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UK ECONOMICS - Coggle Diagram

- - - - EXPENDITURE ON WAGES AND RAW MATERIALS
        
        SHORT TERM
        
        RENEWED EACH YEAR
        
        CHEAP
    - - SPENDING ON ROADS, BRIDGES, HOSPITAL BUILDINGS AND EQUIPMENT
        
        LONG TERM
        
        DOES NOT HAVE TO BE RENEWED EACH YEAR
        
        EXPENSIVE
  - - - OBJECTIVES: STIMULATE GROWTH AND REDUCE UNEMPLOYMENT
        
        CUT TAXES OR INCREASE PERSONAL TAX ALLOWANCES
        
        GOVERNMENT SPENDING INCREASES AND TAXES DECREASE
  - - - OBJECTIVES: REDUCE DEMAND AND CONTROL INFLATION
        
        INCREASE TAXES AND/OR CUT SUBSIDIES
        
        GOVERNMENT SPENDING DECREASES AND TAXES INCREASE
  - - - TO ACHIEVE SUPPLY-SIDE IMPROVEMENTS - SPENDING ON EDUCATION & TRAINING AND PRODUCTIVITY & INFRASTRUCTURE INVESTMENT
        
        TO INCREASE AGGREGATE DEMAND
        
        TO REDUCE THE NEGATIVE EFFECTS OF EXTERNALITIES
        
        TO SUBSIDISE INDUSTRIES
        
        TO HELP REDISTRIBUTE INCOME AND ACHIEVE MORE EQUITY
    - - IMPACT ON THE LEVEL OF AGGREGATE DEMAND - COMPENSATE FOR FAILING - HOUSEHOLD SPENDING ON CONSUMER GOODS - FIRMS SPENDING ON CAPITAL GOODS
        
        CAPITAL SPENDING: IMPROVED INFRASTRUCTURE AND IMPROVED ECONOMIC GROWTH
        
        PUBLIC SPENDING: REDUCING UNEMPLOYMENT AND MORE EQUITY
- - - - ALSO MEASURES THE CHANGES IN PRICES OF GOODS AND SERVICES OVER TIME.
        
        ALSO INCLUDES MORTGAGES, THEREFORE RPI CAN CHANGE MORE DRAMATICALLY FOLLOWING A CHANGE IN INTEREST RATE
    - - MEASURE OF GOODS AND SERVICES PURCHASED BY A NORMAL CONSUMER (EXCLUDING HOUSING COSTS)
        
        ILLUSTRATES HOW PRICES RISE AND FALL OVER TIME
    - - CREATE A BASKET OF GOODS BASED ON THE RESULTS OF THE "LIVING COSTS AND FOOD SURVEY"
        
        ITEMS IN THE BASKET ARE UPDATED ANNUALLY
        
        ALL COSTS OF HOUSING ARE EXCLUDED FROM THE BASKET
        
        GIVE A WEIGHT TO EACH ITEM IN THE BASKET BASED ON IMPORTANCE/PROPORTION OF HOUSEHOLD SPENDING
        
        GATHER PRICES FROM RETAILERS AROUND THE COUNTRY
        
        CHECK PRICES FROM LAST TIME/BASE YEAR
        
        1 more item...
  - - - WHEN THE COSTS OF PRODUCTION INCREASE, IN ORDER TO COVER THEM, FIRMS WILL INCREASE THEIR PRICES
        
        OVERALL PRICE LEVEL WILL THEN INCREASE AND SET OF A PERIOD OF INFLATION
        
        THESE COSTS COULD BE A RESULT OF:
        
        INCREASES IN RAW MATERIAL COSTS
        
        INCREASES IN PROFIT MARGINS
        
        INCREASES IN THE TAXES THAT FIRMS PAY
        
        INCREASES IN ANY OTHER COSTS SUCH AS RENT
        
        A DECREASE IN THE EXCHANGE RATE LEADING TO HIGHER PRICES OF IMPORTS
    - - WHEN DEMAND IS INCREASING AT A FASTER RATE THAN SUPPLY DUE TO HIGH SPENDING BY INDIVIDUALS, FIRMS AND/OR THE GOVERNMENT.
        
        TENDS TO HAPPEN WHEN THE ECONOMY IS IN A BOOM AND THERE IS NO SPARE CAPACITY FOR OUTPUT TO BE INCREASED FURTHER TO MEET THE DEMAND. THEREFORE, PRICES MUST INCREASE
        
        EXPECTATIONS OF DEMAND PULL INFLATION
        
        WAGE PRICE SPIRAL
        
        EMPLOYEES ASK FOR PAY RISES AT LEAST AS HIGH AS THE EXPECTED LEVEL OF INFLATION
        
        FIRMS WILL HAVE TO INCREASE THEIR PRICES TO COVER THE EXTRA COSTS WHICH INCREASES INFLATION
        
        CONSUMER MAY 'PANIC PRICES UP'
        
        CONSUMERS BUY LARGE QUANTITIES OF PRODUCTS BECAUSE THEY EXPECT THE PRICE TO RISE AND THEY WANT TO BUY IT AT THE CHEAPER PRICE
  - - - INCREASE TAXES
        
        INCREASE INTEREST RATES
        
        INCREASE DEPOSIT LEVELS REQUIRED
    - - IMPROVED TRAINING
        
        GRANTS AND SUBSIDIES
        
        ENCOURAGE GROWTH AND ECONOMIES OF SCALE
        
        INVESTMENT IN INFRASTRUCTURE
    - - RESTRICTING THE RATE OF INCOME GROWTH
    - - SETTING MAXIMUM PRICES FOR KEY GOODS
- - - - THE CLAIMANT COUNT
        
        GOVERNMENT'S PREFERRED MEASUREMENT MEASURES NUMBER OF PEOPLE ELIGIBLE TO CLAIM UNIVERSAL CREDIT
        
        CRITIQUES
        
        FREQUENT CHANGES IN THE METHOD OF CALCULATION
        
        SOME CHOOSE NOT TO REGISTER FOR BENEFIT
        
        SOME FRAUDULENTLY CLAIM BENEFIT
        
        STRICT ELIGIBILITY CRITERIA
        
        REDUCED AMOUNT OF TIME
        
        JSA CAN BE ONLY BE CLAIMED FOR 12-6 MONTHS
      - LABOUR FORCE SURVEY
        
        A LARGE, REGULAR QUESTIONNAIRE OF UK HOUSEHOLDS CARRIED OUT BY THE OFFICE FOR NATIONAL STATISTICS (ONS)
        
        MEASURES UNEMPLOYMENT USING THE INTERNATIONAL LABOUR ORGANISATION DEFINITION
        
        PEOPLE AGED 16+ WHO ARE ACTIVELY SEEKING AND AVAILABLE FOR WORK
        
        INCLUDES PEOPLE NOT CLAIMING BENEFITS
        
        CAPTURES A WIDER GROUP OF UNEMPLOYED INDIVIDUALS THAN THE CLAIMANT COUNT
        
        INTERNATIONALLY COMPARABLE
        
        BASED ON STANDARDS SET BY THE INTERNATIONAL LABOUR ORGANISATION
        
        AROUND 80,000 HOUSEHOLDS SURVEYED EACH QUARTER
        
        2 more items...
      - METHOD COMPARISION
        
        LFS USUALLY SHOWS HIGHER UNEMPLOYMENT BECAUSE NOT ALL UNEMPLOYED PEOPLE CLAIM BENEFITS
        
        CLAIMANT COUNT IS AN ADMINISTRATIVE MEASUREMENT BASED ON BENEFIT CLAIMANTS ONLY
        
        LFS IS CONSIDERED MORE ACCURATE FOR MEASURING REAL UNEMPLOYMENT BUT IT IS COSTLY AND SUBJECT TO SAMPLING ERRORS
  - - - BEING TEMPORARILY OUT OF WORK WHILE MOVING BETWEEN JOBS/HAVING A BREAK FROM WORK
        
        CAN OCCUR WHEN WORKERS LEAVE ONE JOB TO LOOK FOR ANOTHER, WHEN GRADUATES TAKE TIME TO FIND THEIR FIRST JOB, OR WHEN SEASONAL WORKERS ARE BETWEEN CONTRACTS
        
        USUALLY SHORT TERM AND REFLECTS THE NORMAL JOB-SEARCH PROCESS IN A HEALTHY, FLEXIBLE LABOUR MARKET
    - - WHEN CERTAIN INDUSTRIES DECLINE BECAUSE OF LONG TERM CHANGES IN MARKET CONDITIONS/MISMATCH BETWEEN THE SKILLS OF WORKERS AND THE JOBS AVAILABLE IN THE ECONOMY
        
        LEAD TO FALL IN DEMAND FOR CERTAIN SECTORS OF THE ECONOMY
        
        HEIGHTENED BY:
        
        OCCUPATIONAL IMMOBILITY:
        
        BARRIERS TO THE MOBILITY OF LABOUR BETWEEN DIFFERENT INDUSTRIES AND OCCUPATIONS
        
        GEOGRAPHICAL IMMOBILITY:
        
        BARRIERS TO PEOPLE MOVING FROM ONE AREA TO ANOTHER TO FIND WORK
        
        CHANGE IN TECHNOLOGY MAKING JOBS BECOME OBSOLETE
        
        CHANGES IN CONSUMER TASTE OR PREFERENCE
    - - LOSS OF JOBS DUE TO A RESULT OF A FALL IN AGGREGATE DEMAND
        
        FALL IN AD RESULTS IN THE FALL IN REAL OUTPUT
        
        FIRMS REDUCE THEIR OUTPUT AND HENCE REDUCE THEIR WORKFORCE
        
        CREATING A SURPLUS SITUATION AS AD OF LABOUR IS LESS THAN AS OF LABOUR
        
        EXAMPLES
        
        WIDESPREAD JOB LOSSES IN CONSTRUCTION AND MANUFACTURING DUE TO THE 2008 FINANCIAL CRISIS
    - - OCCURS WHEN PEOPLE ARE OUT OF WORK AT CERTAIN TIMES OF THE YEAR BECAUSE THEIR JOBS DEPEND ON SEASONAL DEMAND
        
        COMMON IN INDUSTRIES SUCH AS TOURISM, AGRICULTURE, AND RETAIL WHERE ACTIVITY PEAKS DURING SPECIFIC SEASONS AND FALLS DURING OTHERS
        
        FOR EXAMPLE, FARM WORKERS MAY LOSE EMPLOYMENT AFTER THE HARVEST, OR SKI INSTRUCTORS MAY ONLY WORK IN WINTER
    - - OCCURS WHEN WORKERS ARE REPLACED BY AUTOMATION IN THE PRODUCTION PROCESS
    - - OCCURS WHEN CERTAIN AREAS OF A COUNTRY EXPERIENCE HIGHER LEVELS OF UNEMPLOYMENT THAN OTHERS. THIS OFTEN HAPPENS WHEN INDUSTRIES DECLINE IN SPECIFIC REGIONS, SUCH AS FORMER MINING OR MANUFACTURING AREAS. THIS CAN LEAD TO ECONOMIC INEQUALITY, LOWER LIVING STANDARDS, AND OUTMIGRATION AS PEOPLE MOVE ELSEWHERE FOR WORK.
  - - - ECONOMIC EFFECTS
        
        REDUCED INCOME WHILE MAJOR SPENDING COMMITMENTS CONTINUE
        
        REDUCED STANDARD OF LIVING
        
        REDUCED EFFICIENCY AS AN UNEMPLOYED WORKER LOSES HIS SKILL, FITNESS AND MOTIVATION
      - SOCIAL EFFECTS
        
        REDUCED STATUS
        
        INCREASED HEALTH PROBLEMS BOTH PHYSICALLY AND MENTALLY
    - - PROS
        
        BIGGER POOL OF LABOUR AVAILABLE MEANING REDUCED PRICE OF LABOUR
        
        LESS PRESSURE TO PAY HIGHER WAGES
        
        LESS RISK OF INDUSTRIAL ACTION FROM EMPLOYEES BECAUSE FEAR OF JOB LOSSES
      - CONS
        
        FALL IN DEMAND FOR GOODS AND SERVICES - FALL IN REVENUE AND PROFITS. RESULTS IN A KNOCK-ON EFFECT ON SUPPLIERS (NEGATIVE MULTIPLIER EFFECT)
    - - SOCIAL COSTS
        
        INCREASED CRIME
        
        CIVIL UNREST
        
        INCREASED BURDEN ON HEALTHCARE SYSTEM
      - ECONOMIC COSTS
        
        LOST OUTPUT - REAL GDP WILL FALL
        
        NEGATIVE MULTIPLIER EFFECT - REDUCED SPENDING AFFECTS JOBS OF OTHERS
        
        REDUCED TAXATION REVENUE - INCOME TAX AND TAXES ON CONSUMER SPENDING: FALL IN CORPORATION TAX ON COMPANY PROFITS
- - - - CHARGES FOR USING RESOURCES UNDER THEIR CONTROL - PARKING CHARGES, PRESCRIPTION CHARGES AND TV LICENSES
    - - SELLING OFF PREVIOUSLY OWNED NATIONALISED INDUSTRIES OR SERVICES - BRITISH TELECOM AND BRITISH RAIL
    - - COMPULSORY CONTRIBUTION FROM BOTH EMPLOYER AND EMPLOYEE TO PROVIDE WORKERS WITH A MINIMUM WELFARE PAYMENT - UNIVERSAL CREDIT
    - - DIRECT TAXES (PROGRESSIVE)
        
        INCOME TAX AND CORPORATION TAX
        
        INDIRECT TAXES (REGRESSIVE)
        
        VALUE ADDED TAX (VAT)
  - - - TAKES NO ACCOUNT OF PEOPLE'S ABILITY TO PAY
        
        LOWER-INCOME EARNERS PAY A HIGHER PERCENTAGE OF THEIR INCOME IN TAX
        
        LOWER EARNERS PAY PROPORTIONATELY MORE THAN HIGHER INCOME EARNERS
        
        VAT AT 20%...