22 Economic Developments, 1949-1989

Question 1

What are the causes of the economic miracle?

Answer 1

1. No colonies they had to care for
2. Currency reform and the Marshall Plan
3. Inheriting the Rhineland
4. Increased Labour from refugees escaping soviet zones

Question 2

What did Erhards social market economy involve

Answer 2

1. Private businesses free to pick their own prices and wages
2. Regulation from the state for fair competition

Question 3

How was the social market economy enforced?

Answer 3

1. Investment act law 1951, govt subsidies to heavy manufacturing business with slower growth than consumer industry
2. Co-determination Law 1951, delegated Decision Making anomg iron and steel workers
3. Protective tariffs

Question 4

What was the economic Miracle?

Answer 4

1. Unemployment fell to 0.5%
2. Rising income in 1952
3. Largest economy in the world
4. Old firms like Krupps thrived

Question 5

What caused the 1960s recession

Answer 5

1. Less labour after the Berlin Wall 1961
2. CDU spent too much on modernisation in railways and buying USA military equipment.
3. Tried to fix this by reducing spending plans by 10% and rising interest rates. Made it worse

Question 6

What was the effect of the 1960s recession

Answer 6

1. c1965, GDP fell to 2.9%. Growth at 1.2%

2. Inflation at 4% in 1966

Question 7

Policies during the 1960s recession

Answer 7

1. The stabilisation law 1967, increase federal govt power to alter taxes and raise loans
2. Public spending cuts of nearly 2,000 million marks

Question 8

What caused the 1970s inflation

Answer 8

1. OPEC oil crisis 1973, FRG faced paying 17bill DM
2. Union strike, 1974 they increase wage by 11%
3. 1979 oil crisis, 150% increase in prices between 1979-80

Question 9

What were the effects of the 1970 Inflation

Answer 9

1. 1979, unemployment at 2 million
2. Recession until 1982
3. Inflation down to 4.7% between 1973-1979

Question 10

Policies during the 1970s inflation

Answer 10

1. Temporary Sunday driving ban
2. Schmidt made moderate expenditure cuts and increased VAT
3. Schmidt proposed the creation of the EMS

Question 11

What does EMS stand for

Answer 11

Economic Monetary System

Question 12

What does EMS do

Answer 12

Fix exchange rates in Europe

Question 13

What was the Marshall Plan?

Answer 13

1947, USA sent large sums of US money to be used to promote European recovery, helped to revive trade and industry.

Question 14

What was the GDP in the 1950s?

Answer 14

Annual GDP growth rate was 8.2%

Question 15

What was the GDP in the 1960’s?

Answer 15

Annual GDP growth rate was 4.6%

Question 16

What was the GDP in the 1970’s?

Answer 16

Annual GDP growth rate was 2.8%

Question 17

What was the GDP in the early 1980’s?

Answer 17

Annual GDP growth rate was 0.7%

Question 18

What was the GDP in the mid 1980’s?

Answer 18

Annual GDP growth rate was 2.6%

Question 19

What was the OPEC oil crisis in 1973?

Answer 19

OPEC doubled oil prices of crude oil
FRG had to pay more for imports as a result, up to 17 billion DM.
Balance of payments from +$9.5 mill to -$632 mill

Question 20

Why were there union strikes in the 70’s?

Answer 20

Union members were used to the prosperity of the 50’s and demanded large wage increases. Forced 11% pay increase

Question 21

What was the oil crisis of 1979-80?

Answer 21

Shah of Iran was overthrown. Caused panic and there was a further 150% increase in oil prices.
Unemployment rose to over 2 million

Question 22

How did the 80’s economy overcome the 70’s one?

Answer 22

High rate technological modernisation and good industrial relations

Question 23

What was the progress in the 80’s economy?

Answer 23

Oil prices fell in 85
Inflation fell from 6.2% in 81 to 0.6% in 86
Kohl kept annual budget increase down to a max of 8%
However, unemployment was still at 2.2 million by 87