ABSTRACT
Successive governments adopted expansionary fiscal policies in order to increase employment levels. The output rose the balance of payments would move into deficit, under the Bretton Woods system of relatively fixed exchange rates, the only cure for this deficit was to reverse the fiscal expansion and allow unemployment to rise. The Governments objectives for the medium term are to bring down the rate of inflation and to create conditions for a sustainable growth of output and employment. The overall growth trend of the economy was strong enough over this period to dominate the stop-go cycle. The 1973 oil crisis precipitated the first recession which led to an actual fall in GDP but even this decline was only half the decline which has occurred in the current recession. The medium-term financial strategy was effectively introduced in June 1979 against a background of economic events which shows the symptoms of a long-term decline in the general performance of the United Kingdom economy.
