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Teaching activity

In the News Teaching Activity – the UK’s economy slips into recession (Feb 2024)

Elizabeth Veal

22nd February 2024

Last week the ONS GDP data showed the UK economy grew weakly at 0.1% in 2023 with the last two quarters of 2023 showing negative real GDP growth – a recession.

Many commentators have been calling this a ‘technical recession,’ because there is still a chance that the Q3 or Q4 GDP negative figures may be updated from their estimates to show some growth. However, what is clear is that the UK economy has been flatlining for some time, worrying for the government which has pledged to get the economy growing. Many economists are becoming more concerned that there have now been seven quarters where GDP per capita has fallen, indicating that UK citizens are, on average, experiencing a deterioration in their standard of living. Although several other developed economies are also struggling, a recent report noted that the UK’s real wages were rising more quickly than comparative economies and this may mean the UK’s inflation of 4% is becoming more entrenched, which could mean any significant interest rate cuts are less likely – the ‘no-growth’ economy may be around for some time... The UK’s stagnation means it has become harder for the government to find their hoped-for pre-election tax cuts without further cuts to already-stretched public services. The UK economy is in a funk and it may well take some high order economic thinking about policy to turn things around.

UK economy fell into recession after people cut spending - BBC News

1 ‘UK economy fell into recession after people cut spending.’ Explain how people cutting spending could tip an economy into a recession.

2 Using an AD/AS diagram, show how rising real wages could cause inflation to become ‘more entrenched.’

3 Discuss why falling GDP per capita could indicate a deterioration in the standard of living.

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Elizabeth Veal

Liz has taught Economics for over 25 years, including several years as Head of Economics at leading schools.

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