Responses to Economic Challenges

Question 1

Economic challenges from 1951

Answer 1

Under investment in industry = relatively low productivity

Trade deficit- weakening sterling

Inflation

Worsening industrial relations

Question 2

Stop-go policies

Answer 2

Introduced by MacMillan Government

Following Keynesian economics- in times of growth government spending would decrease in times of recession government spending would increase

Risky policy

Question 3

Planned economic growth- 1961 conservative gov

Answer 3

National economic development council (NEDDY)- employers union representatives and gov planned growth

National income committee (NICKY) - regulate wage demands

Question 4

Planned economic growth- department of economic affairs

Answer 4

Under labour gov of 1964

Aim to create plan to guide econ growth- encouraging competition between gov, employees and unions

Growth remained poor

1967- plan dropped

Question 5

Problems with sterling

Answer 5

Valued to highly

1967 gov devalued by 14%

Improved BoP - exports cheaper

Increased inflation- had risen to 18% by 1968

Question 6

1973 oil crisis

Answer 6

Post-war prosperity due to cheap fuel

War broke out between Israel and Arab neighbours-1973

OPEC reduces supply and increase price of oil- response to perceived support of Israel by the west

$2- $35 per barrel

Question 7

Effects of oil crisis

Answer 7

Inflation
Fuel shortages for transport
Increased price of imports- worsened budget deficits

Exchange rate fell to £1-$1.80 in 1975
Gov applied for loan of £3bn from the IMF on condition to implement deflationary measures and 7% reduction in gov spending