Stagflation
Facts for kids
The following fact
sheet contains interesting facts and information on Stagflation.
Stagflation
Facts for kids
Stagflation
Facts - 1: Definition of
Stagflation: Stagflation is a combination of inflation
and stagnation. The term was coined in 1965, by U.K.
politician Iain Macleod (1913-1970),
Stagflation
Facts - 2: Definition of
Inflation: Inflation is a rise in prices relative to
money available. It is an increase in the price you pay
for goods and a decline in the purchasing power of your
money. In other words, during a period of inflation you
can get less for your money than you used to be able to
get.
Stagflation
Facts - 3: Definition of
Stagnation: Economic stagnation is a prolonged period of
slow economic growth, usually accompanied by high
unemployment.
Stagflation
Facts - 4:
The programs introduced by President Lyndon B. Johnson
to meet his vision of the
Great Society pumped
large amounts of money into the economy without raising
taxes. The numerous legislation passed between 1963-1968
resulted in a rise in the cost of goods, which spurred
inflation.
Stagflation
Facts -
5: Rising prices and
economic stagnation gave rise to the use of the term
"Stagflation" during the presidency of Richard Nixon and
continued during the presidencies of Gerald Ford and
Jimmy Carter. It was eventually halted when President
Ronald Reagan introduced "Reaganomics", combining
monetarism with supply-side economics with monetarism.
Stagflation
Facts - 6: Causes: Inflation.
Inflationary pressures led to major shifts in the economic policies
of the presidents and their administrations during this period. A
lack of understanding of economic problems resulted in a focus on
immediate issues effecting the country and short-term solutions to
resolve the problem of inflation.
Stagflation
Facts - 7: Causes: Complacency and
Stagnation. The United States had experienced a long period of
prosperity following WW2, which many Americans believed would last
forever. The economy had seen a boom period in which the United
States dominated trade. Production levels were staggering and had
astounded the rest of the world. US industries stopped developing,
growing and progressing. In other words, they were stagnating.
Stagflation
Facts - 8: Causes: Foreign
Competition. War torn Europe and Japan, began to
recover from the ravages of war, building new and highly
efficient manufacturing plants. U.S. industries faced
fierce competition from abroad and were unable to
effectively compete due to their older plants, out of
date machinery and less efficient methods.
Stagflation
Facts - 9: Causes: Exports
v Imports. By 1970, for the first time in nearly 100
years, the US was importing more goods than it exported.
Stagflation
Facts - 10: Causes: Raw
Materials. The rising costs of raw materials
exacerbated the economic situation.
Stagflation
Facts - 11: Causes: High
interest rates. The 1970's was also characterized by
high interest rates.
Stagflation
Facts - 12: Causes: Rise in
Unemployment. Many factories were forced to close,
millions of workers lost their jobs and unemployment
rose to 6.1%
Stagflation
Facts - 13: Causes: International
Forces. There were many causes of Stagflation, many of which
related to international forces, that were contributing to the
economic crisis in the United States. The problems were met by
introducing erratic monetary policies that created the extreme
economic occurrence, referred to as stagflation.
Stagflation
Facts -
14: Causes:
Economic policies: The Nixon administration and his
economists concentrated more on controlling inflation
than on combating recession and formulated four economic
policies which, without realizing it, sowed the seeds
for stagflation.
● The government
tried to introduce tax rises prompting people to
spend less, which in turn would ease the demand on
goods and drive down prices. Tax rises were soon
abandoned due to fierce protests against this
measure
● The Federal
Reserve Board raised interest rates. Loans were more
expensive and harder to get. Businesses were
reluctant to borrow to grow and improve their
businesses and the economy slowed even further.
● Wage and price
controls were introduced. These had the effect of
forcing manufacturers to find other ways to reduce
costs which they did by reducing their workforce.
Laying off workers led to a rise in unemployment, a
reduction in demand for goods and slowed economic
growth.
● The government
removed the United States from the gold standard.
The value of the dollar plummeted and as a result
the prices of imports rose
Stagflation
Facts -
15: Causes: The
1973 oil crisis: The 1973 oil crisis made the
economic problems in the United States even worse. The
Arab and Egyptian and Syrian members of the Organization
of Petroleum Exporting Countries (OPEC) proclaimed an
oil embargo in response to American involvement in the
1973 Yom Kippur War.
Continued...
Stagflation
Facts for kids
Facts
about Stagflation for kids
The following fact
sheet continues with facts about Stagflation.
Stagflation
Facts for kids
Stagflation
Facts - 16: The United States was faced
with its first fuel shortage since WW2. Oil rationing, price
controls, speed limits and daylight saving time were all put into
effect to conserve energy. Consumers were faced with queues at
fuelling stations and industries were faced with increased
production costs. The oil embargo was lifted in March 1974 but
prices would continue to rise. The increase in oil prices
accelerated inflation.
Stagflation
Facts - 17: The fuel shortage had a direct
and lasting impact on the U.S. automobile industry and led to a
dramatic increase of smaller European and Japanese cars in the
1970's. Americans could no longer afford to buy, or run their large,
heavy, and powerful cars. Imports of foreign cars increased
dramatically.
Stagflation
Facts - 18: Steel consumption
began to decline during the period of competition from
foreign producers and soaring prices of materials. Steel
consumption did not return to its peak level for the
next 20 years.
Stagflation
Facts - 19: Despite the
economic policies of Nixon the recession continued as
unemployment continued to rise. Nixon made the decision
to completely reverse course by adopting an expansionary
fiscal and monetary policy in which the wage and price
controls were lifted. Far from resolving the economic
crisis, stagflation resumed its upward spiral.
Stagflation
Facts - 20: The nation was
then rocked by the
Watergate Scandal and the
resignation of Richard Nixon.
On August 9, 1974
President Gerald Ford took over the reins of the
deflated nation with high inflation, stagnation and high
unemployment - Stagflation.
Stagflation
Facts -
21: President Ford had
lost support by pardoning Richard Nixon and was
reluctant to introduce mandatory wage and price controls
to reduce inflation - which by this time was running at
10%. His approach was to request voluntary controls to
address the economic crisis and introduced a plan called
Whip Inflation Now (WIN).
Stagflation
Facts -
22: The WIN plan was
based on requests to hold back the increases in wages,
reduce spending, increase savings and cut back on their
oil and gas consumption. Not surprisingly, the WIN plan
lost.
Stagflation
Facts -
23: President Ford and
his administration began cutting government spending and
introducing higher interest rates to curb inflation. The
economic polices of President Ford failed and President
Jimmy Carter was elected.
Stagflation
Facts -
24: President Jimmy Carter was faced with
ending Stagflation and reducing unemployment. To achieve
these goals he cut taxes and increased government
spending. These policies failed to have the desired
effect and inflation surged hitting a 32-year high of
13%.
Stagflation
Facts -
25: President Carter reversed the changes
and attempted to address the economic crisis by reducing
the money supply and raising interest rates.
Stagflation
Facts -
26: The nation was
then hit by the 1979 Oil crisis resulting in higher fuel
prices, oil shortages and Americans returned to the
queues at gas stations.
Stagflation
Facts -
27: As the nation’s
economic problems of Stagflation deepened the popularity
of Jimmy Carter decreased and Ronald Reagan assumed the
presidency in 1981.
Stagflation
Facts -
28: The economic
policies of Ronald Reagan, referred to as
Reaganomics, applied a
variety of different tactics to combat stagflation
including the reduction of taxes, decreasing the growth
in government spending, decreasing economic regulation
and promoting unrestricted free-market activity.
Stagflation
Facts -
29: Some of the major
legislations passed during the presidency of Ronald
Reagan to combat Stagflation included the Economic
Recovery Tax Act of 1981, the Tax Equity and Fiscal
Responsibility Act of 1982, and the Tax Reform Act of
1986.
Stagflation Facts - 30:
By 1983 the U.S.
economy finally began to recover and the economic crisis
known as Stagflation at last came to an end.
Stagflation
Facts for kids
Stagflation
●
Interesting Facts about Stagflation for kids and schools
●
Summary of Stagflation in US history
●
Facts about Stagflation
● Economic polices to combat
Stagflation
●
Fast, fun, facts about Stagflation
● The causes of Stagflation
● Stagflation facts for schools,
homework, kids and children |