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'The UK has the strongest and best-performing economy in Europe' Discuss.

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Introduction

'The UK has the strongest and best-performing economy in Europe' Discuss When one talks about a strong economy, a few key economic indicators will get mentioned; inflation, unemployment and economic growth. These are considered the three main macroeconomic indicators of any economy. To define a strong economy in the simplest form you must have a low rate of inflation, low unemployment and steady economic growth. During this essay there will be comparisons between other European countries (e.g. France, Germany, Luxemburg, Belgium, Spain, Italy) and these economic indictors mentioned as well as others. We will start to look at inflation rates. "The British economy has slowed over the past 12 months, but remains among the strongest in the developed world, a report has said" (BBC News Online). Last month the Underlying rate of inflation in the UK remained unchanged at 2.3%, which is below the governments target rate of 2.5%, this is good for the economy. The headline rate of inflation, which includes mortgage interest payments, fell last month by 0.4% to 1.7%. These figures show the rate at which prices are increasing. When we compare the UK's annual inflation figure of 1.2% to that of Germany and France (-0.6% in October), which is around the 2% mark, it seems that our rate is quite low and therefore good for our economy. ...read more.

Middle

Germany, the biggest economy in Europe, growth has been dented severely this year. It was forecasted to be around 2% but recent figures show that it will be around the 0.75% mark, which is very low. The definition of a recession is two consecutive quarters of negative growth and this therefore proves that the German economy is in trouble. France on the other hand has continued to grow at about the same rate as the UK, growing 0.5% and therefore on course for the forecasted 2.0% annual growth rate. "Both France and the UK have both seen their growth figures barely damaged by the after-effects of the 11 September attacks" (BBC News Online). Some economists are saying that the UK and French economy will slow towards the end of the year although household consumption has remained high in both countries compared to Germany. This brings us on to the circular flow of income, a key indicator for the role of the economy and is a framework for understanding macroeconomic changes. Expenditure is a key factor for a growing economy and if this expenditure is higher than the income then the government must borrow from the International Monetary Fund (IMF) and the amount borrowed is called the PSBR, the Public Sector Borrowing Requirement is a monthly, non-seasonally adjusted figure, which measures the size of the government's deficit. ...read more.

Conclusion

When the government carries out Monetary Policy who also decides on Fiscal Policy, they tend to make decisions, which will boost their popularity in the short term but have no relevance to the long term economic well being. Whereas the Central Bank is a lot more thoughtful when making these economic decisions. It can therefore be concluded that on the whole UK is indeed a strong performing economy within Europe and most possibly the strongest. This strong performance is reflected by such indicators as solid growth and forecasts for next year predicting an annual growth of 2.75% - 3.75%. Inflation currently at 2.3% is lower than forecasted which is a strong indicator for a strong economy. Our unemployment is at the lowest it has been since the 1970's and lower than that of the two biggest economies in the world at present at 2.3% or around 900,000. Interest rates are remaining unchanged at 4%, which is low, and the reason for the British economy having a firm housing market. The UK's main economic problem is the manufacturing output. It could be argued that this sector of the economy is in recession after figures of negative growth in the last two quarters. As a result of this the UK is suffering from an all time high trade deficit, which is also due to the high value of the pound. But overall the UK economy is in a good state taking into advantage the global economic slowdown which is going on around it. ...read more.

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