years ago. Effect of Balance of Payment on UK Economy Balance of payment entails a number of things. First, it involves the current account then financial account. Capital balance and net errors and omissions are also taken into account when arriving at the net value of the balance of payments (Krugman & Wells 2009: 600). Goods and services together with income inflows and current transfers are considered for current account (Krugman & Wells, 2009: 600). The financial account is basically a trade of any financial assets. The capital account had been determined by capital asset sale. For the last five years, the balance of payment has also been fluctuating as unemployment has been. The current account has been on the deficit side for a long time. Economists have argued that this is a favourable situation as some countries which have had a large surplus like Japan have remained stagnant in growth but yet UK has been growing since the 1980s when the deficit began (EconomicOutlook, 2010: 60-76). The financial and capital account surpluses have been offsetting the deficit in the current ...Download file to see next pagesRead More
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