Choose any country, assess its current macroeconomic position and Essay

Choose any country, assess its current macroeconomic position and discuss what policy options might be adopted (or have been ado - Essay Example This is translated in the macro level as the economy’s total income and total expenditure. GDP measures both the income of the people in the economy and expenditure in the form of consumption, investment, government purchases and net exports. We can assess the economic performance of United Kingdom (UK) using the economic indicators mentioned above. We begin with analysis of the trend in UK’s GDP. There were rises and falls in UK’s GDP as results of the economic fluctuations over the years but the latest figures in its trends reveal the positive position of UK. The UK figures show that GDP on a comparable basis (constant basic prices) grew by 0.5 per cent in the year to end-September 2010 and grew by 0.7 per cent in the third quarter of 2010 (www.scotland.gov.uk 2011). These figures are the results of the experienced increase in both services and construction sectors, 0.6 % and 1.6% respectively and the fall in production sector by 0.4 %. This trend was presented in Figure 1. FIGURE 1. UK GDP GROWTH RATE (2000-2010) In this graph, UK’s GDP was positive from year 2000 up to the first quarter of 2008 and started to register negative growth rates in the second quarter of 2008. There was a negative GDP gap as the actual GDP was less than the potential output. This was the same year when the global recession hits most countries around the world. Recession is one of the economic fluctuations that economies have to face and pass through because failure to do so will cause economic depression. It is a period of declining real GDP, accompanied by lower real income and higher unemployment. UK is one of the affected economies by the recent global crisis. The effects were seen and felt by everyone in the economy. The findings of a survey of almost 5,000 small, medium and large businesses suggested that UK faced a serious risk of recession within months (BBC 2008). Major businesses reported fall in their production and sales. Firms particularly i n the manufacturing and services sector have experienced serious cash-flow problems as results of the lowest levels of sales and orders, job expectations and confidence hit. Both consumers and firms were losing confidence in the recovery of the economy. This made them to hold on tight to their money and refrain from spending, making the consumption and investment level very low. We all know from our circular flow of economic activities that expenditures on buyers purchases and consumption will be the income of sellers of products and providers of services. The effects of the changes in consumption behavior of the households were extended to the producers. House builders has to cut their jobs and reported that completion of their house sales fell. The services firms like restaurants, gyms and tour operators were also hard hit by the decrease in consumption level of the households. The low volumes of production and sales of the businesses caused the real income to fall and contributed to higher inflation rate (Friedman and Schwartz 1982, p.253). More firms have decided stop their production activities because the present condition won’