Streetcar Named Desire

The UK's economy has been experiencing growth for nine years consecutively; where the average rate of growth has been 2.5%. The last recession in the UK ended in the last quarter of 1992. However, it is important to note that in recent years, real output has been rising below the average rate of growth [2.5%] therefore, this can be defined as an economic slowdown Ð'- where economic growth is rising but at a slower rate. On the other hand, in 1988 when real GDP % change reached 5%, UK is classified to be experiencing a boom.

UK's sustained growth over the past decade has been described as an Ð''economic miracle' by many economists. The reason behind this Ð''economic miracle' during the early nineties was due to the North Sea Oil and foreign investment. Additionally, government policies have improved labour relations, thus providing the encouragement of small-scale enterprises and self employment.

The UK's economic growth arise from an increase in consumer's demand, thus expenditure. This causes a shift to the right in the aggregate demand curve. The effects of economic growth are a rise in consumer's living standards. Essentially, this has resulted in more employment in the service sector, due to consumers demanding services. Thus more employment in the service industry has resulted in higher productivity and induce further economic growth.

A change in the monetary policy in the past has also caused a change in economic growth. Lower interest rates in the UK had lead to an increase in economic growth. A cut in interest rates has boosted consumption which will inevitably increase GDP. However, an increase in demand for imports around 1995 had caused an economic slowdown. This is because money will have leaked out of UK's circular flow of income, causing reduced GDP.

In the short run, the effects of economic growth will mean a higher rate of demand and thus inflation as the UK's economy reaches near full employment. Consequently, UK's resources such as labour and raw material may become scarce. Eventually, a small percentage change in output will lead to a faster acceleration in prices.