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Production Output Performance Analysis

1.Research and indetify the types of unemployment in the chosen economy ?

The main aim of this paper is to discuss the measurement of performance of an economy by applying different macroeconomic indicators including GDP, GDP per capita, GDP growth rate, unemployment rate, and inflation rate. It also discusses performance trend of the economy during the period of 2005-2014. Moreover, it also talks over the government measures adopted in the country to attain the production output performance, full employment, and stable price. The selected country for this paper is the United Kingdom (UK).

The UK is constituted of Northern Ireland, Wales, England, and Scotland. The country plays an important role in the UN, Nato, and EU and it has also a longsighted history as a major player in world affairs. The twentieth century is considered Britain having to give a new definition to its place in the world (United Kingdom country profile, 2011). The UK is a major economic and military power, with significant cultural and political influence worldwide. Different industry sectors including manufacturing and service play an important role in enhancing total GDP of the country. Over the years, several changes can be seen in the political, economic, social, technological, and cultural environment of the country that significantly affects GDP.

The GDP is a measure of output and national income for a country's economy (Myers, 2016). The GDP is equal to total expenditures for all final goods and services produced in a specific time period within a country. The below graph presents the UK GDP from 2005 to 2014:

                                                                        (Source: Trading Economics, 2016).

t is clear that GDP in the UK was 2418.94 USD Billion in the year 2005, reaching an all time high of 2990.20 in the year 2014. The above graph shows that GDP in the UK decreased greatly from year 2008 to 2009, but it continuously increased after the year 2009 to 2014.  The below Graph shows the UK GDP per capita over 10 year period:

                                                                                    (Source: Trading Economics, 2016).

It is clear from the above graph that GDP per capita reached to 40933.46 USD Billion in the year 2014 from 39020.65 USD Billion in year 2005. The above graph indicates that GDP per capita increased after year 2005 to year 2007 and decreased in the year 2008 and 2009 and reached to 38008.82. It is also found that after year 2009, GDP per capita regularly increased to the year 2014. GDP per capita is received by dividing the gross domestic product in the country, adjusted by inflation, by the total population (Trading Economics, 2016). In addition, the below graph shows GDP growth rate in the UK during this period:

Labour Market Analysis

                                                                          (Source: Trading Economics, 2016).

The above graph presents that GDP growth rate was approx 1.4% in the year 2005, which continuously decreased to the year 2014 and reached to approx 0.5% in that year.

Overall, it can be stated that in the UK, GDP rate is fluctuating over the period of 10 years. At the same time, a declining trend can be depicted in the GDP growth rate, which indicates to the decline in the total production and spending in the economy. The declining GDP growth rate also indicates to the decline in the income level, which affects the growth of the economy significa

ntly.UK Government takes several actions and develops effective policies to stimulate strong and sustainable economic growth in the country. For example, it is found that to achieve the production output performance, the UK government largely invests in infrastructure including road networks, scientific excellence, energy, communication, transport, etc (UK Government Policy Paper, 2015). The government has plan to invest over £100 billion for the development of a better infrastructure. Additionally, the government also introduced new measures in the infrastructure act in order to better the fund, management and maintenance of national infrastructure.

In addition, the UK government also invests in science and technology to support the production output performance. Moreover, the government also take actions to increase access to finance for businesses and households by providing more incentives to banks and other lending institutes (UK Government Policy Paper, 2015). Additionally, to support small businesses and entrepreneurs so that GDP can be improved, the government has also created a British business bank.

It is also evaluated that the UK government has also developed various policies including UK trade and investment (UKTI), direct lending scheme, and UK export finance to increase the export and assist inward investment resulting in improving the GDP. For instance, through UKTI, the government provides expert global trade advice and practical support to the UK's local companies, which want to grow their business in the foreign markets. Additionally, it is also found that the government also cut corporation tax to 20% from April 2015 and also simplified business regulations in order to develop UK businesses and induce economic growth (UK Government Policy Paper, 2015). Additionally, it is also evaluated that to stimulate growth, the government also invested in creating a more educated manpower in order to lead creativity and innovation. Concurrently, it is also found that the UK government works with international institutions such as World Bank, International monetary fund, etc., support local growth, and makes a more effective and efficient planning system in order to stimulate the current economic growth.

Types of Unemployment in the UK

The below graph shows the changes in the unemployment rate in the UK over the period of 10 years:

                                                                             (Source: Trading Economics, 2016)

It is clear from the above graph that the unemployment rate was significantly increased during the years 2008 to 2012. It is also found that after the year 2012, the unemployment rate was constantly decreased to the year 2014, which is beneficial for the economic growth of the country. Thus, it shows a declining trend in the unemployment rate in the UK, which can have a positive impact on the people's income as well as the growth of the economy (Wagner, 2013). It also indicates that employment opportunities are regularly increasing in the UK that significantly contributed in lowering the unemployment rate in the country. 

Main types of unemployment in an economy include cyclical, structural, frictional, and geographic (Great Britain: Parliament: House of Commons: Work and Pensions Committee, 2012). The below are some types of unemployment in the UK:

Cyclical and Demand Deficient: This kind of unemployment occurred in the UK due to recession period during 2008-2013. It is because in the recession, real GDP reduced and firms produce less resulting in less demand for employees and loss of jobs (Lipsey and Chrystal, 2015).

Structural: It is also found in the UK due to the changes in the nature of the economy (Grant, Vidler, and Smith, 2003). For example, as the UK economy is becoming more service sector oriented, many manufacturing jobs have been lost. Moreover, as the current UK's economy is consisting of high tech industries, it is difficult for many unemployed workers to get jobs due to lack of required knowledge and skills.

Youth: In the UK, there is high unemployment amongst young workers because they have lack of adequate motivation and skills (Pettinger, 2015).

Frictional: Frictional factors also cause some unemployment. For example, it takes time to get a new job to the unemployed people (Lipsey and Chrystal, 2015).

Geographic: In some regions and particular areas like north, unemployment is high in the UK.

The UK government takes appropriate measures to achieve full employment (Great Britain: Parliament: House of Commons: Work and Pensions Committee, 2012). For example, the government proposed three priorities for G20 governments to attain full employment. These priorities include building of active market policies and policies to increase or maintain the labour demand, social protection policies to support vulnerable or disadvantaged group (by linking to employment measures), and development of education and skill policies (The Stationery Office Limited, 2009). In addition, the government also significantly invests in building more educated workforce to enhance employability (UK Government Policy Paper, 2015).

Government Measures to Achieve Full Employment

Moreover, the government also invested significantly to increase the policies for the active labour market in order to assist people to get jobs. For instance, through this investment, the UK government is expanding employment services, creating extra training places, jobs, and experiences. Concurrently, it is also assessed that the UK government also increases spending to create more employment opportunities in the public sector and other volunteer sector (The British Government, 2016). Thus, it can be stated that the government in the UK plays an important role in reducing the unemployment rate and stimulate the economic growth.

Inflation refers to the continuous increase in the overall price level of the economy (Belke and Polleit, 2011). Inflation measures the price level or consumer price in an economy. During any stage of business cycle, inflation can take place and it is one of the major constraint on consumer spending. It is evaluated that due to rising cost of production factors such as raw materials and human resources as well as excess demand, inflation can occur (Boone and Kurtz, 2012). It is also found that inflation devalues money (through persistent increase in the price) by decreasing the number of products it can buy. The below graph shows the UK inflation rate over the period of 2005-2014.

                                                                                 (Source: Trading Economics, 2016).

It is found that the inflation rate in the year 2005 was approx 2.80%, which reduced to 2.2% in the year 2014. In addition, the above graph presents a fluctuating trend in the inflation rate during the period of 2005-2014. It also indicates that in the most of years, inflation rate continuously decreased.  It is also identified that during this period the UK experienced a cost-push inflation, which was mainly caused due to higher taxes, increasing oil prices, and devaluation of pound. Moreover, inflation was also caused by other factors including lower prices of energy including gas, decreasing other commodity prices such as food and metal, supermarket price wars among Tesco, Sainsbury, etc (Ball, 2012).

It can also be stated that decreasing inflation rate was beneficial for the UK's economic growth. It is because it improved the purchasing power of customers and enable them to buy more product and services.

Concurrently, it is evaluated that the government uses different measures to achieve stable price in the economy. It is found that inflation target is one of the important government measures, which is used in the UK to attain stable price. In the UK, price stability is defined by the inflation target of 2% by the government (Bank of England, 2016). In other words, it can be stated that in order to ensure price stability, UK government ensures that the price level increases gradually, by an average of no more than 2% each year. In the annual budget statement, the Chancellor of the Exchequer announces the inflation target of the government each year (Bank of England, 2016). At the same time, if inflation falls outside of the limits, the Bank of England is forced to interfere. In addition to this, Central Bank's monetary policy is also an important measure to achieve price stability and supports the UK government in attaining economic objectives of growth and employment. Moreover, the government also develops policies to control the money and attain stable prices in the UK.

Conclusion

From the above discussion, it can be summarized that different macroeconomic variables significantly impact on the economic performance of a country. It can also be summarized that GDP, unemployment rate, and inflation rate are some important macroeconomic variables that are used by the government to evaluate the economic performance of the country. It can be stated that the GDP rate is fluctuating in the UK over last ten years. It can also be stated that after the year 2008, GDP per capita and real GDP increased to the year 2014. Low GDP in the UK shows lower total production output, which is not good for the sustainable growth of the country. At the same time, it can also be stated that unemployment rate and inflation rate decreased in the UK during the period 2009-2014. It can be stated that the decline in the inflation rate positively supported the UK economy to maintain the price level and enhance consumer confidence towards purchasing. Concurrently, the decrease in the unemployment rate also supported in increasing the income level of consumers.

It can also be stated that the UK government uses different measures such as inflation target and monetary policy to stable the prices as well as active labour market policies and creating employment opportunities to attain full employment. Additionally, it can also be stated that the government significantly invests in infrastructure, support export and small businesses through funding and other facilitates, development of educated workforce, etc. to stimulate the economic growth. Overall, it can be stated that the government in the UK take necessary actions required to stimulate the economic growth.

References

Ball, L. (2012) UK e-Book for Money, Banking and Financial Markets. UK: Palgrave Macmillan.

Bank of England (2016) Monetary Policy Framework. Available at: https://www.bankofengland.co.uk/monetarypolicy/Pages/framework/framework.aspx [Accessed: 8th December, 2016].

Belke, A. and Polleit, T. (2011) Monetary Economics in Globalised Financial Markets. Germany: Springer Science & Business Media.

Boone, L. E. and Kurtz, D. L. (2012) Contemporary Marketing, 2013 Update. USA: Cengage Learning.

Grant, S., Vidler, C. and Smith, C. (2003) Heinemann Economics A2 for AQA. UK: Heinemann.

Great Britain: Parliament: House of Commons: Work and Pensions Committee (2012) Youth Unemployment and the Youth Contract: Second Report of Session 2012-13, Vol. 1: Report, Together with Formal Minutes, Oral and Written Evidence, Volume 1. UK: The Stationery Office.

Lipsey, R. and Chrystal, A. (2015) Economics. UK: Oxford University Press.

Myers, D. (2016) Construction Economics: A New Approach. UK: Routledge.

Pettinger, T. (2015) UK Unemployment Stats and Graphs. Available at: https://www.economicshelp.org/blog/5695/alevel/unemployment-stats-and-graphs/ [Accessed: 7th December, 2016].

The British Government (2016) Achieve full employment in the UK through government policy. Available at: https://www.change.org/p/the-british-government-achieve-full-employment-in-the-uk-through-government-policy [Accessed: 7th December, 2016].

The Stationery Office Limited (2009) Building Britain’s Recovery: Achieving Full Employment Presented. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/238506/7751.pdf [Accessed: 7th December, 2016].

Trading Economics (2016) Available at: https://www.tradingeconomics.com/united-kingdom/gdp-per-capita [Accessed: 7th December, 2016].

Trading Economics (2016) Available at: https://www.tradingeconomics.com/united-kingdom/gdp [Accessed: 7th December, 2016].

Trading Economics (2016) Available at: https://www.tradingeconomics.com/united-kingdom/inflation-cpi [Accessed: 7th December, 2016].

Trading Economics (2016) Available at: https://www.tradingeconomics.com/united-kingdom/gdp-growth [Accessed: 7th December, 2016].

Trading Economics (2016) Available at: https://www.tradingeconomics.com/united-kingdom/unemployment-rate [Accessed: 7th December, 2016].

UK Government Policy Paper (2015) 2010 to 2015 government policy: UK economic growth. Available at: https://www.gov.uk/government/publications/2010-to-2015-government-policy-uk-economic-growth/2010-to-2015-government-policy-uk-economic-growth [Accessed: 7th December, 2016].

 United Kingdom country profile (2011) BBC News. Available at: https://news.bbc.co.uk/2/hi/europe/country_profiles/1038758.stm [Accessed: 7th December, 2016].

Wagner, H. (2013) Globalization and Unemployment. New York: Springer Science & Business media.

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