US economy Flashcards

Question

rise in overseas investment 1950-1973

Answer 1

rose from $19bn in 1950 to $160bn in 1973

Answer 2

by 1970, US companies counted for nearly 80% of the worlds international investment

Answer 3

-bigger companies -> economies of scale -transport costs in US often more expensive than est. factory + producing locally in another country -US MNCs had more capital, better tech, higher productivity + better management than competitors (looser regulations + labour laws) -dollar became world economy's main trading currency, used for trade payments + reserve banking -> greater security for US businesses investing abroad -Tax laws encouraged foreign investment, profits taxed in country where they were earned, encouraged to operate in low cost economies -fed. govt insured against losses in politically unstable countries (risk free ventures) -local subsidiaries used (HQ in US but set up local companies to do business abroad. reduced costs in overseas markets for local consumers) -increased popularity of US produce abroad as people wanted 'american dream' lifestyle

Answer 4

european economic community; created prosperous market in western europe for US to capitalise off

Answer 5

if you accepted US aid, you were agreeing to allow US trade and business in your country

Answer 6

-grew US economic influence -potential investment + prosperity valuable asset to foreign policy -used wealth to influence politics -led to US support of corrupt govts e.g. the shah in iran, apartheid in south africa -pressure to ensure companies had access to oil, became central to fp

Answer 7

the spread of institutions, organisations, businesses and culture on a worldwide scale

Answer 8

international exports rose by over 8% a year from 1950-1973

Answer 9

international monetary fund set up to promote currency stability. provided emergency financing for states in crisis. helped US dollar become dominant world currency by paying in dollars only. designed to ensure economic crisis in one country did not spread. provided funds to ensure countries did not default on their loans

Answer 10

loaned money to developing countries. as european empires collapsed in asia and africa, dozens of new states emerged in need of funding

Answer 11

general agreement on trade and tariffs: encouraged a reduction in trade barriers e.g. taxes or tariffs and complicated rules that impeded the flow of goods and capital between countries

Answer 12

1. IMF 2. world bank 3. GATT

Answer 13

US had cheap sources of energy -domestic oil supplies plentiful after war -access to significant amounts of oil from s. america + middle east

Answer 14

$2 - kept industry/prod. costs low + drove demand for more cars

Answer 15

increased use of nuclear power

Answer 16

-low inflation -low unemployment -successive administrations ran surpluses on the fed. budget -balance of payments surplus -high consumer demand -high worker productivity combination of factors called virtuous cycle after 1968 all factors would become negative

Answer 17

1966 japan grew by 6.5%, West germany by 13% and US by 3.3% -> US economy slowing down while other countries caught up

Answer 18

by 1960s both countries had built sophisticated industrial bases with lower costs (lower wages + higher prod.) -japanese productivity 3 times higher than US between 1960-73

Answer 19

exported much higher level of their output than US -W. Germany exported 30% of goods produced, US only 7%

Answer 20

sold goods on international market at cheaper prices than US -> lowered market share

Answer 21

1948 - 25% 1964 - 15% 1970 - 10%

Answer 22

overtaken by the EEC (later EU) in 1970s

Answer 23

imported goods cheaper -> encouraged consumers to buy foreign goods over US alternatives -more money going out of country -combined with money leaving for international aid, balance of payments went into deficit in late 1960s for first time since 1945

Answer 24

over $90bn yearly

Answer 25

1965 - $1.4bn 1970 - $28bn 1975 - $53.2bn 1980 - $73.8bn

Answer 26

60s - 1% 70s - 2% 80s - 4%

Answer 27

-inflation: govt had to borrow money -> more money in economy but amount of goods/services did not increase -> price rise -currency weakness: other states less willing to buy dollars (bad investment) -> weakened dollar + increased cost of imports -higher interest rates: inflation + dollar weakness made US federal reserve (centr. bank) raise interest rates -> lowered amount of investment in economy + demand for goods (harder to buy on credit)

Answer 28

-inflation rose: reduced consumer spending + job losses in manufacturing -labour costs rose: 1960s wages rose but productivity fell. with less demand, businesses reduced workforces -> unemployment -rapid unemployment rise -welfare costs rose: had to be paid for by borrowing (less tax rev)

Answer 29

1966 - 3% 1970 - 6% 1974 - 11% 1980 - 13.5%

Answer 30

period of low growth, high unemployment + high inflation (combination of stagnant economy + inflation)

Answer 31

organisation for petroleum exporting countries

Answer 32

1973, in response to US support of israel in arab-israeli war (yom kippur war), arab oil states increased price of oil by 400% in six month period, until march 1974. OPEC put total embargo on oil sales to US -crippled US economy

Answer 33

after iranian revolution, supply of oil reduced again + prices rose by 100%

Answer 34

after ww2 US dollar fixed to rate of $35 per ounce of gold. abandoned by Nixon as it did not allow dollar to change value against other currencies, even when US experienced BOP problems

Answer 35

-abandoned gold standard -> weakened dollar, made imports more expensive + exports cheaper -aim was to reduce demand for imports, increase demand for US goods at home and abroad -imposed price and wage limits to control inflation + lessen pressures on US businesses -effects wiped by 1973 oil crisis

Answer 36

WIN - whip inflation now -wanted to cut spending and reduce taxes but democrats in congress would not pass most proposals

Answer 37

-increase spending in some areas and offset by reducing it in others -given power to ration petrol after 1979 oil crisis, did not help -1980, inflation reached 13.5% and interest rates at 20% -tried to implement public works schemes but didn't take off

Answer 38

growth would come to economy if private citizens invested more and barriers were reduced to the prod. of goods/services -supported by reagan

Answer 39

degree in economics and sociology

Answer 40

milton friedman of the chicago school of economics and the policies of margaret thatcher

Answer 41

1. tax cuts: cut personal taxes by 23% in first budget -> encourage spending to stimulate economy 2. spending cuts: cut spending on 300 govt projects to reduce money in the economy and therefore inflation and the size of the govt 3. regulation cuts: believed 'red tape' prevented expansion. prevented min wage increases, resisted increased workers rights, TU powers, health/safety regs etc.

Answer 42

massive increases in military spending, current equivalent of $550bn yearly on arms buildup

Answer 43

tax rev did not change much. more money in people's pockets, stimmed spending and saving -> increased money available for businesses to invest and grow

Answer 44

drastic cuts in many areas but not military. overall govt spending grew considerably budget deficit grew

Answer 45

1980 - $73.8bn 1985 - $212.3bn

Answer 46

passed with aim of reducing deficit in 1985. however US still had deficit of $221.2bn in 1990

Answer 47

unemployment peaked at 10.8% in 1982 but then fell: 7.2% in 1985 and 5.6% in 1990

Answer 48

US GDP grew avg of 3% per year after 1982 overall US economy 23% bigger in 1989 than in 1980

Answer 49

13.5% when reagan entered office in 1981. fell to 4.65% by 1989

Answer 50

-every year of his presidency, the US economy grew, inflation fell and unemployment declined -wrongly assumed that tax cuts would increase govt rev. -failure to control spending -> massive deficit that led to recession after he left office -disproportionate gain for wealthy americans from tax cuts and business reg changes, while poor people struggled with welfare cuts, low wages that couldn't keep up with inflation, and less protection from exploitation

US economy Flashcards

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