Macroeconomics Real World Examples Flashcards

Question

Benefits of Growth

Answer 1

The best country to use when applying the benefits of growth is China. Despite many costs of growth applying to China as well, the benefits have far exceeded the costs with higher incomes, poverty alleviation, living standards benefits, job creation, profits for firms and large fiscal benefits for the government all witnessed.

Answer 2

1) In both 2008 and 2010, the UK was in recession battling not just lower growth and higher unemployment but also higher than target rates of inflation. The reason was higher commodity prices, in particular oil, energy, and food, which deepened the recession in both instances. 2) Japan increased its sales tax from 5% to 8% in 2014 to increase tax revenue, reduce government debt, and battle deflation. The impact of this rise shocked the economy into recession later that year with President Abe having to delay further rises in the sales tax. A further rise took effect in October 2019 from 8% to 10% again acting as a major contributor to recession in 2020. 3) With increases in interest rates in the US throughout 2018 and into 2019, many countries (emerging economies in particular) saw their currencies weaken markedly, none more so than Argentina where the value of the Peso fell against the US Dolar by 59% ni 2018. Such a large, sustained fall in currency value has led to a huge supply-side shock in Argentina resulting in stagflation. Other countries such as Turkey and Nigeria have also seen large currency declines in 2020 resulting in recession with high rates of cost push inflation.

Answer 3

1) In the UK with a wide range of tastes, preferences, and income differences it is clear that no individual's spending habits will perfectly represent the average basket of goods and services with personal inflation rates differing from the headline figure. 2) In recent years, many firms have been responding to higher costs of production as a result of the weak pound not by raising prices to consumers but instead by reducing the size of their products, a phenomenon known as 'shrinkflation'. Products like Jaffa Cakes, Snickers, Kit Kat, Twix, Toblerone, and many others products have all become smaller in size but at the same price. This is in reality an increase in inflation but is not taken into account by official inflation figures. 3) Housing costs make up a large proportion of monthly spending for households in the UK but these costs are not included in the UK's CPI basket. This is why the ONS has moved to using the CPIH, which includes owner-occupied housing costs, as their headline figure. 4) It could be argued that the UK CPI basket is too slow to adapt to changes in consumer spending habits. For example, in 2015, music streaming subscriptions and protein powder came into the basket whilst external satellite navigation systems came out when many would argue these consumer trends had been taking place long before their additions or removals from the basket.

Answer 4

1) The size of the informal sector in countries like Italy and Greece is very large, with some estimates approximating both to be 25% of GDP. In many developing countries like Indonesia, the number of unlicensed businesses, subsistence farmers, and jobs in the informal sector is very high. This unofficial, unrecorded activity does not count towards official GDP figures and therefore leads to growth figures being lower than what they should be. 2) India and China have experienced rampant economic growth since the 1990s but with that has come serious environmental costs in the form of air pollution and resource degradation. Malaysia and Indonesia has been grappling with the problem of deforestation with their economic growth, not taking into account GDP figures. 3) Over-specialised countries like Nigeria (oil) and Botswana (diamonds) have wide unequal distributions of income as the benefits of high rates of growth are confined mainly to those who work in those industries and to corrupt politicians. In the US, income inequality as measured by the Gini coefficient is one of the highest in the developed world, proving that high rates of growth and GDP/capita will not necessarily raise the income and living standards of all in the economy. 4) Switzerland and Norway have highly over-valued currencies causing problems when converting to US Dollars using the nominal exchange rate to provide GDP/capita data. As a result, final figures will over-report average incomes and living standards not taking into account the fact that goods and services are much more expensive in these countries than abroad therefore reducing the purchasing power of this income. India has a largely under-valued rupee with the opposite problem of interpreting GDP/capita figures. 5) With strong economic growth in 2018 and 2019, the US economy was in danger of overheating and inflation rates reaching the 3% mark. Between the years 2000 and 2007, rampant Chinese growth translated into high rates of demand-pull inflation peaking at 9%. 6) In both the UK and USA strong growth and high incomes throughout the 2010s decade led to rising current account deficits. As incomes rose, consumers sucked in imports increasing import expenditure. In the UK, current account deficits in this decade have ranged from between 4-6% of GDP, and in the USA recent current account deficits have averaged 2.5% of GDP.

Answer 5

1) Japan has suffered from decades of demand-side deflation after a widespread banking crisis in the 1990s. Deflation was long-term and seeped into expectations where consumers delayed spending and firms discounted heavily, real interest rates were positive and the real value of debt increased all of which led to a vicious deflationary spiral. Greece since the financial crisis of 2007 has also suffered a prolonged period of bad, demand-side deflation with similar negative consequences. Many Eurozone economies such as Germany, Italy, Spain, and Ireland entered deflation in 2020 with concerns of this becoming entrenched into expectations, stifling economic recovery into 2021.

Answer 6

1) Between 2015 and 2016 the UK and Eurozone economies experienced a bout of good deflation caused by the supply side mainly due to falling oil and commodity prices. In the UK, the inflation rate hit a low of -0.1%, and in the Eurozone, the rate went as low as -0.6% but in both cases, deflation proved temporary and did not feed through to consumer expectations. Therefore consumers and producers purely benefitted from the relief of lower prices and costs respectively.

Answer 7

1) In November 2017, the inflation rate in the UK hit 3.1%, overshooting the 2% inflation target blamed by the Bank of England purely on the weakness of the pound increasing import prices and thus costs of production for firms in the UK. Similar examples of cost-push inflation due to weaknesses in a country's currency can be seen in Turkey and Nigeria. A more radical case is Venezuela suffering from extreme hyperinflation. 2) In Argentina, dramatic falls in the value of Peso have triggered very high inflation rates anywhere between 20% and 50% in recent years. Wage price spirals and consumers bringing consumption forward triggering further price spirals are common in the country. 3) Japan's sales tax rises in 2014 from 5% to 8% and in 2019 from 8% to 10% helped to maintain consistent positive rates of inflation; rare for a country that has battled deflation since the early 1990s.

Answer 8

1) With strong economic growth ni 2018 and 2019, the US economy was ni danger of overheating with inflation rates reaching the 3% mark - this was a clear case of demand-pull inflation. 2) Between the years 2000 and 2007 rampant Chinese growth translated into high rates of demand pul inflation peaking at 9%.

Answer 9

1) Higher than target rates of inflation from the end of 2016 through to the end of 2018 in the UK led to negative real wage growth and thus a fall in individual purchasing power. Very high rates of inflation in Argentina and Turkey have also significantly reduced purchasing power with many households struggling to even buy basic groceries. 2) With interest rates at near zero levels since 2009 in the UK, bouts of inflation as witnessed due to the weak pound post the Brexit vote resulted ni negative real interest rates eroding real returns from savings considerably. 3) For an export-dominant country like Brazil, high relative inflation rates beyond 10%, as experienced at the heart of their economic crisis in 2016, significantly reduced international competitiveness making it harder to export. 4) Rates of inflation in Argentina touching 50% have led to damaging wage-price spirals, where workers consistently ask for higher wages to maintain pace with rising prices, and consumer price spirals where consumers bring forward their spending to beat higher prices in the future. All this has done is accelerate the inflation rate year on year to worrying highs.

Answer 10

1) In the UK, the Labour Force Survey (LFS) has a sample size of 100,000 people in 40,000 households, representing 1 in 440 of the working-age population. This small sample size is due to the high cost of carrying out the survey resulting in a +-/ 3% margin of uncertainty with the final unemployment rate. 2) Unemployment rates in Greece and Spain peaked at 28% following recessions in 2010 with youth unemployment rates hitting highs of approximately 65% in both countries. As a result, many youngsters became discouraged and dropped out of the labor force forming the 'hidden unemployed' who do not count towards official unemployment figures, as they were no longer seeking work. 3) In the UK in 2020 20.9% of those aged between 16-64 were economically inactive. Of those, a large proportion were either early retired or looking after the family home; inactive groups that perhaps should count towards official unemployment figures but don't. In Japan the official jobless rate is 3% but this fails to take into account the proportion of women who are not part of the workforce. In 2020 71.3% of women aged between 15-64 were in work suggesting a large number of women missing from official unemployment statistics. 4) There were approximately 8.1 million people working part-time in the UK in 2020, representing a large proportion of the workforce. These workers are recorded as fully employed even though they may be seeking full time work but can only receive part-time work and are thus, in reality, underemployed. Once more in 2020 3.2% of all UK employees were working on zero-hours contracts again representing the underemployed despite being counted as fully employed. 5) In the UK there are large unemployment disparities between Northern and Southern regions with unemployment much higher in the north than in the south but this is not shown in official data. In the US there are unemployment disparities between black and Hispanic unemployment rates, 10.8% and 8.8% respectively in October 2020 with a 6.8% overall unemployment rate, though this disparity is much lower than historic levels. In Greece, Spain, and South Africa, youth unemployment rates are much higher than official rates suggesting underlying structural issues in the economy not noticeable from the LFS figure.

Answer 11

1) Coronavirus recessions have led to cyclical unemployment soaring in many countries across the world. Countries that experienced double-digit rates of unemployment include the USA, Greece, and Spain though more Eurozone economies are expected to reach unemployment rates beyond 10% into 2021 as the economic crisis continues. 2) Turkey, Nigeria, Argentina, and South Africa have suffered extremely high rates of cyclical unemployment as very weak exchange rates have created economic crises. The jobless rate has been above 10% in Turkey and Argentina, above 20% in Nigeria, and even above 30% in South Africa.

Answer 12

1) In India 50% of the population is aged 25 or below yet the majority of these youngsters are being trained for professions where job vacancies are limited resulting ni a skills mismatch and occupational immobility of labor. Instead, there is a high demand for workers in the engineering sector for example but current skills do not match. 2) In the UK many youngsters are leaving university with degrees that compete for very similar jobs in finance and banking for example whereas huge gaps remain in the engineering, manufacturing, medicine, and nursing sectors as four examples where few trained graduates exist. 3) Technological advances in the supermarket, farming, banking, manufacturing, print media, and retail sectors have resulted in occupational immobility for workers across the world who used to be employed in such sectors. The Coronavirus crisis has accelerated this substitution even more. 4) In countries like France and Spain, structural unemployment rates are naturally high due to very strict hiring and firing regulations, driven through strong trade unions. As a result, it is a huge risk for a firm to hire low-skilled workers given the difficulty in firing them if that worker proves ineffective for the firm over time, keeping structural unemployment stubbornly high. This is represented by high natural rates of unemployment between 8-10% in France and approximately 12% in Spain, compared to a significantly lower natural rate of unemployment of around 3.5% in the USA.

Answer 13

1) Germany introduced a minimum wage for the first time in 2015 but with concerns that, especially in regions of low wages, real wage unemployment could result. However, evidence has shown that the minimum wage and increases since implementation have done nothing to W1 halt employment growth with employers instead absorbing the higher costs and accepting lower profits. The same can be said of the UK's recent increases in the living wage where concerns had been raised regarding job losses in the retail and hospitality sectors in particular but again employers have instead chosen to absorb costs rather than reduce the size of their workforces.

Answer 14

With unemployment rates in excess of 15%, Greek national debt has skyrocketed to 180% of GDP, the highest in Europe; a large chunk of government revenue is directed to dealing with the social costs of poverty, crime, riots, and mental health conditions. The Greek economy has been working well below its potential with individuals suffering from drastically lower incomes and many youngsters finding it impossible to find work, dropping out of the labor force, and adjusting to life on low incomes - the problem of hysteresis. Many countries are experiencing similar consequences as unemployment has risen from Covid-driven recessions but with job support policies in place to prevent long-term unemployment and hysteresis.

Answer 15

1) In response to the economic crisis from Coronavirus, the Monetary Policy Committee (MPC) of the Bank of England enacted dual expansionary monetary policy, reducing interest rates from 0.75% to 0.1% and pumping an extra £450bn of money into the UK economy through quantitative easing. The intention of this policy move was to promote economic growth and employment thus reducing the overall impact of the recession on UK macro performance. However as interest rates were already very low before the cuts took place, this avenue of monetary policy has been limited in its effectiveness forcing huge increases in quantitative easing to provide further stimulus to the economy. But with extremely weak consumer and business confidence the idea of lower interest rates promoting greater borrowing, spending, and investment was unlikely. In reality, businesses have used borrowed funds to protect jobs and continue paying bills thus preventing mass bankruptcy and skyrocketing rates of unemployment. 2) In 2020, the Reserve Bank of Australia cut interest rates numerous times from 0.75% to 0.1% (an al time historic low) along with rounds of quantitative easing in a bid to stimulate the economy, protect jobs but also to fight against the risk of deflationary pressures. 3) The Reserve Bank of India continued its trend of expansionary monetary policy with further interest cuts from 5.15% at the start of 2020 to a record low of %4 by December to aid an economy badly hit by Coronavirus restrictions. Rising inflation due to rising food prices in India has made interest policy all the more difficult. 4) The US Federal Reserve reversed its path of interest rate rises in 2019 given slowing growth but with the extreme Covid recession in 2020 causing unemployment levels to rise rapidly and growth to contract enormously, interest rates were cut all the way back down to 0.25% by the end of year.

Answer 16

1) In January 2016, the Bank of Japan surprised economists with a shock move to negative interest rates. Interest rates have remained at -0.1% with the intention to boost economic growth and ensure positive inflation rates during the COVID-19 recession. The negative interest rate applies only to commercial bank deposits; all commercial banks have an account at the central bank to keep reserves as a form of security and to earn a return. However with negative interest rates, commercial banks are charged on deposits held at the central bank incentivizing them not to keep excess reserves but instead to lend out that cash to consumers and businesses to boost AD, stimulate the economy, and provide much-needed demand-pull inflation. In Japan's case, the negative rate has applied only to commercial deposits at the central bank; ti hasn't fed through to saving and borrowing rates applicable to customer bank accounts. 2) In June 2014, the European Central Bank (ECB) reduced its deposit rate to -0.1% in a bid to fight off deflation, stimulate growth and reduce cyclical unemployment across the Eurozone. A few months later in 2015, the ECB also announced the start of their quantitative easing programme, which combined with such low interest rates, would also help in weakening the Euro thus stimulating the largely export-dependent Eurozone economy, with a further deposit rate cut to -0.5% in 2020 to fight Covid recessions. 3) The Swiss National Bank in January 2015 reduced interest rates to -0.75% in Switzerland in order to reduce the value of a highly overvalued Swiss Franc which reached undesirable highs when money poured into the country for safekeeping due to economic crisis abroad. Again negative interest rates only applied to commercial bank deposits at the central bank but the intention of the policy was realised with the Franc depreciating as hoped for but still, it remains highly overvalued. Other examples of countries who have used negative interest rates in the past; 4) Sweden 5) Denmark

Answer 17

1) In response to the Financial Crisis of 2008 and the lower bound of interest rates, the Federal Reserve in the US opted to use a more extreme expansionary monetary policy, quantitative easing (QE), involving the purchasing of bonds by the central bank to reduce interest rates across the economy and thus stimulate lending, borrowing, AD and economic growth. In the US between 2008 and 2015, three rounds of QE led to $3.7 trillion worth of bonds bought up by the Fed in a bid to boost the economy. Long-term interest rates in the US did fall and growth stabilised soon after the QE programme with some crediting QE directly for this economic recovery. From 2013 to 2017, the Fed had been 'tapering' QE, reducing the number of bonds it was buying up on a monthly basis before completely ending the programme soon after, allowing the bonds it holds to mature and not replacing them thus effectively taking money of the economy; a process known as Quantitative Tightening. However, the economic crisis driven by Coronavirus in March 2020 forced the Fed to restart its bond-buying programme starting with $700bn of new money pumped into the economy via the purchase of bonds and other securities. 2) QE was used in the Eurozone in 2015, worth €2.5 trillion, to both stimulate the Eurozone economy and to weaken the Euro providing a boost to net exports. The Eurozone's asset purchasing programme ended in December 2018 but restarted in 2020 given shocks to growth and risks of deflation spirals from Covid recessions. QE has also been used in Japan since the 1990s but in Japan, there has not been substantial evidence of QE increasing borrowing and boosting economic growth. 3) In the UK, the Bank of England bought up £375bn worth of bonds between 2009 and 2012 before increasing purchases further by £60bn in 2016 after the Brexit vote. The implementation of QE was a direct response to the Financial Crisis and deep recession it caused and due to the limited nature of interest rates that had reached their zero bound. QE has been credited for UK growth stabilisation and for its part in promoting economic recovery although critics argue that it has only served to create an asset bubble in the stock market and widen wealth inequality. The deep Covid recession has led to a further £450n worth of EQ taking the overall total to £895bn by the end of 2020.

Answer 18

1) The Federal Reserve in the US increased interest rates numerous times from 2016 to 2019 and has been tapering back QE. Interest rates were 0.25% in 2016 reaching 2.5% at the start of 2019. The reason for rate rises were two fold; to protect against demand-pull inflationary pressure, cooling down a booming US economy and also to normalize interest rates after a uniquely long period of near-zero rates. More recently, however, interest rates have been slashed to boost slowing economic growth, first due to ongoing trade tensions with China and more recently cut all the way down to 0.25% given the depth of the Covid recession. The MPC in the UK, prior to the economic crisis from Covid, was hoping for interest rates to follow a similar upward path reaching more normal and sustainable levels but with Brexit uncertainty, and one of the deepest recessions in Europe from Coronavirus, interest rates have actually been cut to record lows of 0.1% and are likely to stay at record lows for a considerable period of time. 2) In Argentina, interest rates soared to dramatic highs of 70% in 2019 to fight against a plummeting Peso and uncontrollably high rates of inflation. Naturally, such high interest rates only deepened the economic crisis in the country impacting negatively upon growth and unemployment as the incentives to borrow and spend or invest were reduced significantly. Turkey in 2020 has also hiked up interest rates from 8.25% to 15% in 2020 to stave off a currency crisis with similar negative macro tradeoffs.

Answer 19

As a response to the economic crisis of Coronavirus in 2020, many governments around the world enacted large-scale fiscal stimulus (expansionary fiscal policy) to revive their economies. Below is a selection of fiscal stimulus packages used by various governments: 1) In the fiscal year ending March 2021, the UK government is forecast to borrow £400bn, 20% of GDP with much of this borrowed money used to finance huge fiscal stimulus to fight one of the deepest recessions in Europe. The UK economy shrunk by 11% throughout 2020 prompting the government to increase spending on wage subsidy schemes, grants, and business loans to protect employment and welfare benefits, making it easier to claim benefits and raising the amounts claimants could claim to help the unemployed. In addition, spending on healthcare, education, and infrastructure increased with further government spending on initiatives to encourage more consumer spending in the summer such as the Eat Out to Help Out Scheme and numerous job support packages to promote greater apprenticeships and in-work training opportunities for the youth. Furthermore, there have been cuts to VAT for the hospitality and tourism industry from 20% to 5% up to March 2021 as well as the cancellation of business rates for industries hardest hit by the pandemic. Though growth rates are some of the lowest in Europe, unemployment rates remain far below levels seen in other European nations suggesting the job support policies in particular have prevented a large spike in unemployment, though the burden of such large borrowing and increases in the national debt will be felt for many years to come with national debt hovering around 100% of GDP. 2) The French government announced a €100bn stimulus package comprising of business tax cuts that businesses pay on top of corporation tax as well various increases in government spending to both fights against immediate damage caused by the Covid recession but to also to promote long run sustainable growth via greater spending on renewable energy, infrastructure, and skills training. 3) Germany deployed a huge fiscal stimulus in June on top of already implemented wage subsidies and business grants, including a widespread VAT cut from 19% to 16% and greater government spending including cheques direct to households with children to promote greater consumption. The government also increased spending on childcare services to enable more adults to get back to work with greater funding for renewable energy storage and digital infrastructure to promote long-run growth. 4) The USA and Japan both implemented some of the largest fiscal stimulus packages in the world worth $2.2tn and $1.1tn respectively favoring a more direct avenue of public money to fund ailing businesses, those unemployed, and in the case of the US, depositing households with cash to provide economic relief and protect incomes. For both countries, further stimulus is likely as debt climbs far beyond 100% of GDP in the USA and beyond 200% of GDP in Japan.

Answer 20

1) Greece was reliant on bailout funds from the IMF and the Eurozone starting in 2010 to avoid complete economic collapse but with these emergency funds came forced austerity including deep spending cuts and tax rises. Between 2010 and 2015, government spending on healthcare fell by 50% and education spending fell by 20%. Furthermore, Greek governments reduced employment in the public sector, lowered public sector wages, and cut spending on pensions. Wide spread tax rises included income tax, corporation tax, VAT, petrol duties, alcohol and cigarette taxes, tourism taxes, imported cars, and many others. As well as these conditions forced on Greece, liberalizing policies like privatization, deregulation, and labor market reforms were pushed through with many arguing that these policies strangled the economy and prevented any prospect of growth. Budget deficit reduction has come at a huge cost of living standards improvement, economic growth, unemployment, and incomes. The Greek economy has suffered a deep economic crisis with output contracting by 25% since 2009, unemployment peaking at 25%, youth unemployment hitting highs of 66%, and spiraling deflation every year. Italy experienced austerity in a comparable way with similar crippling macroeconomic effects. 2) Since 2010, the conservative party in the UK has adopted austerity policy mainly in the form of government spending cuts to reduce the level of annual public borrowing and the budget deficit). Government spending cuts have focused on government departments, local councils, police services, defense, and welfare. UK austerity policy has differed from that in the Eurozone as tax rises have been limited to a VAT rise from 17.5% to 20% in 2010. Other than this, the government has regularly reduced direct taxes such as income tax and corporation tax to allow for continual growth during austerity years. Austerity policy has worked in that budget deficits have come down from peaks of 10% of GDP in 2009 to 2% of GDP in March 2020. Debt reduction has been successful enough for the government to implement a huge fiscal stimulus to fight the COVID-19 economic crisis in 2020. Though austerity in the UK has stabilized government finances and has brought confidence back in the government's ability to pay its debt, government spending cuts have been felt especially amongst the poor with welfare cuts and cuts to local government budgets. Some also argue that growth rates could have been much higher if fiscal policy had been looser, actually reducing debt/GDP levels given how low-interest rates have been for the government to borrow at. Other examples of countries that implemented austerity during the Financial Crisis; 3) Spain 4) Portugal 6) Ireland 7) France

Answer 21

1) The UK government has committed to spending £640bn over the next five years as part of a National Investment Strategy to boost productivity and promote greater regional equality. 2) From 2019 to 2022, the investment tax-free allowance has increased fivefold from £200,000 to £1 million meaning that businesses who invest in plant and capital machinery are able to claim back up to £1m from its taxable profits incentivizing businesses to bring forward investment plans thus boosting the capital stock in the economy. There are also subsidies and tax relief available for small and medium enterprises that partake in research and development expenditure. 3) Since the conservative party came into power in 2010, corporation tax rates have fallen significantly from 28% in 2010 to 19% in 2020 encouraging more capital re-investment from greater retained profits. 4i) The income tax-free allowance has been raised from £6,500 in 2010 to £12,500 in 2020 with rate taxpayers paying £1,205 less tax than in 2010. The income threshold before the 40% rate is due has increased from £37,400 in 2010 to £50,000 in 2020 with 1 million fewer workers in this bracket than in 2015. These policies encourage entry into the workforce and provide incentives for those who work to raise productivity and earn greater disposable income. i) The government has also committed to providing more apprenticeship schemes in order to fill skills shortages in the economy via an apprenticeship levy on businesses where firms earning over £3m profit commit to spending 0.5% of their payroll costs on apprenticeship training. Businesses earning less than this commit to spending 5% in 2020 (a reduction from 10% prior) of apprenticeship training costs with the government funding the remaining 95%. iii) Since 2015, there has been widespread curriculum reform including changes to both primary and secondary curriculum, large-scale reform of GCSE and Level examinations, the introduction of TLevels (practical subject qualifications as an alternative to A Levels) and greater government funding for maths and computer science subjects in schools. Again such education reform is intended to increase and vary skills to fill shortages in the economy but also to raise productivity of the workforce when students finish their education. There has also been a commitment to a further £2.2bn of funding for schools in 2021 representing a 2.2% increase in funding per pupil. iv) For adults who want to re-train and gain new skills, there are subsidies/grants available to encourage them, improving the affordability of attaining new qualifications. For adults without any ALevels, it is now free to enrol in college courses. v) The NHS budget will increase by £20.5bn on top of inflation by 2024, which will help to maintain a healthy and productive workforce, whilst further funding has been confirmed for vaccinations, testing, PE and other health services to battle the Coronavirus pandemic and maintain productivity. 5i) £28.8bn will be spent by the government between 2020-2025 as part of a National Roads Fund. Most funding will be allocated to the upkeep and maintenance of roads and bridges whilst £420m will go directly to local authorities to fix potholes and renew tunnels and bridges. £150m will be used for improving road systems at traffic hotspots reducing journey times and thus boosting productivity. i) The government has committed to two of the largest rail infrastructure projects in Europe, designed to improve labour mobility, flexibility and productivity; Crossrail at a cost of £18.7n and HS2 at an estimated cost of £106bn. iii) £1bn will be spent on improving digital infrastructure to boost productivity with the major allocations being £176m to increase the range of 5G mobile internet networks and £200m to promote full fibre networks in local areas ensuring the entire country has access to super fast Wi-Fi speeds. iv) In a further push to improve labour mobility and flexibility, there have been cuts to planning permission for new housing infrastructure to be built and local authorities have had their borrowing caps lifted allowing them to borrow and spend more on house-building programmes. These policies are in addition to many others to make housing more affordable such as The Help to Buy Scheme and stamp duty exemptions for first-time buyers. 6) The UK government aims to ensure the welfare system is equitable but also not too bloated where there are minimal incentives to work. To achieve this, the government has implemented Universal Credit; a brand new benefits scheme designed to incorporate previous individual benefits into one general benefit payment. Within Universal Credit, there are also caps and other restrictions on the level of benefits that can be claimed which is forecast to lead to a cost saving of f1bn by 2023 when the scheme has been fully rolled out. 7) To make markets more competitive, thus improving the productive efficiency of the economy, the government have promised widespread deregulation, cutting £10bn worth of red tape, committing to scrapping three regulations for everyone they impose and challenging businesses to find burdensome regulations that can be disposed of. 8) It is expected that the UK will be a promoter of free trade post official withdrawal from the EU, liberalising trade by signing international trade deals, and reducing both tariff and non-tariff barriers.