, to identify arguments and contrarguments for households and government for this question. you in advance The Coronavirus has already led to disruption in manufacturing
, to identify arguments and contrarguments for households and government for this question. you in advance The Coronavirus has already led to disruption in manufacturing output, foreign travel and
consumer demand. If travel restrictions are imposed, there will be a big fall in demand for some
sectors, especially travel and tourism. Already airlines have issued profit warnings for 2020 and
some flights have been cancelled. It will also cause a significant fall in demand for certain tourist
sights and related business. For example, London is deserted as restaurants, pubs, theatres and
other attractions are closed. This will be devastating for local business, such as taxi drivers and
gift shops who rely on tourists. In recent years, there has been a rise in self-employed workers
and workers on zero-hour contracts. This means that more workers are vulnerable to having to
take time off work. If workers can work at home or get sick pay, their income will be maintained.
But for many they could face significant falls in income from continued business restrictions.
The stock market has seen its biggest contraction since the global credit crunch. With falls of
12%. A falling stock market can cause a decline in consumer wealth and hold back spending as
people absorb the negative news. However, one study suggests falls in the stock market only
have a limited effect on reducing GDP growth. Moreover, UK average house prices increased by
8.5% over the year to December 2020, up from 7.1% in November 2020, to stand at a record
high of E252,000; this is the highest annual growth rate the UK has seen since October 2014.
This year the government is spending a staggering E280bn on measures to fight Covid-19 and its
impact on the economy including the furlough scheme. This has increased the national debt
above 100% of GDP.
4.1 With reference to the data above evaluate the likely impact on aggregate demand in the UK
economy. Illustrate your answer with a suitable diagram.