ECON 102 Lecture Notes - Lecture 19: Business Cycle, Early 1990S Recession, Jobless Recovery
Document Summary
The term stagflation was born during the mid 1970s. Informally, this is a period of low gdp growth, high unemployment, and high inflation (as the word literally means stagnation and inflation. This recession was, by far, the most significant downturn in the u. s. economy since the great depression. Remember that inflation usually slows down during a recession and accelerates during periods of high growth. Therefore, stagflation is an unusual situation because inflation increases during a recession. The cause of the stagflation was the 1973 energy crisis initiated by an embargo that the organization of petroleum exporting. This event arose from political conflicts in the middle east. Inflation exceeded 9% in 1975 and remained high into the early 1980s. Unemployment reached over 8% and remained high for several years. Effect on perception of u. s. dominance: coming out of ww2, and certainly throughout the 1960s, the united states was perceived as the politically and economically dominant country in the world.
