economic developments

Question 1

major inherited economic problems

Answer 1

declining manufacturing output
high interest rates
steep rise in unemployment
slump in house prices

Question 2

unemployement 1991-1992

Answer 2

rose from 1.6 mill to 2.6 mill

Question 3

negatuve equity

Answer 3

affected homeowners
having to repay mortages that were higher than the current value of their homes

many had homes reposessed

Question 4

major’s high public spending

Answer 4

election imminent

half of this spending was forced
due to rising unemployment

used for subsides on transport and increased NHS spending

Question 5

ERM

Answer 5

exchange rate mechanism
set up to stablise exchange rayes between different EU countries

Question 6

Britain exit from ERM

Answer 6

british currency under pressure from sept 1992

wanted to avoid devaluation so wanted to remain within ERM

pound continued to sink

Lamont announced decision to leave ERM on live TV 19th sept 1992

Question 7

consequences of leaving ERM

Answer 7

economic - britain economy stablised
political - disasterious for conservatives, not seen as party of economics anymore

Question 8

economy post black wednesday

Answer 8

prevented britain from having to keep high interest rates to protect sterling

exchange rates decreased, good for british exports

Question 9

germany economy at the time

Answer 9

suffering costs of reunification and had sluggish growth rates compared to britian

Question 10

consumer spending

Answer 10

increased

car ownserhip went up

house prices rose