The Political Economy of the UK, 1979–2002
The first Thatcher Government was elected in 1979 on the promise of squeezing inflation out of the system – permanently. How did she and her Government propose to do this, given the reluctance to use the structures and policies of the European Community, as it then was? The answer was monetarism: the control of the money supply. The theory – as espoused by Nobel Prize winning economist Professor Milton Friedman – was that since the stock of money multiplied by the number of times that stock circulates each year must by definition equal the quantity of goods and services bought during that period times their price, if you reduced (the growth of) the money supply, you must also thereby reduce (the growth of) prices.
KeywordsLabor Market Interest Rate Real Wage Money Supply Labor Market Policy
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