25. Oil prices affect AD and SRAS
The external
environment
matters a lot
for the UK
economy
World oil price seems to
have stabilised around
$100 a barrel................
26. Deep recession (> 6% fall in
output) and weak recovery
(GDP grew only 0.7% in 2011)
Economy needs
to grow at least
2% for
unemployment
to start falling
38. The Cost of Credit
Official interest rates are about as low as
they can go and government bond yields
are at record lows. Yet regular borrowers
are paying well above these rates
44. Key services:
Business services
Financial services
Transport and tourism
Education and Health
Creative industries
Research and development
Key goods:
Manufactured goods
Oil / gas / minerals
Food and drink
Components
Services
UK is the largest service
exporter in the EU
47. Trade balance in finished manufactured
The structural trade deficit in
manufactured goods seems to
have stabilised but why is the UK
such a large net importer of
manufactured products?
53. Fiscal Policy
The big issue in fiscal
policy is fiscal austerity –
i.e. Cutting the budget
deficit through spending
cuts and tax rises G>T =
budget
deficit
54. How much borrowing can the UK take?
Fiscal austerity as Coalition aims to cut the
size of the budget deficit over the next five
years – will the pain work?
55. The UK government can borrow money for
10 years at cheap interest rates (around
2%) – whereas the cost of borrowing for
other countries is significantly higher – this
gives the UK an advantage – has it been
used well?