Macroeconomics Essay Example | Topics and Well Written Essays - 3000 words

Macroeconomics - Essay Example The level of GDP increased from trough to peak by around 10.2 percent between the year 1981 and 1988, which states that the recovery was strong after the recession. Also after the 1990’s recession there was a sharp increase in GDP growth level. However it is evident that there is a long recovery period after the 2008 global financial crises of UK’s economy. When compared the recovery from all recession periods, it is evident from Figure 2 from the case that recovery from 2008 recession has been protracted and has the deepest fall in GDP growth levels in the year of 2008 recession. The period of Great Moderation that lasted from 1993 to 2007 was faced with smooth growth, low unemployment and low inflation. During this period economy grew to around 5 percent until it was faced with recession in 2008. There are a number of factors that can be attributed to a fall in UK’s saving ratio between 1993 and 2008.It is visible from figure 15 from the case that saving ratio fell to lowest 1.7 percent by the end of 2007.The graph also denotes fall in saving ratio over the years 1993 to 2008. Interest rate in the UK’s economy was low from 1993 that further fell to 3 % in 2003 as seen from figure 12 from the case. This meant that credit was easily available to borrowers at a cheaper cost and savers were not ready to delay consumption and instead save for lower return on savings. Low interest rates and low inflation acted as a disincentive to save. At same time housing prices were rising, which leads to wealth affect and people were ready to borrow and spend more. This wealth effect made people more confident to spend as they knew that value of their property was rising. This is could be seen in figure 13 where there is a sharp rise in average UK housing prices from 1993 to 2007, more than tripling over the 15 year period (Tejvan, 2008). Easily available credit during this period had encouraged more