economic problems Flashcards
what is the stop part of stop-go policy?
-imports exceed exports and balance of payments crisis
-government controls: high interest rates and wage freezes
-demand falls
-output decreases
what is the go part of stop-go policy?
-controls are removed
-increase in demand
-rising imports
-inflation
-imports exceed exports and balance of payments crisis
what type of economic policy is stop-go?
reactionary
describe the balance of payments:
-the difference between the amount of money flowing into Britain and the amount of money flowing out of Britain
-problem is that Britain was spending lots of money on defence and foreign affairs
why were the government trapped between 1961 and 1964 (economically)?
-in order to maintain economic stability they were in a never-ending cycle of stop-go policies
what did the government introduce in 1961 in a response to an ‘overheating’ economy?
-a pay pause to stop wage inflation
-also asked for a loan from the IMF
what balance of payments deficit was there from Macmillan to Wilson?
£800 million
when were britain rejected from joining the EEC?
january 1963
what was the the beeching report and when was it published?
-autumn of 1963
-it recommended huge cuts in the rail network which led to public outrage
-this was a fundamental social change because thousands of stations were axed and lots of rural areas become more isolated
what did Reginald Maudling do?
-put the economy into a go phase
-by lowering the bank rate to encourage consumer spending
-britain’s growth rate went from 4% to 6%
-however imports remained nearly 20% higher so trade still wasn’t balanced
why was inflation increasing?
wages were going up more than the rate of increase in production, so prices of goods had to go up
what was Macmillan’s answer to the economic ‘balancing act’ that the tories faced?
-both the public and industry needed to restrain the demands they make, and use common sense when it comes to how they spend their income
-known as his ‘hands-off approach’
what was the economic impact of the suez crisis?
-exposed financial weaknesses in Britain
-started a rapid decline in the value of the pound (run on the pound)
which tory MPs resigned in 1958 due to Macmillan’s economic methods?
-Enoch Powell
-Thorneycroft
-they both though macmillan went against what was best for the economy - macmillan stuck with an expansionist economic policy
successes of conservative economic policy:
-rise in living standards
-industries such as aircraft, chemicals and cars were expanding
-the says lost to strike action in britain in the 1950s was far less than other european countries
-wages rose faster than prices so people could buy more with the money they earned
-500% increase in car ownership
-greater availability of credit meant purchase of white goods e.g. dishwashers increased
-number of homeowners increased from 25% before the war to 44% by 1964
