Business: Inflation and Economic Growth Essay

Submitted By henrique02
Words: 827
Pages: 4

Demand Side and Supply Side Policies

This is my Global Business Environment assignment where I have been asked to discuss how demand-side policies and supply-side policies can be used to stimulate economic growth.

Economic Growth

The economic growth is an increase in economy which occurs when there is an increase in the quantity of products of goods and services in the economy. Examples of this can be sources such as an increase in technology which will enable all the capital equipment to be more productive. Another example of this is the increase in the land, due to the fact that now technology has been allowing more land to be used more productively.

Economic growth is measure by inflation and terms which are adjusted by inflation. Inflation is the rate which the general levels of good and services are rising and the purchase power is failing in order to keep the excessive growth of prices down, Central Banks, in this case the Bank of England attempt to stop inflation. Inflation can be seen as either the money supply or an increase in price levels, due to the fact that whenever we hear about inflation it relates to the raising prices in the economy.

United Kingdom is one of the world’s largest economists and one of the biggest manufacturers in the world. Over time, the United Kingdom’s economy has increased during the first quarter of 2013; the Gross Domestic Product in the UK has expanded 0.30 over the provision quarter. There have been many changes in the rate of inflation in recent years.

In 2008 the prices of goods ad services rose due to the global financial crisis, the annual rate was about 5%, but after a year later they were down by 1%, the same time they were also failing by 1.5%.

The bank of England believes that the inflation will fall back to 2% target, if the prices of oil and imports go lower.
Since March 2012 the United Kingdom consumer’s price inflation stayed at his highest, as it was held at 2.8%. It is expected that inflation could rise up to 3% by the end of 2013.

Demand-side Policy

The government tends to use different types of policies when they aiming to increase the level of aggregate demand in the economy.
One of the policies which the government uses is the demand-side policy.

Within the economy, the demand-side policies are the policies which are adopted by the government in order to influence the aggregate demand in the economy. The government is looking to prevent increases on the demand by reducing the aggregate demand by using deflationary policies. This has been done by taking actions when the government meets to decide which method they could use in order to influence the levels of aggregate demand.
One of the methods which the government uses is the change in taxation and the benefit system, which can be done in many different ways, one of them is being council taxes. This is the tax which is paid by local authorities as it depends on the values of houses.

The other important factor which the government could also be willing to change is the levels in which the taxes are paid. This is done by