#Econ2 Evaluation of the UK Economy by Matt Smith

Real Incomes are still negative despite Economic Growth. This means that many people still feel worse off and this impacts on Consumption and therefore AD

msh — 2014-03-11 17:35:17 UTC

msh — 2014-03-11 18:51:51 UTC

Interest Rates have been at a historic low for 5 years ( 0.5% )

Bilkis- Low interest rates

2014-03-12 19:15:03 UTC

Winners- people who have borrowed money for things like taking out mortgages and have had their interest rates linked to the base rate, so when interest rates decreased, so did the amount they had to pay back.

Losers- Savers lose out as they get less of a return on their savings as the interest rates decrease.

Abdur

2014-03-12 19:55:20 UTC

Half a million home owners are in negative equity meaning their mortgage now costs more than the value of their house which they have a mortgage on. This is because houses in certain areas lose value but this isn't the case in London as house prices are booming due to excess demand. Those who are in negative equity may feel less confident and consume less because of the negative wealth effect therefore reducing aggregate demand.

2014-03-13 17:59:52 UTC

Long term unemployment may lead to hysterisis

2014-03-13 20:50:48 UTC

High levels of long term unemployment will mean workers will loose their skills and will be working in a job that doesn't require any specialized skills

2014-03-14 11:01:15 UTC

Incomes have been rising faster than inflation, meaning real incomes are starting to rise. Not quite there yet!

Krish

2014-03-14 11:01:39 UTC

Unemployment is 7.2% but it does take into account temporary jobs, zero-hour contracts and self-employment.

Minimum wage to increase by 3% in october 2014

2014-03-14 17:42:07 UTC

Wages are going to increase from £6.43 to £6.50 in October 2014 which means for the first time income would increase by a higher percentage than inflation which is currently 1.9%. So real incomes would increase and consumers would feel better off.

Shivani

2014-03-16 17:28:50 UTC

As many jobs are now temporary, part time or zero hour contracts, there has been a decrease in unemployment and an increase in self employment.

Ravi

2014-03-16 17:36:08 UTC

Youth unemployment: In Oct-Dec 2013; 917,000 young people (aged 16-24) were unemployed, which was 48,000 down from the previous quarter,

Uma

2014-03-18 13:40:17 UTC

The childcare scheme subsidy has been boosted and has risen by 30% since 2010. As the government are spending more into the economy, this is an injection and increase aggregate demand. This means that more money is injected into the circular flow of income. It is also a Supply Side Policy at it will encourage people into work and so increase LRAS and so increase Growth

Bilkis

2014-03-19 09:21:33 UTC

The minimum wage has increased by 19p to £6.50 an hour.

Some would say that this would allow a higher standard of living and benefit millions however, with the minimum wage being £1.15 below the living wage of £7.65, others would argue that it's not a significant step towards a high standard of living for all, especially when all but five business sectors can actually afford to pay their workers higher than the minimum wage. (BBC)

Lasya

2014-03-21 08:19:32 UTC

The UK economy has been too dependent on household consumption, therefore they need to increase export and investment including overseas investment, to obtain a more sustainable economy.

Annie

2014-03-25 13:45:15 UTC

Interest rates are at a historic low at 0.5%, but they are expected to rise soon. If interest rates rise, mortgages will become more expensive, leading to people having less disposable income. This may therefore decrease consumption. Also, as interest rates rise there will be a larger incentive to save, which is a leakage. As the aggregate demand in the UK is highly dependent on consumption, the interest rates may largely affect demand in the economy if they rise in the future.

2014-03-25 14:40:32 UTC

Over 50% of the UK exports are exported to countries within the European Union. At the moment the European Union is quite fragile as growth is slow.

Lasya, Tanmay and Ravi

2014-03-25 14:40:39 UTC

Inflation down to 1.7% - This means that consumers and households have higher real incomes, especially looking into the fact that the price rises have slowed in necessities such as petrol and food, the highest proportion of income goes into these necessities so will be beneficial to lower income households. Additionally, consumers will see a slight increase in their disposable incomes, meaning consumption may rise, causing AD to shift rightwards.

Bilkis, Annie, Sonali

2014-03-25 14:40:53 UTC

Minimum wages have increased, and inflation is falling so people will begin to feel wealthier and may therefore be more confident in the economy. However this will only affect people who are currently on the minimum wage.

Mr Talati

2014-03-25 14:40:58 UTC

The UK economy's growth is currently 1.9% and predicted to be 2.7%. In 2019 we are predicted to be in a surplus. The government has cut energy costs for manufacturers and are handing out more loans at a lower rate for firms whivh means exports for the UK would increase meaning the current account deficit would decrease.

Increase in the Tax Free Threshold to £10,500 from

2014-03-25 14:41:26 UTC

Consumers will have more disposable income therefore they'll consume more which will increase AD and increase their incentive to work. In the long run, there'll be an increase in the LRAS as employment increases; however consumers may choose to save and business' may need to provide training for employees.

Tom, Harvir, Tanisha

2014-03-25 14:41:55 UTC

If there is a high level of unemployment, it means that consumers will demand less imports, as we have a propensity to import more if our real incomes are higher.

Adil, Nahidur

2014-03-25 14:42:03 UTC

High levels of unemployment means there is a large output gap, so little risk of demand-pull inflation. Also many jobs are temporary/zero hour contract.

2014-03-25 14:42:12 UTC

Tax threshold has increased to 10500 so this is an incentive to work and so is likely to reduce unemployment. This is a supply side policy which will increase the LRAS and so the productive capacity of the economy will also increase

Shivani and Harpreet

2014-03-25 14:42:20 UTC

The subsidy to to help with childcare, can increase consumption and so increase AD, this is due to real disposable income increasing. It will also shift the LRAS to the right as it increases the incentive to work.

Current account

2014-03-25 14:45:32 UTC

The current account is made up of trade in services, trade in goods, investment incomes and transfers.

sonali

2014-03-25 16:25:34 UTC

The annual 100% tax allowance for investment has been doubled to £500,000, meaning that most UK firms will get tax breaks. This is a supply side policy as It intends to increase the LRAS by giving firms a incentive to increase capital investment. This will mean unemployment will decrease, and so consumption will increase, increasing AD. However, the standard of living in the UK may not go up as real incomes could still be falling.

Maia and Maddie

2014-03-26 20:29:17 UTC

The personal tax allowance has been raised to £10,500 which means less income tax especially for low income earners. This means disposable income will rise which means consumer spending should increase (providing a good level of confidence) shifting AD curve to the right- however this could cause demand pull inflation, lowering real incomes. However the government would recieve les tax revenue unless those on benefits who are not actively looking for work see more incentive in working due to less taxation so may join the labour force would would mean the government would recieve more tax revenue and the LRAS curve would shift to the right- achieving a economic objective of growth.