ECONOMICS INCREASE IN EXPORTS

Topics: Macroeconomics, Inflation, Government debt Pages: 5 (1505 words) Published: March 9, 2015
Macro-Economics Essay
Using the data and your economic knowledge, assess the importance of an increase in exports for achieving an improvement in the performance of the UK economy. (25 marks) To assess the impact of an increase in exports for achieving an improvement in the performance of the UK economy, we must first define the macroeconomic indicators, which are factors the government use in assessing the performance of the current economy. These are, prices and inflation, employment and unemployment, GDP and economic growth, and the current account of the balance of payments, which is to say, the balance between imports and exports. However, because of the recent economic crisis, the state of government finances has also become a key indicator of performance. Furthermore, we are likely to consider the competitiveness of exports in this situation. Exports play an important role in the UK economy, it influences the level of economic growth, employment, and the balance of payments. Exports of goods and services, in 2011, accounted for large percentage of the UK’s GDP, which shows how an increase in exports would greatly improve the performance of the UK economy. Firstly, to be able to assess the importance of an increase in exports for an improvement in the performance of the economy, we must first look at the statistics of the UK economy in the peak of the recession in 2009. In terms of unemployment, which, although self explanatory, means the amount of people out of work who are also actively looking for work and available to begin working immediately, which peaked at 2.47 million in June and July of 2009. High unemployment obviously is negative towards the economy since these unemployed people are basically unused resources that could be working and earning money and contributing towards the economy. Hence, due to this unemployment there is always the potential for more income to enter the economic cycle which would benefit the economy, but cannot due to these people being unemployed. An increase in exports would create employment and conversely reduce unemployment, which indicates an improvement in the UK economy. For example, the growth in car exports have created many jobs in the car industry, such as the BMW factory in Oxford, and Nissan in Sunderland. Export jobs are mostly in manufacturing industries, an important source of full-time employment in the UK, especially in industrial regions. Thus, an increase in exports would improve the UK economy’s performance significantly. Secondly, we can look at the state of the UK economy by analysing the real GDP of the UK in the peak of the recession. Why GDP matters in the scheme of things is because the GDP of a country is the measure of the value of all goods and services a nation produces, and by definition also measures the value of all incomes earned and all spending made over the period of time that it is measured, usually in terms of fiscal quarters. In Q2 of 2008 to Q2 of 2009, the UK economy’s GDP decreased a total of 7.2%. A shrinkage in GDP means that the national income is lower, and therefore spending will be less, which is an indication of an unhealthy economy. However, an increase in exports would most definitely stimulate economic growth. Exports are a component of aggregate demand (AD). Rising exports would help increase AD and cause higher economic growth. This growth in exports can also have a run on effect to related service industries. For example, an increase in car exports in an industrial area will help the local economy, with local shops and restaurants benefiting from an increase in spending. With all this increase in spending on UK produced goods and services, the GDP will increase, an indication of an economy performing well. Therefore, it can be said that an increase in exports will increase GDP, and stimulate economic growth, and thus will have an increase in performance in the UK economy. Thirdly, we can assess the impact of an increase...
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