Economy

Question 1

How was the economy affected due to WWI?

Answer 1

• loss of trade, as 20% of all merchant ships were lost during the war
• Britain couldn’t trade with countries they were at war with
• Britain was left in £8 billion debt in 1920
• Gov printed off more money to pay debt; led to inflation

Question 2

Describe the economic timeline (1918-31)

Answer 2

1914 - Britain leaves Gold Standard
1920 - post war boom arises due to demand of goods, then quickly ends, and causes an economic slump
1922 - Geddes Axe (£24 million in cuts of spending, education, pensions etc)
1925 - £ re-joins Gold Standard
1926 - May General Strike
1929 - Wall Street Crash
1931 - £ leaves Gold Standard

Question 3

What was unemployment like? 1918-31

Answer 3

Never fell below 10%

Question 4

What mistake did the Government make in the 30s and 40s?

Answer 4

They prioritised the £, rather than dealing with unemployment, and believed a Balanced Budget was crucial
(Balanced Budget - difference in total value between payments into and out of a country)

Question 5

What problems did the 30s face?

Answer 5

• 2.5 mil were unemployed
• living standards were awful
• hardest hit areas were those in stable industries
• cuts in spending but high interest rates - to preserve the value of the £

Question 6

How did the Gov try to fix the 30s problems?

Answer 6

• Created National Gov in 1931
• Removed the £ from Gold Standard
• 1934 Special Areas Act - invested in badly hit areas
• Boom in house building

Question 7

What problems did the 40s face?

Answer 7

• During WWII, 1/2 of Gov spending was on defence and the military
• Dec 1940 - Britain used all crash reserves
• Received £6 billion loan from Marshall Aid in 1948

Question 8

How did the Gov try to fix problems of the 40s?

Answer 8

• Atlee Gov cut spending, and controlled private spending - was not popular
• Atlee devalued the £ in 1949 - had to pay for goods in $

Question 9

Explain the inflation situation (51-79)

Answer 9

• Gov raised taxes, causing mass strikes across workers and unions
• This worked short-term, but they were unable to prevent the build up of inflationary pressure (wages same, but increased tax)

Question 10

Explain the unemployment situation (51-79)

Answer 10

• Conservatives pledged to maintain full employment
• Cut taxes and interest rates
• Used stop-go policies - putting political gain ahead of economic stability

Question 11

Describe the economic timeline (51-79)

Answer 11

1967 - £ devalues from $2.80 to $2.40
1971 - currency goes from shillings to sterling
1972 - £ was able to float freely against the other currencies
1976 - IMF $4 billion bailout - 3rd one in 10 years