Read Ch. 4 of Rukstad on Margaret Thatcher’s Britain. Give a short explanation with each question.

1. The money supply aggregate known as Sterling M3 was chosen by Thatcher as the desired target for controlling inflation because it was the aggregate most closely associated with inflation of the 1970’s. Which U.S. money aggregate is it most closely related to? (See the definitions on pp. 94—95.)

 

 

2. Study the figures on page 117. Is an increase in the government debt inflationary? (Do you assume in your answer that inflation is driven by some particular money supply or by something else?)

 

 

3. The initial Thatcher plan in on page 121. Which of the three monetary tools listed on 110 did Thatcher use to contract the money supply?

 

 

4. Prior to Thatcher, how much of the last 100 pounds of income did a high income individual keep?

 

 

5. Did the inflation-fighting policies of Margaret Thatcher generate unemployment? (There is no question that there was unemployment. The question is whether it was caused by the inflation-fighting tactics.)

 

 

6. Did Thatcher reduce the size of the British government relative to the economy and was inflation reduced? (Give numbers where ever possible.)