Balance of payments issues and 'stop-go' policies Flashcards
What brought inflation?
The growth in wages was outstripping the rate of increase in production.
What was difficult to persuade the trade unions? what industry did not benefit?
That their members should not have high wage increases, particularly in some industries such as coal where miners felt they were not gaining as much as other workers.
Why did government controls have to be used?
To curb excessive inflation.
Why did taxation remain high?
- To control excessive spending that would lead to an unwanted increase in imports
- To pay for the rising costs of public services.
What is ‘stop-go’ economics?
Stop - a deliberate slowing down, or deflating of the economy through higher interest rates and spending cuts.
Go - Low interest rates and rising consumer spending.
Why were stop - go economics used?
To control growth when the economy was in danger of overheating.
What led to a problem with the balance of payments?
Manufacturers were not encouraged to increase their export trade which would have helped bolster the export industries = TRADE DEFICT.
Describe how the financial crisis did not do lasting harm to the tories.
- Sterling regained its value against the dollar
- The budget of 1959 provided tax cuts of £370 million
What happened in 1961?
Worries about the economy overheating forced the government to introduce a ‘pay pause’ to hold down wage inflation and to ask for a loan from the IMF.
What was the 1963 EEC application a symbol of?
A sense of failure in bringing about economic modernisation.
