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Mathematics & Economics
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ECONOMIC GROWTH OF THE UK (Essay Sample)

Instructions:
The economic growth of the UK has varied over the 10 years between 2004 and 2014. Analyse the main economic factors that explain UK growth and the policies used in response by government. Your answer must use examples from macroeconomic theory and the real life economy “ (1200 words) Please see the PPT to know the stricture and request. Many Thanks source..
Content:
ECONOMIC GROWTH OF THE UK By Name Course Instructor Institution Location Date ECONOMIC GROWTH OF THE UK IN THE LAST TEN YEARS Introduction The economic growth is determined by comparing the GNP of the previous year to the current year. The growth of the economy of the UK was on the rise over the last ten years. There are several characteristics that accompany this growth. They include low interest rates, increased spending cost, increased wages, a fall in the value of the sterling pound, lowered income and rise in house prices. Several factors have contributed to this trend. These include the government initiative to invest in the infrastructure of the country, increased productivity of human capital, technological innovations, a politically stable government and favorable foreign policies. The government has played its part in regulating and setting up of policies that help regulate the economic growth. Favorable government policies to stimulate the private sector, hence leads to achieving a change in broadband. The government has, moreover, removed trade barriers, hence allowing a favorable competitive in the global market and economy. FACTORS LEADING TO GROWTH OF THE ECONOMY Favorable taxation system The government has created a simpler tax system which is fairer. This helps in improving the state of public resources and finances.in the long run, the growth of the economy is boosted and workers who work to support their families are rewarded. The government has created a competitive taxation system among the G20 making it more lucrative and attractive to international investors. The corporate tax was reduced from twenty eight percent to twenty three and is expected to be lowered in 2015, making it the lowest among the G7 members (A Guide to UK Taxation, 2013). In 2010, the Corporate Tax Road Map was published by the government. This set up several principles that led to tax reforms. The bill opened way for low and simple corporate tax, a stable taxation system, legislation that minimized complexity. All these factors led to a favorable environment for investors, hence became a boost to the growth of the economy (A Guide to UK Taxation, 2013). lefttop Good infrastructure The investment done by the government and private investors in setting up of infrastructure have been a major boost to economic growth. With over 1.7 billion pounds have been invested in over thirty six transport projects, including nine major highways, including the M62 and M1, several local authorities like the Greater bus network, Poole Bridge and Blackpool tram and the National infrastructure plan (2013, pg. 27). In the short-term the investment led to employment directly, created a demand for materials while, in the long term, it allowed the economy an open network to function efficiently. According to the Civil Engineers Contractors Association, (2013, pg. 18), the absence of adequate investment has been damaging to the economy. It was projected that the GDP of the country would have been 5 percent higher with better infrastructural investment. Fairer interest and mortgage rates The gross advances proportion at fixed tariffs increased comparatively from 2007 to 2014, signifying a rise in more people taking loans preferably for investment or personal use, Mortgage Lenders and Administrator's Statistics for 2014 Q1, (2014, pg. 3). The fixed rates have been decreasing over years leading to an increase in more people applying for loans. . Interest rate basis 2011 2012 2013 2014 Percent of business at fixed rates Gross advances 51.2 55.1 70.7 81.0 Balances outstanding 30.7 27.9 28.4 35.2 Weighted average interest rates Gross advances Fixed rate loans 4.24 3.99 3.80 3.32 Variable rate loans 2.87 2.93 3.10 3.12 All loans 3.56 3.44 3.47 3.34 The lower rate reduces the need to save due to the lower rates and returns hence people are more encouraged to spend rather than holding the finances. Moreover, the low interest rates echo a low mortgage interest rate, reducing the cost of repayments. This in turn leaves people with higher disposable incomes, causing an increase in consumer spending. With low rates, it is unattractive for people to save in the country, hence there is a lower demand for the pound hence depreciation in its value. A weaker currency promotes UK's export making it more competitive and minimizing imports. CONSEQUENCES OF ECONOMIC GROWTH Generally, the growth of the economy has led to a better life quality for the citizens. There are better health services, boosted by technological inventions and innovation. The education system has been improved through online learning. E-learning provides a better education, making it accessible from anywhere. However, the negative effects are plenty too. The environment has not been spared. The carefree action by people has led to the depletion of natural reserves, in a bid to find more resources for investment. Pollution through industries has been widespread through radioactive, noise, thermal and water. According to the Environmental Kuzet Curve, firms originally concentrate on the expansion of production, regardless any environmental impact, (Tim et al 2010, pg. 5). lefttopThe non-renewable resources are limited. Continued use of such resources will lead to their depletion after some period. GOVERNMENT POLICIES ON THE ECONOMY The government has been keen to put up several policies that re...
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