1973 Stagflation
Whitney
Armstrong
Econ 2301
May 7, 2011 1973 Stagflation In 1973 the president was Nixon and OPEC had only been around about 13 years. Now the demand for oil in the US was increasing steady with the demand for cars increasing and central heating and air conditioning becoming more popular. In October the Middle East became uproar and wars began to break out. Soon after OPEC announced a change in the oil prices that sent everyone in panic mode; Gas went from thirty cents a gallon to a dollar twenty a gallon very quickly. In February of 1973 the US dollar experienced a changed in worth in the wrong direction. With the dollar worth less, unrest in the Middle East and rising unemployment the stage was set for nasty sixteen month recession that economist had never seen before nor has it happened again, Stagflation. We have norms for every standard of measurement we use on our economy. There is a little bit of room where we can play with these norms and live confortable if we are too high or too low. In in the oil crises of 1973, we experienced many things at the same time, there was high unemployment rising from 4.8% to 8.6%, there was massive amount of inflation, and last but not least the oil embargo that left Americans struggling. First looking at the unemployment, when we look at the unemployment numbers for Nov. of 1973 we see that we are starting out at an above full employment equilibrium. Now it looks like the economy is trying to get back to a natural rate of unemployment which is 5%. Now the first five months of 1974 it seems to level out about 5.1%, about normal. After that there is a steady increasing trend of just rising unemployment. Now if we look at GDP for this same time period we start to understand why unemployment is just steady increasing. Most of the production that was happening at this time wasn’t happing. Our economy was experiencing negative growth. Said
Armstrong
Econ 2301
May 7, 2011 1973 Stagflation In 1973 the president was Nixon and OPEC had only been around about 13 years. Now the demand for oil in the US was increasing steady with the demand for cars increasing and central heating and air conditioning becoming more popular. In October the Middle East became uproar and wars began to break out. Soon after OPEC announced a change in the oil prices that sent everyone in panic mode; Gas went from thirty cents a gallon to a dollar twenty a gallon very quickly. In February of 1973 the US dollar experienced a changed in worth in the wrong direction. With the dollar worth less, unrest in the Middle East and rising unemployment the stage was set for nasty sixteen month recession that economist had never seen before nor has it happened again, Stagflation. We have norms for every standard of measurement we use on our economy. There is a little bit of room where we can play with these norms and live confortable if we are too high or too low. In in the oil crises of 1973, we experienced many things at the same time, there was high unemployment rising from 4.8% to 8.6%, there was massive amount of inflation, and last but not least the oil embargo that left Americans struggling. First looking at the unemployment, when we look at the unemployment numbers for Nov. of 1973 we see that we are starting out at an above full employment equilibrium. Now it looks like the economy is trying to get back to a natural rate of unemployment which is 5%. Now the first five months of 1974 it seems to level out about 5.1%, about normal. After that there is a steady increasing trend of just rising unemployment. Now if we look at GDP for this same time period we start to understand why unemployment is just steady increasing. Most of the production that was happening at this time wasn’t happing. Our economy was experiencing negative growth. Said
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