Revision:Macroeconomic Questions - The Structure of the British Economy

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(Adapted from June 1989 Part A, Q.15.)

1. An economy has three sectors - government, companies and households - and also trades and invests overseas. All capital formation is carried out by companies. The government’s budget is balanced. The following national accounting data are available, but three items from the complete accounts are missing (gross trading profits of companies, transfer payments from the government to households, and dividends and interest paid by companies to households). Assume no changes in the value or volume of stocks and works-in-progress.
   1. From the data calculate:
      1. National income;
      2. Gross trading profits of companies;
      3. Personal savings.
   2. Show that the financial deficits of some sectors are offset by the surpluses of others.

      Imports of Goods and Services - 4000

      Incomes from Self-Employment - 2000

      Direct Taxes on Companies - 1000

      Government Expenditure on Goods and Services - 3000

      Gross Undistributed Profits - 1000

      Consumers Expenditure - 7000

      Capital Consumption - 500

      Net Property Income from Abroad - 500

      Exports of Goods and Services - 5000

      Direct Taxes on Persons - 3000

      Indirect Taxes (Net of Subsidies) - 1000

      Gross Capital Formation - 2000

      Income from Employment - 7000

      Rent - 500

2. How has the structure of the U.K. economy, changed in the post-war period? Does it matter that the UK now employs only one fifth of the workforce in Manufacturing?
3. What is meant by a ‘deficit’ or ‘surplus’ in the balance of payments. What has been the recent position of the British balance of payments? What policies can be adopted to cure a deficit?
4. Have women benefited more than men from the changes in the structure of the British economy over the last two decades?

Additional References after textbooks have been consulted

For full titles of items cited by only by author see Reading List in Elementary Macroeconomics.

1. Beckerman
2. Griffiths and Wall Ch.1; Artis Parts 1,2.
3. Griffiths and Wall Ch.26; Vane and Thompson Ch.4, 10, 14
4. Griffiths and Wall Ch.1, 23; Artis Cb. 10.1 to 10.3.

(Note Griffiths and Wall references are to the 8th edition).

R Martin and B Rowthom, The Geography of De-Industrialisation, Macmillan, 1986.

C Greenhalgh, Employment and Structural Change in Britain: Trends and Policy Options, Employment Institute, 1989.

W Healey, ‘Do Current Account Deficits Matter?’, Economic Review. March 1991.

N Crafts ‘UK Productivity Performance in Comparative Perspective’ Economic Review November 1993.

C Greenhaigh ‘Why Manufacturing Still Matters’ Economic Review September 1994.

P Rice ‘The Changing Face of the Labour Force in Great Britain’ Economic Review September 1994.

P Turner ‘The UK Economy in 1999’ Economic Review April 2000.

For long run series of facts on the British economy see Economic Review Data Supplement September 2000.

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