How Supply and Demand Affects the British Economy Essay

How Supply and Demand Affects the British Economy - adjudicate ExampleThe aim of this paper is to do this, as well as look into all relate elements and issues enveloped in this subject liaison. This is what will be dissertated in the following.The British economy is considered as being a parasite on the rest of productive capitalism (Roberts, n.d.). However, in the European Commissions latest assessment of EU finances, it was predicted that the UK economy would grow by 2.2% this year and by at least 2.6% in the year of 2004. The bear on market has remained strong despite the global slowdown with the unemployment rate being at around 27-year lows, tell the European Commission. (Osborn, 2003). As well, inflation in Britain is much lower than that of most other EU countries. sparingal shocks can cause unpredictable damage and changes in union accept and short run aggregate supply which lie outside our normal macroeconomic models. As a result, a new correspondence level of natio nal output is achieved. However, The unpredictable nature of these shocks creates a fluctuating rate of economic developing and may require some sort of macroeconomic policy response. (Tutor, 2005). To the UK economy, which is an open economy, an example of a necessity shock would be that of a recession in a major trading partner such(prenominal) as the United States. Meaning that, if the United States were experiencing a recession, real disposable incomes of US consumers would fall and then demand for imports would fall as well. Although some people argue that because the UK has not entered recession international events extradite therefore not had a great number on economic growth however, this is not aline the UK has suffered due to the global downturn but this has, to some extent at least, been offset by go along levels of consumer confidence the reflationary effects of the decision by the Monetary Policy Committee to reduce nominal touch on rates still further to their current level of just 4.0%. Cheaper money has been a key performer sustaining both confidence and consumer spending. The continued strength of house prices and low unemployment also helped to limit the impact of the demand shock that hit the British economy. (Tutor, 2005). Inflation is the process in which prices rise in the domestic economy, of which atomic number 18 reflected in the reduced purchasing power of a national sum of money over time. prevalent price inflation is a fall in the purchasing power of money within an economy, as compared to currency devaluation which is the fall of the market value of a currency between economies. The particular extent to which these both phenomena are related is open to economic debate, though the comparison of a currency to foreign currencies is ground on investor demand for currencies, and therefore must at least partially be a matter of perception. The issue of inflation is incredibly important in British politics on account of its e ffect on the purchasing power of both the consumer and business, and the corresponding linkage that the declining value of wealth and income has to the general economic health of the country. The law in Britain of supply and demand results in the rich acquiring richer and the poor getting poorer. Once a region or country is ahead of the economic pack, it then