Need help with my writing homework on Macroeconomic Policies. Write a 2000 word paper answering; Some of the recent steps taken by the current government include some very drastic changes in government spending and increases in taxes. This is being done in the wake of the higher level of government debt which is even greater than the GDP of the country. Before the austerity measures, there were discussions that the UK might default on its commitments owing to a large amount of public debt which was undertaken by the previous government as a part of its fiscal expansion efforts to stimulate the economy.
In order to discuss whether the steps taken by the British Government were successful in achieving the desired objectives, it is important to understand that from Nov 2008 till now, two governments were running the affairs of State. The current Conservative Government took charge in 2009 so before that labor government was running the show and adopted policies that were radically different from what is now being practiced and preached under David Cameron’s new conservative government.
The last two quarters of 2008 witnessed a continuous drop in GDP of the country and during the last quarter i.e. September to December 2008, the UK officially entered into the recession. Recession is often characterized by the decline in the gross domestic product of the country for more than one quarter therefore during the initial period, the UK economy experienced a decline in growth and policies adapted by than labor government was not successful in generating the desired results.
The above graph1 shows the GDP growth trends for the last five years i.e. since 2005 till the third quarter of the current year. These trends indicate that the UK’s economy started to pick up from the second quarter of 2009 indicating that the efforts taken by the British Government were successful in initiating the process of recovery in the economy.
What is also important to note that there is a debate going on suggesting that the real impact of the austerity measures will start to manifest later.