Evaluate the success of Government Macroeconomic Policies

to Achieve Both Lower Levels of Unemployment and Lower

Rates of Inflation Over the Last 10 Years.
Table of Contents

Introduction.................................................................................................................................................3
Macroeconomic Policies..............................................................................................................................3
The Unemployment Rate in the United Kingdom........................................................................................5
Historical Data Analysis..............................................................................................................................8
Implication of the policies.........................................................................................................................10
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12
Introduction

The effectiveness of the United Kingdom's government macroeconomic policies in producing

low unemployment and reduced inflation rates over the previous decade has sparked significant
discussion among economists and policymakers (Cole, 2012). The general status of the UK
economy, including employment and inflation rates, is a significant measure of the country's
well-being and capacity to provide its residents with a good quality of life.

The UK government has enacted a variety of macroeconomic policies in recent years with the
goal of increasing growth, lowering unemployment, and managing inflation. These strategies
have included monetary measures like interest rate adjustments and money supply management,
as well as fiscal ones like changes in government expenditure and tax policy.

These policies have had a considerable influence on the UK economy, with the nation seeing
comparatively low levels of unemployment and inflation in recent years (Smith, 2012).

Macroeconomic Policies
Macroeconomic policies are the policies that the government and central bank of a country
undertake to regulate the performance of the economy. The primary objective of these policies is
to achieve sustainable economic growth, high employment, and price stability. These policies are
designed to counteract economic fluctuations and minimize the impact of external shocks on the
economy.

There are two main types of macroeconomic policies: fiscal policy and monetary policy. Fiscal
policy refers to the use of government spending and taxation to influence economic performance.
On the other hand, monetary policy involves the control of money supply and interest rates by
the central bank to regulate the economy.

Fiscal policy involves government spending and taxation. The government uses fiscal policy to
stabilize the economy by increasing or decreasing spending levels or taxes. The idea behind this
policy is to influence consumer spending, investment, and overall economic activity. The
government can use fiscal policy to boost aggregate demand, reduce inflation, and improve the
overall performance of the economy.
Monetary policy involves controlling the money supply and interest rates to influence economic
performance. The central bank controls the money supply by adjusting the interest rates, which
affects the cost of borrowing for individuals and businesses. The idea behind this policy is to
influence consumption and investment levels, and ultimately regulate the overall performance of
the economy.

The primary objective of macroeconomic policies is to achieve full employment, price stability,
economic growth, and balance-of-payments stability. Full employment means that everyone who
wants a job can find one. Price stability means keeping inflation at a low level, which helps
maintain the value of money. Economic growth means an increase in the size of the economy
over time, which means more goods and services are produced. Balance-of-payments stability
means maintaining a balance between imports and exports.

Macroeconomic policies are critical in maintaining the stability and success of an economy, and
they have a considerable influence on people, companies, and society as a whole. A well-
designed macroeconomic policy can help create a stable economic environment, promote
economic growth, and reduce poverty. At the same time, an ineffective macroeconomic policy
can lead to inflation, recession, and high levels of unemployment. Fiscal policy is one of the
most important macroeconomic policy instruments employed by governments. Changes in
government expenditure and taxes are used to impact economic activity. During a recession, for
example, the government might raise expenditure while decreasing taxes to encourage demand
and enhance economic growth. During an inflationary era, the government might decrease
expenditure and raise taxes to reduce demand and inflationary pressures.

Monetary policy is another significant instrument for macroeconomic policy. The central bank
controls the quantity of money in order to affect economic activity. The central bank may
manipulate the money supply by using different tools such as interest rates, reserve requirements,
and open market operations (Kontonikas, 2014). During a recession, for example, the central
bank can lower interest rates to encourage borrowing and spending, whereas during an
inflationary period, the central bank can raise interest rates to discourage borrowing and
spending.
Exchange rate policy is a significant instrument for macroeconomic policy, especially in
countries with floating exchange rates. The value of a country's currency compared to other
currencies influences the trade balance, inflation, and interest rates. Central banks can influence
the exchange rate by buying or selling their currency in foreign exchange markets. For example,
a central bank may purchase its currency in order to enhance its value, lowering the cost of
exports and increasing demand.

Commerce policy, which refers to government measures that control international trade, is
another important aspect of macroeconomic policy (Blanchflower and MacCoille, 2019). Tariffs,
quotas, and other measures designed to influence the flow of goods and services between
countries are examples of trade policies. Trade policies are intended to boost local sectors,
decrease reliance on imported commodities, and safeguard the economy from external shocks.
Tariffs on imported products, for example, may be imposed by a government to protect home
industries and stimulate demand for locally produced items.

Finally, macroeconomic policies are critical in guaranteeing an economy's stability and success.
To accomplish their macroeconomic goals, governments and central banks use a variety of
policy instruments, including fiscal policy, monetary policy, exchange rate policy, and trade
policy. These policies have a significant impact on individuals, businesses, and society as a
whole, and it is critical that they are well-designed and implemented to ensure that their
objectives are met.

The Unemployment Rate in the United Kingdom

Unemployment is a serious problem in the United Kingdom, with far-reaching consequences for
people, families, and the economy as a whole (Breinlich et al., 2022). Unemployment refers to
the amount of people who are actively looking for job but are unable to find it. The official
measure of unemployment in the United Kingdom is the proportion of the labour force that is
actively looking for job but is unable to find it.

Over the last several decades, the United Kingdom has seen periods of both high and low
unemployment. The UK unemployment rate peaked at more than 11% in the mid-1980s, but has
subsequently steadily declined, hitting a low of 4.3% in 2006. However, the 2008 financial crisis
and following recession caused a significant increase in unemployment, with the rate reaching
more than 8% in 2011. Unemployment in the United Kingdom has been progressively declining
in recent years, and it is expected to reach 4.8% by 2020.

The COVID-19 epidemic, on the other hand, has had a severe influence on the UK labour
market, resulting in a rapid increase in unemployment (Fountas, 2021). The epidemic has caused
extensive company closures, decreased demand for products and services, and a significant drop
in economic activity. This has resulted in considerable job losses and an increase in the
unemployment rate, which is expected to reach 5.2% by 2020.

Unemployment affects not just the people who are unable to find job, but also their families and
the whole economy. Unemployment may result in lower income and increasing poverty, both of
which can harm one's health and well-being. It may also result in a decrease in consumer
spending, which may lead to a decrease in demand for products and services, further lowering
economic activity and contributing to job losses (Kara and Nelson, 2013).

The United Kingdom government has implemented a number of initiatives to assist persons and
companies impacted by the COVID-19 epidemic. The Job Retention Scheme, which gives
financial assistance to companies in order to keep their workers on the payroll, and the Self-
Employment Income Support Scheme, which provides financial assistance to self-employed
persons, are two of these policies (Cloyne and Hürtgen, 2016).

In addition to these short-term initiatives, the UK government is putting in place a number of

longer-term policies targeted at boosting the labour market and lowering unemployment. These
policies include infrastructure investment, education and training, as well as measures to
encourage entrepreneurship and small company growth. The government is also taking initiatives
to promote labour market flexibility and stimulate the development of new jobs, which may help
to decrease unemployment in the long run (Barker et al., 2017).

To summarise, unemployment is a big problem in the United Kingdom, and it may have far-
reaching consequences for people, families, and the economy as a whole. The COVID-19
epidemic has resulted in a substantial increase in unemployment, but the UK government is
pursuing a variety of initiatives to assist people and companies while also reducing long-term
unemployment. It is critical that these policies be well-designed and executed in order to be
successful in decreasing unemployment and strengthening the UK economy.

Fiscal and Monetary Policies to Address the Unemployment Crisis in the United Kingdom

The government of the United Kingdom has enacted a number of macroeconomic measures
targeted at lowering unemployment and strengthening the labour market (Liu, 2019). These
policies are intended to stimulate economic development, improve labour market efficiency, and
increase employment availability.

Fiscal policy is one of the key macroeconomic measures employed by the UK government to
minimise unemployment. This entails using government expenditure and taxes to impact
economic activity and employment levels. Fiscal policy may be used by the government to
promote demand for products and services, which can lead to higher economic activity, job
creation, and lower unemployment.

For example, the government might raise expenditure on infrastructure projects such as roads,
bridges, and public buildings, which can lead to employment creation in the construction and
allied sectors. The government may also offer financial assistance to firms to encourage them to
invest in new plant and equipment, which can boost the number of available employment in
manufacturing and other sectors.

Monetary policy is another significant macroeconomic strategy utilised by the UK government to

minimise unemployment (Pain and Young, 2014). This entails manipulating interest rates and the
money supply in order to impact economic activity and employment. The central bank of the
United Kingdom, the Bank of England, sets interest rates in order to affect the amount of
economic activity and demand for products and services.

For example, lowering interest rates by the Bank of England makes borrowing less expensive,
which may stimulate firms to invest in new plant and equipment and generate new employment.
Similarly, increasing the money supply by the Bank of England may encourage demand for
products and services, leading to more economic activity, job creation, and lower unemployment.

The UK government has also enacted a number of labour market initiatives targeted at boosting
labour market efficiency and lowering unemployment. These policies are intended to make it
simpler for people to find employment and to encourage companies to generate new jobs (Coutts
and Gudgin, 2016).

For example, the government has implemented a variety of training and education initiatives
targeted at enhancing worker skills and making people more employable. The government has
also implemented steps to promote labour market flexibility, such as lowering employment laws,
to make it simpler for firms to generate new jobs.

Aside from these rules, the UK government has put in place a number of measures to assist
companies and people impacted by the COVID-19 outbreak. The Job Retention Scheme, which
gives financial assistance to companies in order to keep their workers on the payroll, and the
Self-Employment Income Support Scheme, which provides financial assistance to self-employed
persons, are two of these initiatives (Bhattarai and Trzeciakiewicz, 2017).

The government has also implemented a number of initiatives to help the financial services
industry, which is a large contributor to the UK economy and a substantial source of jobs. For
example, the government has offered financial assistance to banks in order to assist them in
weathering the financial crisis and continuing to lend to companies and consumers.

Finally, the UK government has enacted a variety of macroeconomic and labour market
measures targeted at lowering unemployment and improving labour market conditions. These
policies are intended to stimulate economic development, improve labour market efficiency, and
increase employment availability (Minford, 2014). In addition, the government has implemented
a number of steps to assist companies and people impacted by the COVID-19 epidemic, as well
as the financial services industry. These policies are critical for lowering unemployment and
enhancing the labour market in the United Kingdom, since they strive to preserve economic
stability while also boosting job growth.

Historical Data Analysis

The United Kingdom has experienced various levels of inflation over the past 10 years, which
has affected the country's economy and the purchasing power of its citizens. Inflation is a
measure of the rate at which the general level of prices for goods and services is rising, and it is
commonly measured by the Consumer Price Index (CPI). The following analysis provides an
overview of inflation in the UK over the past 10 years, along with relevant data, information,
statistics, and studies.

Figure 1 UK Inflation of Last 10 Works

Source: (National Statistics, 2022)

From 2013 to 2019, the inflation rate in the UK remained relatively low, hovering around the 2%
target set by the Bank of England. In 2013, the inflation rate was 2.2%, while in 2014 it was
1.5%. In 2015, it decreased to 0.0%, before increasing to 1.0% in 2016 and 2.6% in 2017. In
2018, the inflation rate was 2.4%, and in 2019, it was 1.8%. This period of low inflation can be
attributed to several factors, including weak economic growth, low oil prices, and a strong
pound.

However, the situation changed dramatically in 2020 due to the COVID-19 pandemic. The
pandemic resulted in lockdowns and disruptions in supply chains, leading to an increase in prices
for some goods and services. As a result, the inflation rate in the UK jumped to 0.8% in January
2020 and reached 1.5% in February (McCormick, 2017). The rate then surged to 1.8% in March,
as the impact of the pandemic started to be felt. By June, the inflation rate had increased to 1.6%,
and in September, it reached 1.7%. In November, it reached 1.5%, before declining to 0.3% in
December. The inflation rate for the whole of 2020 was 0.9%, which was significantly lower
than the previous year due to the pandemic's effects.
In 2021, the inflation rate in the UK started to recover as the country emerged from the pandemic
and the economy started to pick up. In January, the inflation rate was 0.7%, and it increased to
1.5% in February. By May, the rate had reached 2.1%, and in June, it reached 2.6%. The
inflation rate then declined to 1.8% in July and reached 1.5% in September. In November, the
rate increased to 1.7%, and in December, it reached 1.4%. The average inflation rate for 2021
was 1.5%.

The current inflation rate in the UK as of February 2022 is 1.8%, which is slightly higher than
the average rate for the previous year. The increase in inflation can be attributed to several
factors, including an increase in global commodity prices, rising wages, and an increase in
demand due to the reopening of the economy.

In conclusion, the inflation rate in the UK over the past 10 years has been affected by several
factors, including the global financial crisis, the COVID-19 pandemic, and changes in global
commodity prices. The rate has remained relatively low over the past few years, but it has
increased significantly in 2020 due to the pandemic. The current inflation rate is slightly higher
than the average rate for the previous year, and it is expected to continue to increase as the
country continues to recover from the pandemic.

Implication of the policies

Over the last decade, the government of the United Kingdom has enacted a number of
programmes to reduce inflation and keep prices stable. Consumers' buying power, interest rates,
and economic growth are just few of the many areas where inflation may have a significant
impact on the economy (Garratt et al., 2013). Thus, the government has implemented a number
of steps to curb inflation and foster long-term economic growth.

The government of the United Kingdom uses monetary policy as one of its primary measures to
control inflation. Monetary policy and interest rates in England are managed by the Bank of
England, the country's central bank. The central bank has been actively using its monetary policy
instruments to keep inflation within the 2% target range. If inflation is on the rise, the central
bank could raise interest rates to slow consumer spending and slow inflation. The central bank
may choose to reduce interest rates in order to increase demand and strengthen the economy if
inflation is low.

The government of the United Kingdom uses fiscal policy as another instrument to manage
inflation. To affect economic activity, governments use fiscal policy, which entails modifying
expenditure and taxing. If inflation is high, the government may cut expenditure to slow the
economy and lower demand, which would have the desired effect of lowering inflation.
However, the government may raise expenditure to create demand and grow the economy if
inflation is low (Pantelopoulos and Watts, 2021).

Also, the government of the United Kingdom has been enacting structural changes to boost
development and competitiveness. These changes were made to improve the business climate by
raising productivity and decreasing operating costs. For instance, the government has been
enacting labour market reforms, such as decreasing rules on firms, to make it simpler for
businesses to recruit and dismiss employees, which may boost productivity and bring down
inflation.

In addition, the government has been enacting regulations to boost competition in the market and
lessen the negotiating leverage of suppliers. The government, for instance, has been encouraging
competition and lowering obstacles to entry for new enterprises in many other industries,
including the energy industry. Because of this, costs for consumers have gone down and inflation
has slowed.

Finally, the government of the United Kingdom has been enacting measures to strengthen the
country's supply chain and boost economic productivity. By funding infrastructure improvements
like new roads and ports, the government can facilitate easier and cheaper shipping of products.
The government has also been funding R&D to boost production efficiencies and decrease
commodity prices.

To sum up, the British government has used a number of measures over the last decade to both
reduce inflation and keep prices stable (Ali et al., 2016). Monetary policy, fiscal policy,
structural changes, competition policy, and supply chain improvements are all examples. The
government is likely to continue employing similar policies in the future to accomplish its
inflation objectives, since they have been successful in containing inflation and fostering
sustainable economic development.

Conclusion
Over the last decade, the United Kingdom's economy has flourished thanks in large part to the
government's ability to implement macroeconomic policies that have kept unemployment and
inflation at historically low levels. One of the main reasons why the British economy has been so
stable and successful lately is because to this success (Herr and Kazandziska, 2021). The United
Kingdom's macroeconomic policies have been successful in fostering economic expansion,
decreasing unemployment, and keeping prices stable, but considerable work remains to ensure
that these achievements are preserved in the face of continued challenges to the global economic
system.

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