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Explain what has happened to the UK economy over the last 3
years. How have businesses been affected by this?

The UK economy is the world's sixth largest national economy, measured by GDP and purchasing
power parity. However, in 2008 the UK entered its worst economy since World War 2.…

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The recession had a huge effect on the number of people unemployed. Output and demand falls, this
causes firms to cut back and therefore make redundancies. Companies are also much less willing to
hire more staff. A negative multiplier effect takes place also. As more people are unemployed, these

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Figure 4

Inflation refers to the increase in price of goods and services.
(CPI is the Consumer Price Index)
(RPI is the Retail Price Index)
Figure 4 shows that inflation was generally on the rise from 2000 to 2008. However, as companies
had realised that changes in price needed…

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