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Discuss the extent to which Britain can ease its economic problems within the next 3 years

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Introduction

Discuss the extent to which Britain can ease it's economic problems within the next 3 years Britain's economic problems are many fold, currently suffering from the effects a recession, which is two consecutive quarters of negative growth. This has caused the value of the pound to depreciate significantly. Many companies and industries also were seen to go bankrupt, some may have been because of a lack of demand as people lost confidence and began to save. Although there are many problems in the British economy today, there are also some ways in which the British government could solve or at the very least ease these problems. Firstly the government will need to decrease the output gap by increasing AD, this is knows as actual growth or short-run growth. They could achieve this by the use of Fiscal policy, this is changes in government spending and taxation in order to alter AD. The government is doing this now by implementing the car scrap scheme. However this will depend on the size of fiscal expansion, as if it is too big then the economy may pick up rapidly causing AD to outstrip LRAS on the Keynesian diagram, as a result causing rapid inflation. ...read more.

Middle

Although this is not very effective during a recession this still helps a little. The best method for a government to implement right now is fiscal policy, this will be the most likely cause for us to pull out of this recession. Only when government spend will we be sure to have extra spending which will work via a multiplier effect, which is the enlarged impact on national income of a smaller change in an injection or spending. The government can reduce unemployment when in recession by creating new modern industries to replace old jobs. This will benefit us as we will produce more high value products, we already specialise in pharmaceuticals, aeroplanes and chemicals etc. This can be done by the government providing various companies with government grants, which will aid them in expanding. Although this is a very effective method of increasing the employment rate in the UK, this will take many years to accomplish and 3 years will not be enough. This also conflicts with the budget deficit, as this extra spending will add to our country's deficit and put us further into debt. ...read more.

Conclusion

Both of these can either cause an economy to go into a deeper recession or they can aid an economy out of a recession. However these two do not cause a recession or a boom they just enforce it. The effectiveness of the accelerator depends on many factors. In the recovery 2009/10 there is such so much spare capacity that a small change in national income will probably have no accelerator effect. Secondly investment decisions depend crucially on confidence. Business confidence is very fragile and low at this very moment and are very unlikely to invest until they see strong recovery for a couple of years i.e. 4% not the 1% that we may see in 2010. The accelerator will not work at the moment because bank lending has frozen to a halt. Most investment by firms depends on bank loans, also firms can also make do with old machinery and buildings when times are uncertain and with the time lags of 2 to 3 years before firms can build new capacity we should not expect the accelerator to work until we are in at least 2 years of recovery. ?? ?? ?? ?? ...read more.

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Here's what a teacher thought of this essay

3 star(s)

***
This is good in places but lacks depth. The writer has evaluated in places but has not systematically examined the policy alternatives. There is no discussion of supply side measures apart from subsidising some industries.

Marked by teacher David Salter 05/04/2012

Here's what a star student thought of this essay

4 star(s)

Response to the question

This essay responds well to the task, engaging well the United Kingdom's economic problems. This task has a few sections to it: what economic problems are there, what policies are there available to ease these problems, and to what extent ...

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Response to the question

This essay responds well to the task, engaging well the United Kingdom's economic problems. This task has a few sections to it: what economic problems are there, what policies are there available to ease these problems, and to what extent are these policies going to be useful in the next there years? I feel as if this essay tackles all of these problems, but in a bit of a jumbled way. Although there is plenty of analysis, I feel as if a few diagrams would split the bulk of the essay up and make it easier for the examiner to allocate marks.

Level of analysis

The analysis here is good. What I liked here is how mechanisms are explained well, rather than simply asserted. However, sometimes this can be improved upon. For example "the government has also reduced the value of the pound in order to increase our exports and via the multiplier." If I were an examiner, I would wondering if this candidate understands why a depreciation of the pound will increase exports. I would also be wondering if they mean the price of exports, or the value of exports. It's important you know what sort of things examiners will be looking for, and you should try and ensure they cannot ask questions of your explanations. Effectiveness is discussed throughout here, although sometimes it is a bit basic. Saying that fiscal policy has time lags is correct, but it needs expanding upon to become a strong evaluative point. I would be looking at arguing how value judgements must be made, and these can so quickly become insignificant after external shocks to aggregate demand and supply.

Quality of writing

This essay has an okay structure, but I feel it is a bit jumbled. I would've preferred to have seen a succinct introduction which detailed the main economic problems: unemployment, slow growth, rising inflation and a worsening balance of payments. If I were answering this question, I would've looked at policies in isolation, as some of them can have an effect on a number of problems. This seems more logical to me, as you can then discuss the limitations of policies and the associated problems the economy will face. Then, there needed to be a conclusion rounding this together and coming to a justified judgement to whether the United Kingdom has the ability to ease its problems. Spelling, punctuation and grammar are fine here, and technical terms are used fluently.


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