The British Economy Essay Example | Topics and Well Written Essays - 1500 words

The British Economy - Essay Example However, in order to facilitate these activities and to increase efficiencies, new concepts, theories and method have been developed. In this process, the accuracy and efficiency has enhanced but complexities have also increased significantly. International trade has a great economic importance as it helps to bring economic prosperity to a country. International trade activities include import and export which influences foreign and domestic exchanges. Besides, certain economic risks are also associated with international trade and hence, government always try to control international trade related activities (Seyoum, 2000, p.8). This paper will attempt to deal with foreign exchanges policy of UK. Earlier, the UK pound was used to be determined using the fixed exchange rate policy by comparing to other foreign currencies. However, due to certain shortcomings of fixed exchange rate policy, the UK Government has shifted to floating exchange rate policy. This paper will present explanat ions on fixed and floating rate policies and how the UK Government plays crucial role in controlling and deciding the foreign and domestic currency policies. ... The per capita GDP was nearly was $35,100 with real GDP growth rate of 1.6% in 2010.Regulatory authorities including the central bank (Bank of England) is responsible for managing and controlling the economic affairs. The inflation and unemployment in 2010 were 3.3% and 7.9%. During the financial crisis of 2007-2008, the UK’s economy was heavily affected. However, currently, the economy is recovering at higher speed as policy makers have taken necessary steps for improving the overall economic condition (CIA 2011). Nearly 75% and 23.8% of total GDP is contributed by the services sectors and Industries. The major services sectors include -financial, distribution, business, communication, hotels, transport etc. Currently, the country is suffering from high trade deficit due to higher import comparing to lower export. During 2009, net export of goods and services were recorded $351.3 billion; whereas, net imports of goods and services were higher i.e. $473.6 billion (U.S. Departm ent of State, 2010). As per the updated information, the value of 1 British pound is compared to other major foreign currency in the given below. Table 1: British Pound and Other Foreign Currency (Source: MSN Money, 2011) Fixed Exchange Rate System and Role of UK Government The foreign exchange rate is very important for controlling the major aspects of economy like import, expert, interest rate, inflation etc. The foreign currency market is exposed to different types of risk that affect the entire economic policy like inflation, interest and unemployment etc. There are two types of foreign currency policies i.e. fixed and floating. Earlier, UK Government used to