1979-1987

Question 1

define Keynesian economics

Answer 1

-a fall in demand for products causes industrial economies to slip into recession
-gov should borrow money and raise revenue streams
-boost will lead to genuine recovery and growth
-companies and firms have money to keep producing
-workers have money in their pockets to spend on goods and services
-gov then taxes companies and workers to recoup initial debt outlay

Question 2

define interest rates

Answer 2

-high interest rates encourage saving and discourage irresponsible borrowing and spending
-low interest rates encourage spending and borrowing- increase demand

Question 3

define public spending

Answer 3

gov spending money on services

Question 4

what did thatcher think post war consensus policies contributed to

Answer 4

-inefficiency and low growth
-undermining of personal responsibility and creation of dependancy culture
-hard working members of society subsiding the work shy
-stifled initiative

Question 5

what did thatcher want to do

Answer 5

-cut public spending
-reduce gov interference
-reduce gov bureaucracy
-reduce the power of the unions

Question 6

define free market economics

Answer 6

let the natural economic forces of supply and demand operate with no gov control

Question 7

what was built on the ideology of monetarism

Answer 7

-economic theory promoted by Milton Friedman
-root cause of inflation is gov spending
-gov therefore need to reduce public expenditure and restrict amount of money in circulation keeping currency value up to avoid prices rising

Question 8

when were the two monetarist budgets introduced

Answer 8

1979 and 1981

Question 9

what would controlling the money supply lead to

Answer 9

reduced inflation and economic growth

Question 10

what happened to the economy by 1980

Answer 10

it plunged into recession
-inflation above 15%
-rising unemployment going above 2mil
-stagflation was back

Question 11

what saved britain from a severe balance of payments crisis

Answer 11

the flow of the North Sea oil and gas

Question 12

what did thatcherites believe about gov spending and what did it lead to

Answer 12

that individuals spent their money better than the gov
this led to to shift from direct taxation to indirect taxation
1988, top rate of income ta fell from 83% to 40%
standard rate fell from 33% to 25%
1979, VAT went from 8% to 15%

Question 13

what were the view point on reducing direct taxation

Answer 13

supporters: it would incentivise wealth creation and allow ppl to keep more of what they earnt
critics: it was less progressive and would hit poor ppl harder

Question 14

what was the loony left

Answer 14

the name given to the left wing councils that promoted liberal politically correct policies eg. promotion of multicultural initiatives

Question 15

what was introduced to control overspending of labour local authorities

Answer 15

rate capping- limited the amount the money that the council was allowed to raise in local taxation

Question 16

what were the reactions to the introduction of rate capping

Answer 16

1985, many authorities including Liverpool tried to rebel against it and refused to set budgets but they had to back down due to a threat of bankruptcy
1986, local gov act abolished the big metropolitan local authorities
Victory in short term against looney left but in long term it damaged local accountability

Question 17

why did thatcher never manage to cut public spending

Answer 17

bc of spending on social security went up due to high unemployment

Question 18

describe the demand side and the supply side in the economy

Answer 18

demand- keynesian (post war consensus): needs gov interference
supply- free market: allows market to control itself and individuals to take control

Question 19

describe companies which privatised

Answer 19

BP in 1979
British Aerospace in 1980
The drive for privatisation gained momentum with the sale of British telecom in 1984

Question 20

stats for privatisation

Answer 20

1979-1990 individuals owning stocks and shares went up from 3m to 9m

Question 21

describe beliefs about privatisation

Answer 21

-driven by anti-socialist ideology
-core belief that private sector was more dynamic and efficient than the public sector at running and delivering goods and services
-businesses competing in the marketplace encouraged improvements and innovation
-Outsourcing (where companies take on contracts to deliver goods and services) became increasingly widespread
-life for employees was insecure- some lost jobs- can no longer rely on long term job security
-thatcherites wanted to push further privatisations

Question 22

what was deregulation

Answer 22

-gov would interfere as little as possible
-removing ‘red tape’ made it easier for businesses to trade- encouraging entrepreneurship and wealth creation

Question 23

what measures were introduced to encourage start up companies?

Answer 23

loan guarantee scheme- easier to borrow money
allowance scheme- encouraged unemployed to start business by giving £40 a week for a year

Question 24

how did deregulation effect britain

Answer 24

-restored Londons position as a world financial centre- bigger risks taken led to bigger fortunes made
-financial services were UK’s most important export industries
-productivity didn’t increase much (2.2%) growth in GDP during 1980’s no better than in the 1970’s

Question 25

what are the aims of interest rates

Answer 25

to control inflation

Question 26

what actions were taken to control inflation

Answer 26

inflation at 17% in 1979
Increased the value of the pound

Question 27

what were the effects of interest rates

Answer 27

-more expensive for businesses to borrow
-more difficult for businesses to export
-decline in output and demand
-many businesses went bankrupt leading to unemployment
-1980, inflation at22%
1986, inflations at 2.5%

Question 28

what were the aims of unemployment

Answer 28

to no longer worry about it
to make the british industry more competitive
controlling inflation was more important than controlling unemployment

Question 29

what actions were taken in relation to unemployment

Answer 29

many industrial plants closed permanently
youth employment schemes (employers to take on young ppl)
employer national insurance rates reduced for lower paid jobs

Question 30

what were the effects of unemployment

Answer 30

-manufacturing output fell by 15% in 2yrs
-steel production cut by 30% to less than 14m tons
-1983, unemployment over 3m (13.5% of total workforce)- didn’t fall until 1987
-areas dependant on heavy industry, the employment rate went up by 25%
-workers found that traditional skills were not in demand as they were rendered out of date