Essay explaining what happened to the economy during the recession

Essay explaining what happened to the economy during the recession

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  • Created on: 02-01-11 18:55
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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. The UK
economy saw huge dips in economic growth, Gross Domestic Product (GDP) and house prices as well
as an increase in unemployment.
GDP
Year Quarter Growth (%)
2008 Q1 0.5
2008 Q2 0.3
2008 Q3 0.9
2008 Q4 2.1
2009 Q1 2.3
2009 Q2 0.8
2009 Q3 0.3
2009 Q4 0.4
2010 Q1 0.4
2010 Q2 1.2
2010 Q3 0.8
Table 1
GDP = the value of goods and services produced by an economy over a specific period.
Table 1 shows the growth of the economy (economic growth is the increase in value of goods and
services produced by an economy over time) since the first quarter in 2008. At this point the
economy was at an all time high and was growing at 0.5%. However, the recession began in the
second quarter as growth declined and the GDP was decreasing now at 0.3%.In the third quarter of
2008 the UK economy was in a "slump". This decline continued and the GDP was most quickly
decreasing in the first quarter of 2009 with the lost point of the depression in the third quarter of
2009. Statistics show that the UK left the recession in the fourth quarter in 2009 with quarterly rates
of 0.4%. Significant growth began in the start of 2010 as the UK economy starts to re-build and
recover. However, many have predicted a double dip for the UK economy this time around.
UNEMPLOYMENT

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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
people have less disposable income and hence spend less money on goods, (in particular on luxury
items) and so this leads to even more job losses.…read more

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INFLATION
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 to be made in order to keep customers interested and
buying their products, there was a rapid decline in prices. Inflation had topped at 5.…read more

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