Economic Developments

Question 1

Why could the conservative party be considered lucky coming into power at this time?

Answer 1

• the post-war economic recovery was beginning to show
• the 1950s held the general pattern of continued economic improvement

Question 2

What are the key components of the post-war boom?

Answer 2

• end of food rationing (1954)
• baby boom
• global economy
• industry
• employment

Question 3

What was the increase of births causing the ‘baby boom’?

Answer 3

5% (2 million)

Question 4

How had the global economy improved?

Answer 4

increase in overseas trade = high levels of earning from exports

Question 5

How had employment improved?

Answer 5

reached full employment by 1955 (only 200,000 unemployed)

Question 6

How did the service industry expand?

Answer 6

• by 1960 nearly 5 million people were employed in this industry

Question 7

How did wages get impacted by this economic boom?

Answer 7

due to economic growth and low unemployment wages were increased

Question 8

What did the conservatives have as a tax budget?

Answer 8

a ‘give away’ budget = £134 million tax cut

Question 9

Who did this tax budget apply to?

Answer 9

middle class

Question 10

What were people more able to enjoy?

Answer 10

• jobs
• money
• goods

Question 11

How did people feeling more affluent help the economy?

Answer 11

there was a growth in consumerism

Question 12

What are stop go economics?

Answer 12

when there are tensions between an expanding economy (go) and the results of the economy overheating (stop)

Question 13

Why was there a balance of payments issue?

Answer 13

caused by a trade deficit

Question 14

Why was there a trade deficit?

Answer 14

because higher salaries created a large internal consumer demand however this high demand did not encourage manufacturers to increase their export trade - leading to the trade deficit

Question 15

What did pressure from America cause for the economy after the Suez crisis?

Answer 15

a run on the pound

Question 16

What is a run on the pound?

Answer 16

when the pound decreases in value in comparison to the dollar

Question 17

How did the growth in wages negatively impact the economy?

Answer 17

it outstripped the rate of increase in production which led to inflation

Question 18

Who was Macmillan’s chancellor during this time?

Answer 18

Peter Thorneycroft

Question 19

What was Thorneycroft’s beliefs?

Answer 19

monetarism - limit wage increases & to cut the money supply

Question 20

Who was the main person who opposed Thorneycroft?

Answer 20

Iain McLeod

Question 21

Why did McLeod oppose Thorneycroft?

Answer 21

because it would lead to increased unemployment and cutbacks in housing

Question 22

What did this disagreement symbolise?

Answer 22

the problems with stop-go economics

Question 23

What did Macmillan end up doing?

Answer 23

• agreed with McLeod
• wanted to keep up an expansionist economic policy

Question 24

What happened to Thorneycroft after this?

Answer 24

• suggested drastic spending cuts (1958) - overruled by Macmillan
• resigned alongside two of his junior ministers (Enoch Powell & Nigel Birch)

Question 25

How did Britain recover after the balance of payments crisis?

Answer 25

• Sterling regained its value
• Thorneycroft and Powell did not make any long lasting negative effect on the Conservative party
• April 1959 provided tax cuts of £370 million

Question 26

How did Britain not recover from the balance of payments crisis?

Answer 26

• still trapped in the ‘stop-go’ economics
• pay pause introduced - to hold down wage inflation
• loan from IMF (International Monetary Fund)