Economic Recovery and Macroeconomics

ORGANISATIONS, COMPETITION AND

THE BUSINESS ENVIRONMENT [ER1S51]

ASSIGNMENT TWO

ECONOMIC RECOVERY AND MACROECONOMICS IN THE UK

Contents

1. Compare and contrast the different views held

by the Coalition Government and the Labour

opposition on how to ensure economic recovery 2

2. Using supply and demand diagrams predict the

likely effects of macroeconomic developments

on your firm over the next three years. 3

3. Discuss the strategic implications of these

predictions for your firm 5

4. Bibliography 6

Compare and contrast the different views held by the Coalition Government and the Labour opposition on how to ensure economic recovery.

Since 2008, the UK economy has faced many challenges, not least of which has been a change of government from a Labour led house to a Coalition between Conservatives and Liberal Democrats, at a time of considerable economic instability.

The banking crisis, in 2007/8, began a period of economic decline. Risky lending by banks, and the subsequent losses, saw a dramatic fall in both consumer and business confidence and in turn a reduction in access to affordable lending for both consumers and businesses. The external shock of the banking crisis fuelled the UK to enter its first recession in over 15 years, beginning in 2008. A recession is when gross domestic product (GDP) growth, or the measure of the total economic output occurring within the UK, is negative for two or more quarters. In 2012, a second quarter of negative GDP growth announced a double dip recession, which is a recession followed by a short positive GDP growth before entering a second recession. These recessions forced a reduction in aggregate demand, the total demand for goods and services within the economy. As a result, the UK saw rising unemployment, falls in average earnings and increasing pressure on the government’s budget position because of increased spending through welfare and a...