6. do you think the government should do more to help those who wish to retrain
My results show that people are insecure about the stability of their economy and that the government could do more to make it more stable and increase employment, and the major thing it could do would be to increase the amount of available jobs to the economy.
The government may try to reduce unemployment by using fiscal, monetary and supply side policies. Monetary policy is where the bank of England controls the amount of money available to the country by changing interest rates. The monetary policy can be used to either inflate or deflate the economy, it also influences the changes in exchange rates as the changes in the currency have an effect on macroeconomic activity. this will effect the economies income and thus changing the amount of spending and savings in the long term and therefore go through the circular flow of income and spending. The government has recently decreased interest rates to 0.5% this was the lowest ever, this was done to try to increase inflation and consumer spending, decrease savings, and this will improve injections into the economy and helps the economy recover from the recession. Monetary policy may work differently depending on the interest elasticity of demand for different products for example demand for capital investment out of businesses in the private sector businesses. The drawbacks from using a monetary policy is that there will be less demand in the housing market as interest rates increase, this will slow down the growth of household wealth and reduce the amount of equity withdrawal which can increase inflation as it will negatively affect consumer spending, this also affects people who save rather than spend as they will have a large amount of money in the bank and their yearly interest will increase. As interest rates increase consumers debt from credit/store cards will also increase, this may slow down demand in the retail industry, and it may negatively affect consumer confidence. As interest rates increase the exchange rate for foreign currency will also increase. This will put British products to a price disadvantage as our exports will be expensive compared to the global market, this will result in less injections into our economy, so as the pound gets stronger aggregate demand will decrease which also reduces the rate of inflation
A fiscal policy involves the use of government spending, taxation and borrowing to reduce the rate of inflation, it helps improve economic growth in a period of recession, and it basically helps stabilise the financial state of the economy. The disadvantages of fiscal policies are that increasing taxes may create a disincentive to work, this will create a fall in productivity and aggregate supply may fall. Government spending will be reduced to increase aggregate demand may negatively effect public services for example public transport or education. It may cause a higher budget deficit as it will need higher taxes which may decrease the size of the private sector, this will cause aggregate demand to increase very slowly or not at all. The benefits to a fiscal policy include capital spending, if capital spending is increased on the the national infrastructure, it may attract tourists resulting in injections into the economy. Another benefit is that government spending may be used on developing new businesses, this will increase competition, also investing in infant industries could benefit the consumer as it will force businesses to become more innovative and invest in research and development to create a cost advantage to other businesses. In the long term investment into more training and education could be beneficial as people will be gaining more skills making them a more employable workforce. This will increase the economies average income making the infrastructure more stable. The government has reduced VAT from 17.5% by 2.5%, the current VAT is 15%, the government has also tried to increase jobs in the uk by nationalising Northern rock, and other large companies, this will reduce unemployment increasing and create more consumer spending.
Privatisation is the change from being nationalised (owned by the government) to when a business buys it and is responsible for the decisions and running of the business. If the government privatises businesses it will increase government spending on other matters such as educations, and public transport.
The final policy is a supply side policy, this is a way for the government to increase productivity and shift the aggregate supply to the right by encouraging an increase of supply in the economy. The aim of supply side policies are for the market to work freely by reducing government interference. There are many benefits to the supply side policy as it lowers tariff barriers and this will increase trade and competitiveness in the market. Taxes are reduced this may increase workers motivation as they will gain a higher income which will make the consumer less price sensitive and improve the state of the economy. It will enforce deregulation, this involves removing barriers to entry to increase a markets competitiveness, this benefits the consumer as they will get cheaper products that are high in quality, they will also benefit from a companies incentive to find a competitive advantage, resulting in innovative products entering the market. However there are negative effects to the supply side policy this includes job insecurity to employees as the trade union becomes less powerful, employees may feel stressed or safe, as they may end up being made redundant. The government may reduce unemployment benefits to increase the incentive to work. However this may cause stress towards employees who are facing redundancies, as they will need to survive whilst in between jobs.
The Phillips curve shows the trade off between unemployment and inflation, as inflation decreases, unemployment decreases. So if the government increases inflation then employment will rise, this will raise the economies income, which will stabilise the economy. The disadvantage to the Phillips curve is that it is oversimplified. The diagram below shows the relationship between unemployment and inflation on the graph.
stores that sell inferior goods will benefits most from the recession as consumers become more price sensitive and less conscious about the quality. Stores such as primark will experience an increase in profit as consumers will change the places they shop at when their incomes shrink. However businesses that sell luxury goods such as Harrods will find a loss in profits as they will lose customers and may have to spend extra money on promoting the business, or rely on external sources of finance to pull through difficult times in the recession
the graph above shows what the unemployment rate has been like over the past 3 years. As you can see it has increased dramatically by roughly 1.5% of the UK's population. This is abviously because of the recession. If it continues the circle of decline demonstrates what is happening. As companies go out of business, it will lead to more job losses, which will decrease a consumers spending, as consumers become more price sensitive it will decrease more businesses profits and then they have to leave the market and so on. So in conclusion as the economy gets worse unemployment will increase in 2009 as incomes decrease. However stores that sell luxury products will be worse off as they will lose the most consumers to industries that sell inferior goods.
1. how secure do you feel in your current employment?
2. do you think the government is doing enough to secure jobs
3. do you expect the national rate for unemployment to increase in the short term
4. what do you think the government should do to help the unemployed
5. have you considered retraining to help secure your employment
6. do you think the government should do more to help those who wish to retrain