Chapter 2: Economic developments Flashcards
Define inflation and deflation
- inflation - increase in the price of goods and services - when people have more money to spend than there are goods available - can lead to economic overheating as people demand higher wages
- deflation - fall in the price of goods and services - freezing wage rises, increasing taxes - can lead to unemployment - less money = less goods need producing so less jobs
When was full employment reached?
1955 -1% unemployed (around 200,000 people)
In what ways did the economy improve during the post war boom ?
- food rationing ends in 1954
- birth rate increased
- increase in overseas trade - exports and investments
- more jobs in car and steel industries
- rise in living standards and consumerism - cars, entertainment and other luxuries
What was Rab Butlers give away budget of 1955?
provided the middle classes with £134 million in tax cuts - did this to boost conservative election prospects before the 1955 election
How did UK growth rates compare to other countries?
higher income per head than any other major country BUT growth rates were below Germany, France, Italy and the USA
What was the issue with the “stop” portion of stop-go economics?
government introduced **high interest rates and wage freezes **- demand for products falls which allows supply to catch up - less output = lower wages and unemployment, and economix growth is inhibited
What was the issue with the “go” portion of stop-go economics?
low interest and reduced taxes - people have more disposable income so demand for products increases - wages rise above productivity - BALANCE OF TRADE ISSUES - businesses can’t keep up which causes increased prices and inflation - so people are demanding higher wages
Define balance of trade
Define balance of payments
Balance of trade - difference between imports and exports (if imports are higher than exports, the country has a trade deficit)
Balance of payments - includes invisible imports and exports
How did the Suez crisis impact Britain economically?
started a** run on the pound **(rapid fall in the value of the pound in international currency markets) - other countries saw Britains financial weakness
What was Macmillans reaction to Thorneycroft and his proposed policy of monetarism?
monetarism - limit wage increases and cut the money supply
- Macmillan overruled him in 1958 - Thorneycroft resigned along with Enoch Powell and Nigel Birch
How much were the tax cuts of 1959?
tax cuts of £370 million - economy was continuing to expand which is why these tax cuts took place
What was the 1961 Pay pause?
concerns about the economy overheating so pay pause is introduced to hold down inflation - gov also ask for an IMF Loan
Why does Macmillan apply for the EEC in 1961?
What is the outcome?
- economic growth in Europe is leaving Britain behind (trade with the commonwealth and empire isn’t enough)
- application is rejected in 1963
- viewed as an admission that Britain had failed at economic modernisation
What was the NEDC and why was it set up?
national economic development council - made responsible for long term economic planning
What was the 1963 Beeching report?
recommended closure of more than 30% of the rail network - made rural areas more isolated and caused public outrage
