Youtor
Stagflation Explained 2 Minute Economics
>> YOUR LINK HERE: ___ http://youtube.com/watch?v=eK4F6NM8Rqc
In this episode of 2 minute economics i shall explain stagflation • WHAT IS STAGFLATION • Stagflation is defined as the situation in which inflation is accompanied with high unemployment and economic stagnation • WHY IS IT IMPORTANT • This is because stag-flation was one of the first instances of real world economics proving theoretical economics wrong • HOW IT CONTRADICTED ECONOMISTS • Economists during the 1970’s, a period of slow growth due to an oil crisis, thought that inflation and unemployment were a trade-off meaning high inflation led to lower unemployment and high unemployment led to stable inflation • ITS ORIGINS • Stag-flation was first introduced in the house of commons in the UK when the politician Ian Macleod was referring to the oil crisis in the U.S. in the 60’s and 70’s during which the U.S. experienced 5 quarters of negative growth, high unemployment and inflation. Initially he called this a “stagnation situation” but it was later modified to stagflation. • CONTROVERSY WITH KEYNESIAN ECONOMICS • Keynesian economics is a branch of economics whose belief is in allowing inflation to curb unemployment or in other words they believe that the strategy of federal reserves across the world to curb inflation during economic stagnation causes high-unemployment and misery, however this was contradicted by stagflation which believes that high inflation causes or is accompanied by high unemployment. • THEORIES ON THE CAUSES OF STAGFLATION • Since stagflation contradicted major economic theories economists made it their duty to find a logical reasoning to it. • One of the reasonings given was that when the OPEC countries embargoed western countries in 1973, oil prices rose, this led to higher costs which led to higher inflation even when there was economic stagnation • The second reason given was that trade unions especially strong ones can cause stag-flation since they could artificially keep up incomes and wages or even increase them during times of economic stagnation • The third reasoning is falling productivity, if productivity were to fall during economic stagnation the cost of production could increase and this would cause higher inflation and lower production. • ~-~~-~~~-~~-~ • Please watch: India's Smartphone Economy Is Booming • • India's Smartphone Economy Is Booming... • ~-~~-~~~-~~-~
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