How does the economy work ?

There are many factors which influence the UK economy –

• Demand, personal consumption and supply drive the economy where supply refers to labor and availability of natural resources.

• Inflation helps in increasing the demand for production and it increases the supply of money. Sometimes, inflation index can be misleading where the gain in the price of assets such as homes indicate a bubble, instead of growth in the economy.

• The price of assets, trade policy, exchange rates, federal budget,   stock portfolios and inflation/deflation balance determine the strength of an economy.  

• Fiscal policy can stimulate or depress an economy. The primary objective of monetary policy is to regulate inflation and the secondary objective is to support a positive economic activity.

• Economically, recession indicates slowing down of activities and at the time of recession unemployment increases.