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Examine and assess the role of the government in managing the UK economy - Essay Example

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The state of commercial affairs in the country is massive and financial sector is highly developed. The economic system of the country is free market in nature, where public as well as private sector…
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Examine and assess the role of the government in managing the UK economy
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Download file to see previous pages government in determining long-term success of the country. The economy of U.K. has faced several financial crunches since World War II.
It is claimed by some researchers that financial crisis during 2008 in U.K. and other Western nations was caused primarily due to deregulation of financial markets, that had significantly gained speed in these nations 1980 onwards (Trading Economics, 2014). The policy deregulation had drastically lowered control of the government authorities over financial markets of respective economies. Lower state control in the monetary financial market generated certain market exuberances. The real estate sector investments in these economies were made for speculative purposes, which finally generated the property price bubble. Several banks collapsed due to failure of unproductive investment projects, thereby resulting in the recession in 2008; this was because aggregate money supply in the economy had fallen in these nations.
During the recession, as aggregate supply of money in U.K. had fallen, degree of productivity in the economy had declined. Lower level of production of several goods and services had greatly increased the level of unemployment in the country.
It can be observed from the above graph that the extent of inflation in U.K. had astonishingly increased during the recession in 2008. This was due to expansionary, monetary as well as fiscal policies adopted by regulating authorities of the country at that point of time (Hirsch, 2008). The authorities had implemented these polices for stimulating the depressed market of U.K.
In order to maintain welfare of the European economy during recession, its government authorities had adopted expansionary fiscal policies by increasing expenditure in the economy and lowering tax rates so as to enhance employment and output level of the country. Figure 4 in the Appendix shows the way in which fiscal policies attempt to revive an economy from the state of ...Download file to see next pagesRead More
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