Macroeconomics Of Brexit: Motivated Reasoning Essay

Question:

Discuss about the Macroeconomics of Brexit for Motivated Reasoning.

Answer:

Introduction:

For some time now, economists have been arguing about the potential effects of Brexit. While some strongly believe that it will adversely affect the economy of UK in the long run, others propose that the move may be beneficial for the economy over time. According to the article “The Macroeconomics of Brexit: Motivated Reasoning?” the claims presented by a majority of economists do not follow a clear way from economic standards and theories. In this view, the class material on “Economics for Today” by Layton, Robinson, and Tucker (2016) provides a useful tool for understanding the probable implications of the Brexit.

From the point of view of a majority of economists, the Brexit would result in a reduction in the trade activities between the UK and the rest of the world. Consequently, this will make the British economy less productive and poorer than it would otherwise have been if it had remained in the EU (Buiter et al., 2016). In the same view, Layton et al. (2016) explain that the prevailing economic conditions in the international market affect the demand for a nation’s exports while the domestic conditions affect the demand for imports. Thus, the class text helps one to understand that the Brexit will significantly reduce the volume of trade between the UK and the rest of the world.

It is imperative to note that the article’s author is opposed to the view that the Brexit may trigger a recession period in the UK. Instead, the author believes that the exit may bring about significant uncertainties in the economy, thereby act as a deterrent to investment in the country. In agreement, the text by Layton et al. (2016) helps one further understand this concept. More specifically, they explain that investment demand is a volatile component because it is future oriented and risky. Typically, it depends on the expectations that investors have of future key influences (Watt, 2016). In addition, it is based upon the firm’s confidence about the profitability of the venture and future conditions of the country. Thus, the uncertainty arising from Brexit is bound to affect investment demand in Britain negatively. Even so, the adversity associated with the exit of Britain from the EU is somewhat exaggerated.

It is worth pointing out the fact that the information provided in the article may be useful for one’s future career and other economic applications. As a whole, the article is informative on the various implications of policy change. Thus, an economic student may apply the knowledge obtained from this piece to the workplace in the future. For instance, the concept of the effects of uncertainty on investment demand may be used when making investment decisions in the firm setting. Likewise, the concepts highlighted on the effects of policy change on demand may help one in mitigating the adverse effects of policy change on international and domestic trade. Thus, overall, the author of the article was successful in relaying useful information about the implications of Brexit and policy change as a whole.

References

Buiter, W, Rahbari, E, & Schulz, C. (2016). The implications of Brexit for the rest of the EU. [Online] Vox. Available at: [Accessed 14 Mar. 2017].

Layton, A, Robinson, T & Tucker, I. (2016). Economics for Today. (5th Ed.) South Melbourne, Victoria.

The Macroeconomics of Brexit: Motivated Reasoning?. (2016). [Online] The New York Times. Available at: [Accessed 14 Mar. 2017].

Watt, W. (2015). The implications of a Brexit. [Online] Black Rock. Available at: [Accessed 14 Mar. 2017].

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