Essay on The effect of the macro-economy

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External Influences

The Macro-economy

The production and exchange process of the whole economy as opposed to individual markets within the economy. Businesses are affected by changes in the macro-economy and by government processes towards the macro-economy. Government economic policies change a lot. (E.g. labour made bank of England independent on their first day in office.)

Instead of dividing the economy into different sectors (e.g. retail, cars etc) we look at the economy of the country as a whole.

Government Macro-economic objectives:

• Control of inflation – 2.5%
• Maintain full employment-all who want a job can get one.
• Control of balance of payments. Imports vs. exports
• Stability of exchange rate. Could
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China will make more and more to export.

Full Employment

• Full Employment- Used to be a job for all, now a job for all those who want one. Affected by economy-if economy is good, more jobs, if you are going through a recession then that is not the case. If you are over 21 the minimum wage is £4.85 for over 21’s, for under 18’s just £3.
• The EU convention of Human rights, Article 23 states that everyone has the legal right to work. This means that if the person doees not have a job through no fault of their own, they must be compensated for. This is why must governments have a state system to provide for them.
• In U.K there is a period of time where you get unemployment benefit linked to housing and family sizes. After an unemployment of 6 months, if you want to keep unemployment benefits you must sign up for training or education.
• Full Employment differs from what it used to mean, it used to mean everyone should work but now it means what it says above.
• The ‘Poverty Trap’ is where you get benefits, then accept a job and get less money than from benefits so there is no incentive to go to work for a low paid job, so people just stay at home. This is bad for a government.
• New deal- the government told people who were unemployed they must go into training or education. They did this because a lot of 17 year olds don’t go into training, employment or education and so don’t know where they are, or how they are…