stagflation

Examples of stagflation in the following topics:

• Shifting the Phillips Curve with a Supply Shock

  • Stagflation caused by a aggregate supply shock.
  • Stagflation is a combination of the words "stagnant" and "inflation," which are the characteristics of an economy experiencing stagflation: stagnating economic growth and high unemployment with simultaneously high inflation.
  • The stagflation of the 1970's was caused by a series of aggregate supply shocks.
  • The resulting decrease in output and increase in inflation can cause the situation known as stagflation.

• The Taylor Rule

  • For example, in times of stagflation, inflation may be high while unemployment is also high.

• Arguments For and Against Discretionary Monetary Policy

  • However, following the stagflation of the 1970s, policymakers were attracted to policy rules.

• The Short-Run Phillips Curve

  • However, the stagflation of the 1970's shattered any illusions that the Phillips curve was a stable and predictable policy tool.

• Alternative Views

  • Neo-Keynesian economics is often confused with 'New Keynesian' economics (which attempts to provide microeconomic foundation to Keynesian views, particularly in light of stagflation in the 1970s).
  • Stagflation (economic stagnation and inflation simultaneously) created issues with this however, necessitating New Keynesian ideas (as discussed briefly above).

• Impacts of Policies and Events on Equilibrium

  • A negative supply shock can cause stagflation due to a combination of raising prices and falling output .
  • This supply shock in turn contributed to stagflation and persistent economic disarray.

• Volcker Disinflation

  • During his time as chairman, Paul Volcker led the Federal Reserve board and helped to end the stagflation crisis of the 1970s.

• The Carter Administration

  • His administration sought to make the government "competent and compassionate"; however in the midst of an economic crisis produced by rising energy prices and stagflation, he met with difficulty in achieving his objectives.

• The Goals of Economic Policy

  • However, following the stagflation of the 1970s, policymakers began to be attracted to policy rules.

• Countercultures

  • Second, a decline of idealism and hedonism occurred as many notable counterculture figures died, the rest settled into mainstream society and started their own families, and the "magic economy" of the 1960s gave way to the stagflation of the 1970s.