[TASK 2] UK Economy "to make slight recovery"
The Guardian
http://www.guardian.co.uk/uklatest/story/0,,-5564088,00.html
- Suggest some reasons for the fall in consumer spending.
- Using economic analysis, explain how a "fall in consumer spending" and "high oil prices" will affect the UK economy.
- Explain the impacts of a fall in interest rates on the national income of the UK economy.
- Suggest some other ways to promote greater growth in the economy.
Deadline: Week 6/7
posted by t12cjc | 6:38 pm
5 Comments:
1. consumers continue to save rather than spend.
2. *fall in consumer spending->lower national income->economic downturn
*high oil prices->lower demand for oil->consumption for oil falls->lower national income->economioc downturn
*if elasticity for oil is low, the change in demand for oil will be less than proportionate to the change in the oil prices. therefore, consumption remains high and income of factor owners increase, causing the economy to be better.
3.fall in interest rate->people will not buy as much assets such as bonds->more money to buy things->consumption increase->income of factor owners increase->national income rises.
4. *increase govt expenditure to increase exports and thus, increase the national income of the country.
*increase investments by producers->income of factor owners increase->national income rises.
*govt decrease tax on consumer goods->greater disposable income->greater consumer spending->income of factor owners increase->national income rises.
-aly and sherlyn-
qns 1: Suggest some reasons for the fall in consumer spending.
- "The UK economy will stage a modest recovery this year but is still not "out of the woods"
- shows UK has not fully recovered from its period of unemployment ...
- plus the economy has not been fully stabilised
- not much employment=less disposable income = less consumer spending.
Qn 2 .Using economic analysis, explain how a "fall in consumer spending" and "high oil prices" will affect the UK economy.
-"Factors such as weaker consumer spending and higher oil prices have been blamed for the slower performance of the UK economy in recent times."
fall in consumer spending = less income created for factor owners = further decrease in consumption = further fall in national income through the multipier effect (:
a fall in AE will lead to a decrease in income of factors owners through the multiplier process. thus resulting in a fall national income more then the initial fall in comsumer spending.
-higher oil prices
AS falls + consant demand = output rises and prices rise.
- pple have lower consuming power = demand less for oil = UK economy negatively affected. ):
Qn. 3: Explain the impacts of a fall in interest rates on the national income of the UK economy.-
"Cheaper pump prices last month drove inflation back to the Bank of England's 2% target in December - strengthening the case for the Bank to cut the cost of borrowing, according to many analysts."
- fall in i/r = cost of borrowwing made cheaper = easier to borrow = pple will borrow more = increase in consumer spending = rise in AE = rise in income thru the multiplier process = UK economy generating more $$.
Qn.4: Suggest some other ways to promote greater growth in the economy
- increase investments = rise in AE = generate income thru multiplier process.
assume mpw=0.5 and mpc of domestic output is =0.5, investment injection is $100m thus k=2. through the multiplier process, the total change in income would be 2x100m=$200m. hence an increase in national income.
by zhang mei and anna
Mriaow!
Suggest some reasons for the fall in consumer spending.
If wage rates remain at the same level while inflation rises, real income falls, compelling consumers to save rather than spend.
Furthermore, increasing consumer concerns about job security, debt levels and the housing market could cause consumers to rein in their spending abruptly, thus resulting in a sharp decrease in consumer spending growth.
Using economic analysis, explain how a "fall in consumer spending" and "high oil prices" will affect the UK economy.
A fall in consumer spending would lead to weaker overall economic activity. An economic slowdown entails slower growth of GDP. It may even result in a recession.
A sustained period of high oil prices may result in inflation, causing a fall in the purchasing power within the economy.
Explain the impacts of a fall in interest rates on the national income of the UK economy.
A fall in interest rates reduces the income from saving, making borrowing more attractive and stimulating consumer spending.
Lower interest rates can increase the prices of assets like shares and houses. Higher share prices raise households' wealth and can boost their willingness to spend. Higher house prices let existing home owners extend their mortgages so as to finance increased consumption.
Suggest some other ways to promote greater growth in the economy.
Cut income tax so as to boost real income, inducing consumers to spend more.
sincerely, Jean =)
[Task 2] UK Economy "to make slight recovery"
1. Suggest some reasons for the fall in consumer spending.
It is due to the slower performance of the UK economy in recent times. Therefore consumers are willing to save rather than spend.
2. Using economic analysis, explain how a "fall in consumer spending" and "high oil prices" will affect the UK economy.
Fall in consumer spending will cause withdrawal in the economy. The economy will worsen as a result.
High oil prices will not affect the demand greatly because it is very difficult to find a substitute for oil and oil is a necessity for daily use such as petrol for vehicles.
3. Explain the impacts of a fall in interest rates on the national income of the UK economy.
There will be greater expenditure on goods and services people do not need to pay as much as when the interest rate was higher. The government will receive lesser money from interest rates but the increase in expenditure of the people will help to create injection into the economy. Income of producers will increase leading to a higher level of economy.
4. Suggest some other ways to promote greater growth in the economy.
i.Government can create more jobs so that income will be earned by the people which will enable them to spend more on goods and services. Government can also come up with policies which will decrease tax.
ii.There can be more investments.
Shu Hui and Dorothy :) friends forever//
Suggest some reasons for fall in consumer spending.
When the country experiences a recession, consumers are less likely to spend more, or as much money as they used to in the past. Consumers are more likely to save than spend. Resulting in the fall in consumer spending. Also, unemployment rates will result in fall of consumer's ability to spend. With a recession going on, prices of good will also become higher, resulting in lesser consumer ability to spend.
Using economic analysis, explain how a "fall in consumer spending" and "high oil prices" will affect the UK economy.
The country's economy is highly dependent on the amount of consumer expenditure. Less spending by consumers will affect the cashflow of producers. The economy is more likely to move slower and not develop as fast. Also, the currency will not be as strong. High oil prices will not encourage more spending by consumers. Consumers will not want to spend more than they used to in the past, especially in times of recession.
Explain the impacts of a fall in interest rates on the national income of the UK economy.
Lower interest rates will make spending less attractive and borrowing more attractive, thus stimulating spending. A fall in interest rates will reduce the income from savings and interest payments on loans. There will also be more investments from other foreign companies.
Suggest some other ways to promote greater growth in the economy.
Improvement in technology will help the country to experience greater growth. Attract more foreign companies to invest in the country.
Libing. I dont know how to do la. LOL.
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