Macroeconomics real world examples

UK Inflation rate

3.4%

Inflation rate target

± 2%

Components of AD

Consumption - 60%, Government spending - 25%, Investment - 15%, (Exports-Imports) - 1%

UK interest rates (Bank rate)

5.25%

Unemployment rate

4.2% in February 2024

Balance of Payments

£9.9 billion trade deficit in Feb 2024

Annual growth rate 2023

0.1% (very poor performance, economy is stagnating, technically in recession) - this is because of high interest rates, high rates of personal taxation, cuts to gov. spending, low consumed and business confidence (demand side), on supply side, short run factored like rising fuel prices, gas and electricity prices, long run - poor productivity bc. of shrinking labour force, poor and ailing infrastructure, very week business investment

Quarterly Growth Rate

-0.3%

Annual growth forecast (2024)

0.8%

Output gap

-0.1% (negative output gap) due to rising unemployment

GDP per capita

£36,000

Total GDP

approx. equal to £2.53 trillion - services (79%), manufacturing (14%), construction (6%), agriculture (1%)

Employment rate

74.5%

Economic inactivity rate

22.2% - higher than pre covid, has gone up because of a rise in long-term sickness, drives wage growth and reduces potential growth

Job vacancies

Falling (loose labour market)

Youth unemployment

11%

Youth unemployment

11%

Consumer confidence

Very weak

Balance of Payments deficit

£9.9 billion (Feb 2024)

Current Account Deficit

3.2% of GDP

Wage growth

5.6%

Productivity and investment

Very poor productivity ever since financial crisis - chronically uncompetitive and cost of production for firms is higher

Very poor investment since Brexit, cost of production is higher

Minimum Wage rate

£11.44 an hour (incredibly high) - another reason for high labour costs

Exchange rate

Weak pound - £1 = $1.24, £1 = €1.16

Pound has been week since Brexit vote in June 2016 - should help improve export competitiveness and reduce current account deficit, but haven’t seen that bc. we don’t have large manufacturing bass

US and Euro area

US is doing well - good news in terms of trade, but EU countries are stagnating, not good news for demand of British exports

Budget Deficit

4.2% (2023-2024) - ever since COVID, budget deficit has been rlly high

National Debt

98% of GDP - amount of gov. spending on debt interests has been more that they spend on education yearly

Bond Yields

4.2% - this figure has gone down since the disastrous Liz Truss and Kwasi Kwarteng budget

Income Tax

0% to £12,570, £12,570 to £50.270 - 20%, anything from £50270 up to £125, 140 - 40%, £125, 140 + -45%

Progressive taxation system

National Insurance

12% to 10% to 8%

Corporation Tax

25%

VAT

20%

Gini Coefficient

0.357 - indicator of income inequality

BofE Base Rate

5.25%

Average Lending Rate

6.25%

Bank willingness to lend

Good

Business confidence

Poor but positive signs

Savings Ratio

10.5%

Quantitative Easing

£895 billion