Let’s rewind to 1965 in the UK, how the term “stagflation” was coined, and the global spread.
Stagnant combined with the world inflation resulted in “stagflation” when a British politician described a slow economy also suffering from high inflation rates
Stagflation spread globally and landed especially hard in the US
Consumers lost interest in foreign goods and business owners had trouble restocking right after a strong holiday season
Economists had previously assumed that inflation would only exist when the market was strong and unemployment was low
Stagflation resulted in a dilemma because efforts to reduce inflation could increase unemployment and further slow economic growth
Stagflation only ended after a recession and more controls over spending
Test your knowledge
Stagflation is. . .
Choose an option
Stagflation is difficult to solve because. . .
Choose an option
Which of the following did not contribute to stagflation?