Macroeconomic objectives statistics UK

Explain possible conflicts between controlling unemployment and inflation.

UK unemployment fell to 3.8% in 2022, but inflation soared to over 11% in October 2022 as demand and supply shocks collided.

Explain possible conflicts between controlling unemployment and inflation.

In the UK, after the Bank of England raised rates to 5.25% in 2023-24, unemployment rose to 4.2% by early 2024 (ONS).

• Explain possible conflicts between economic growth and inflation.

• UK fiscal stimulus and rapid growth post-COVID in 2021 (7.5% GDP growth) coincided with inflation rising above the Bank of England’s 2% target, peaking at 11.1% in October 2022.

• Explain possible conflicts between economic growth and inflation.

○ The Bank of England raised rates to 5.25% in 2023–24 to meet the 2% inflation target, contributing to weak UK GDP growth of just 0.1% in Q1 2024.

• Explain possible conflicts between economic growth and the current account balance.

○ In the UK, strong growth in the mid-2010s coincided with a persistent current account deficit of around –5% of GDP in 2016, one of the largest among advanced economies.

• Explain possible conflicts between economic growth and the current account balance.

○ In the early 2010s UK austerity period, efforts to “rebalance” the economy and improve competitiveness coincided with sluggish GDP growth (around 1–2%) and weak domestic demand.

Explain possible conflicts between economic growth and environmental sustainability.

○ China’s rapid growth in the 2000s increased GDP but led to severe air pollution (PM2.5 levels often above 100 μg/m³) and environmental costs.

Explain possible conflicts between economic growth and environmental sustainability.

UK policies like the Carbon Price Support and investment in green energy increase business costs but aim to reduce emissions.

• Explain possible conflicts between economic growth and income inequality.

• In the UK, GDP growth during the 2000s coincided with rising income inequality: the top 10% earned over 100 times more than the bottom 10% by some measures.

• Similarly, US growth over the same period saw top 1% incomes rise faster than median incomes

• Explain possible conflicts between economic growth and income inequality.

• UK progressive tax and welfare reforms in the 2010s aimed to reduce inequality, but critics argued some policies slowed private investment and economic expansion.

Explain possible conflicts between economic growth and budget deficit reduction.

• In the UK, during COVID-19 (2020–21), GDP fell sharply, and the government increased spending to stimulate growth.

• This pushed the budget deficit to around 14% of GDP, the highest since WWII.

Explain possible conflicts between economic growth and budget deficit reduction.

UK austerity measures post-2010 aimed at deficit reduction contributed to sluggish GDP growth (~1–2%) and weak recovery.

• Explain how expansionary fiscal policy might create conflicts with other macroeconomic objectives.

UK fiscal stimulus during 2021–22 (COVID recovery) helped GDP rebound (~7.5% growth) but contributed to inflation rising above 11% in October 2022.

• Explain how expansionary fiscal policy might create conflicts with other macroeconomic objectives.

UK borrowing rose to £303 billion in 2020–21 during COVID-19 fiscal expansion, around 14% of GDP

• Explain how supply-side policies might reduce one conflict but create another.

○ In the UK, post-2010, supply-side reforms like deregulation and tax incentives boosted employment, but real wages for low-skilled workers lagged behind, widening income inequality.

• Explain how supply-side policies might reduce one conflict but create another.

• UK energy market liberalization and subsidy cuts reduced inflationary pressure but initially led to some job losses in energy-intensive industries.