Thatcher's economic policies - Lawson boom + bust

Question 1

what was 1985-88 known as

Answer 1

the boom years

Question 2

why were the mid 1980’s known as the boom years of the thatcher era

Answer 2

• The economy grew by 4% a year between 1985-88. these rates of growth had not been seen since the 1960’s

Question 3

what did this mean about thatcher’s economic policies

Answer 3

• Thatcher economic policies were working

-as inflation remained low , unemployment was falling and the economy was booming as a result of free market economic policies

Question 4

popular capitalism was..

Answer 4

very popular with millions of people buying shares in the newly privatised industries

Question 5

what was thatcher’s first term about doing

Answer 5

• to solve the economic crisis that britain had been facing during the late 1970’s and 80’s

Question 6

and what did her supporters argue

Answer 6

• the tough economic decisions that were needed to tackle inflation
• subsidising nationalised industries , taxation, creating a thriving free market which would create economic growth and wealth

Question 7

in 1975 the country was in an economic crisis and by 1985 they were in a boom what was the result of this

Answer 7

• the boom led to cultural changes with the emergence of the ‘loadsmoney’ culture

Question 8

what did london become associated with

Answer 8

• london became associated with the ‘yuppies’ ( young upwardly mobile professionals ) who associated with stock market trading

Question 9

what were the streotypes of yuppies

Answer 9

who associated with stock market trading and accoring to other popular stereotypes , wore expensive suits , drank champagne, drove porshces and carried a new gadget called the mobile phone

Question 10

what did chancellor nigel attempt to do

Answer 10

keep the boom going with a series of measures design to reduce the size of the state and increase the role of the free market

Question 11

in 1986 what did lawson try to do

Answer 11

decided to deregulate the city

Question 12

what was the 1986 financial services Act

Answer 12

• made trading of stocks and shares easier in attmept to attract foreign investment

Question 13

at the same time deregulation took place the..

Answer 13

stock exchange began computer trading .

Question 14

together these two measures were known as the ..

Answer 14

‘Big Bang’

Question 15

what did lawson also permit

Answer 15

the relaxation of credit controls allowing people with lower income to borrow large sums of money

Question 16

at the same time he decreased intrest rates from

Answer 16

14% in 1985 to 7.5% in 1988

Question 17

what did this make borrowing

Answer 17

more cheaper

Question 18

lawson had continued to moiniter the money supply as a means of controlling inflation until ..

Answer 18

1985

Question 19

from 1985 onwards what did lawson use to control inflation

Answer 19

intrest rate policy

Question 20

what was lawson’s plan

Answer 20

• to raise intrest rates when inflation began to rise and cut intrest rates when inflation was low

Question 21

high intrest rates would …

Answer 21

• higher intrest rates would decrease spending as people with debt woud have to pay high intrest on their loans

Question 22

moreover people with debt would want to

Answer 22

and people without debts would want to save more because they would recieve higher intrest rates on their savings

Question 23

what did lawson believe about this

Answer 23

• would help control inflation

Question 24

what happened to lawson’s intrest rate policy

Answer 24

• did not lead to a prolonged boom instead lawson’s policies led stock markert crash 17th october 1987

Question 25

what did the crash became known as

Answer 25

black monday

Question 26

what did it do

Answer 26

• wiped 50 million off the values of shares

Question 27

what did lawson fear

Answer 27

lawson feared that stock market crash would lead to an economic crash , therefore lawson introduced a series of measures to keep the economy going

Question 28

what is the first thing lawson first do

Answer 28

he cut intrest rates to 7.5%

Question 29

what is the second thing lawson did

Answer 29

his 1988 budget cut the top rate of income tax from 60-40% and the standard rate was cut from 27%-25%

Question 30

what did these measures cause

Answer 30

rather than protecting the economy deregulating credit , low intrest rates and low taxes led to rising inflation

Question 31

who did this affect

Answer 31

• this hit everyone who borrowed money in the mid 1980’s due to lawson’s deregulation of credit .

Question 32

as a result of this

Answer 32

as a result the economy went into a recession and umeployment started to rise again

Question 33

however in what way did the policy work

Answer 33

however the policy worked and inflation came down

Question 34

in 1989 what happend

Answer 34

• lawson resigned

Question 35

why

Answer 35

-lawson believed inflation could be controlled by joining a fixed exchange rate system with other european countries

Question 36

known as

Answer 36

exchange rate mechanism

Question 37

what happend to nigel lawson

Answer 37

he was overuled in a bitter row with margret thatcher after her advice from her economic adviser alan walters over entering the ERM

Question 38

what did john major continue doing

Answer 38

continued to use the policy of raising intrest rates when inflation started to rise even though it led to rising unemployment

Question 39

john famously said ‘if its not hurting its not working’ what did oppenents of thatcher believe about this statement

Answer 39

• because both herself and john major were willing to accept unemployment was a price worth paying to keep inflation low

Question 40

thatcher wuld soon leave her position as leader of the CONS party an PM why

Answer 40

after daming speech made by jeffery howe leading to leadrship campaign by bitter rival micheal heseltine

Question 41

on november 1990 what happend

Answer 41

• margret thatcher resigned as PM because it was clear she would lose her leadership election to helestine

Question 42

what happend to john major

Answer 42

john major her chancellor stood a chance against helestine and won. the major government continued to follow thatcher’s economic policies as did blair’s new labour government elected in 1997