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Macro Economics Goals : UK

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on 17 October 2014

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Transcript of Macro Economics Goals : UK

By: Ritika Golechha and Priya Shah
UK Unemployment Rate Down to Nearly 6-Year Low
Inflation target first adopted October 1992
The Bank of England Act 1998
This restated that the Bank's monetary policy objective is to deliver price stability
support the Government's economic policy, including its objectives for growth and employment.
Policy made to aid employment & growth, subject to aiming to hit inflation target.

The Department for Communities and Local Government and the Department for Transport have created the £730 million Growing Places Fund. The fund is used by local enterprise partnerships to support infrastructure.
With local authorities, 24 enterprise zones across England were created
The economy is too dependent on a narrow range of industry sectors.
The economy needs to be driven by private sector growth, with business opportunities evenly balanced across the country and between industries.
reduction of debts and deficits more conducive to growth through restraint on public employee wages, to create room for higher spending on infrastructure.

UNITED KINGDOM: Income inequalities
Pay-as-you-earn tax (PAYE)
The Coalition government’s approach to tackling the economic crisis has focused on cutting spending and shrinking the size of the welfare state.
The latest evaluation conducted by the IFS suggests that the fall in income inequality since the crisis has been driven by falling real earnings alongside benefit entitlements growing in line with prices.
They project that this fall is temporary and by 2015/16 inequality will have been driven up by cuts in the working age welfare budget and no further falls in real earnings.

Low Unemployment
Low and Stable Inflation
Economic Growth
Equity in the Distribution of Income
UK GDP Grows Stronger Than Expected

The UK economy expanded 0.9 percent in the second quarter of 2014, up 0.1 percentage points from the second estimate, mainly due to changes in the GDP calculating methods. Figures for the first quarter were also revised to a 0.7 percent expansion, from a 0.8 percent increase previously reported.
The UK jobless rate continued to fall, reaching 6.2 percent in the three months to July of 2014, the lowest since late 2008.

Unemployment Rate for July 2012: 8.1%
Unemployment Rate for July 2013: 7.8%
Unemployment Rate for July 2014: 6.3%
July 2012: 2.5 %
July 2013: 2.85%
July 2014: 1.75%
UK Inflation Rate Down to 1.5%

UK annual inflation rate slowed for the second consecutive month to 1.5 percent in August of 2014 from 1.6 percent in July. Falls in prices of motor fuels and food and non-alcoholic drinks provided the largest downward contributions while the largest, partially offsetting, upward effects came from clothing, transport services and alcohol.
Quantitative easing
government had room to cut the interest rate set by the central bank and embark on further injection of money into the economy by the central bank by buying assets
reduce Bank Rate to 0.5%
Bank Rate could not practically be reduced below that level, and in order to give a further monetary stimulus to the economy, it decided to undertake a series of asset purchases.
Since 2009
total assets purchases of £375 bn
of the purchases was and is to inject money directly into the economy in order to boost nominal demand.
does not involve printing more banknotes.
Smaller Coefficient, Greater Income Equity

GINI Coefficient for 2010: 33
GINI Coefficient for 2012: 31
GINI Coefficient for 2013: 30
As it is measured in relation to median income, income poverty can be viewed as being about inequality in the lower half of the income distribution only. In looking at what has happened to the whole of the income distribution, this indicator is therefore moving beyond poverty to look at income inequality more widely. Income inequality can be analysed in a variety of ways, and the analyse included here covers: Changes in income over time across the income distribution, Shares of total income across the income distribution, Ratios of the incomes between the top, middle and bottom, and Gini coefficient: a measure of overall income inequality.
The overall message from these various analyses is simple: income inequalities have been increasing, both recently and over longer time periods. These inequalities have been increasing at both ends of the spectrum. In other words, the poorest have fallen further behind the average, and the richest have moved further ahead.
Youth Unemployment (OECD - Organization for Economic Cooperation and Development)
The transition between school and work should be facilitated by ‘reducing early exits from education and ensuring that young people acquire skills relevant to labour market requirements
Facilitate the development of labour force skills and competencies’
Structural Unemployment
Macroeconomics Goals: UK

US gini coefficient 2008: 44
UK gini coefficient 2008: 40
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