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Economy - Essay Example

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Economy Contents Contents 2 Summary of the article 3 Analysis of the article and identification of linkage with the economic concepts 4 Economic challenges faced by the economy and rationale for the economic policy (ies) chosen by the government to overcome the challenges 6 Limitations of economic policy of the government 7 Findings and analysis 8 References 11 Summary of the article The economic article is about the health of the economy of UK in recent period of time…
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Download file to see previous pages... This was positive news for the economy of UK but the policy makers have struggled to register even modest pace of progress of the country’s economy. The government of UK has however faced lot of criticism from the people because of policy measures on austerity after it took office in 2010. Since the time the government of UK has reduced their spending, the economy of the country has become stagnant. This has been fuelled by the effects of recession. As compared to the last fiscal, the economy of the country has grown by a meager 0.3% in the first quarter of the current year. The last quarter of 2012 registered a lean growth of 0.3%. This showed that the economic depression in UK has been prevailing since the last year and is still continuing in 2012. According to the director of fixed income at Scotia Bank, Alan Clarke, the GDP growth rate of the country has been 1.2% for the last year. The slight increase in the economic growth rate is a sign of relief for the UK treasury but the challenge of reviving the economy still looms large over the policymakers. One of the major rating agencies, the Fitch Ratings emerged as the second major ratings agency to dismiss UK from its triple “A” credit ratings. The economy of UK saw unemployment levels rising in the month of February and the wages of labor also declined to minimum levels. The International Monetary Fund who were once a major proponent of the austerity measures of the governments commented that UK should consider to reduce government spending on the back of weak economic progress of the country. The British political administration headed by the Prime Minister commented that they would continue with the austerity policies in order to avoid the fate of Greece and other members of the European Union (Dow Jones & Company, 2013, p.1). The British administration still believes that it might take longer than expected for the economy to recover but the slightest progress in the first quarter of 2013 indicated that the economy is healing. There are no easy solutions for economic recovery from the situation of crisis built over the years. This is evident from the worldwide economic slowdowns in countries like US, Germany, China, etc. Analysis of the article and identification of linkage with the economic concepts The rime of Golden age in Europe and US saw the major economies of the world like UK passing through a phase of reconstruction and government policies on increased expenditure in order to boost the aggregate demand in the economy. This created increase in the flow of money in the economy of the countries like UK. This policy adopted by the policy makers could be linked with the economic theory proposed by the British economist, Keynes. The Keynesian theory of economics explained that an expenditure of one member in the economy leads to the income of another member. The rise in income level of the population led to the increase in aggregate demand which was supported by increase in production and increase in fiscal deficits of the government (Mankiw, 2011, p.39). In the later stages the increase in liquidity level beyond limit and excessive savings led to decrease in investments and fall of production levels. This caused inflation ...Download file to see next pagesRead More
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