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Macroeconomic - Essay Example

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According to BBC News Business (2011), the GDP of the United Kingdom has been falling since the onset of the 2008 recession; though the global economy is on a recovery path, the country experienced a further reduction of 0.2 percent in the last quarter of 2011. This has been…
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Download file to see previous pages In addition, BBC News Business (2011) asserts that there is a high rate of unemployment in the United Kingdom that requires the government to take comprehensive measures if the situation is to be reversed.
The united kingdom government has taken some fiscal and monetary policy measures in an attempt to reverse the economic situation. According to Warrell (2012), the government has reduced its spending by outsourcing security and other services from private firms as one of the chief fiscal policies. However, several stakeholders claim that the government is not doing enough, and the Institute of Directors is calling for further cuts in public spending, and reduced taxation, which is the other approach to fiscal policy (O’Connor, 2012).
In addition to the above mentioned fiscal policies, the United Kingdom government has taken key monetary policy approaches including inflation targeting and quantitative easing. According to BBC News Business (2012a), the central bank lowered the base lending rates in order to encourage banks to lend more to individuals and corporations; however, despite a low base lending rate of 0.5 percent, banks did not increase their lending and the central bank may raise the rates to 0.75 or 1 percent. According to BBC News Business (2012b), the Bank of England decided to use quantitative easing as the other monetary policy approach in order to reverse the economic situation. In early 2009, the bank injected £75 billion into the economy, which had increased to £200 billion by the end of that year. In October 2011 and February 2012, the bank added £75 billion and £50 billion respectively to bring the total amount injected into the economy using the quantitative easing approach to £ 325 billion.
The United Kingdom reduced its expenditure in an attempt to redeem the national economy and pay of its debts, which is a more preferable approach as compared to the other viable option of increasing taxation. ...Download file to see next pagesRead More
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