Share this article on twitter share this article on. Linkedin share this article by email share this article by whatsapp stagflation is an economic phenomenon. That mixes two concepts: economic recession DW Leads with price inflation. These two concepts were thought to. Be incompatible, since during periods of economic depression with high unemployment rates, consumption. Tends to fall and merchants lower prices to stimulate consumption. It is a logical thought: if my. Clients do not buy from me because they have few economic resources, it would be better to lower. The prices to attract more clients. So, how is it possible that, in a situation of economic crisis, prices rise? Has this happened before?
Origin of Stagflation During
The 70’s there was a war conflict whose consequences. Shook the global economy. We talked about the yom kippur war. Inesem business school master in. Banking economics + mifid ii certification more information the conflict began in october. 1973 and pitted a coalition of buyer email list arab countries against the state of israel who decided to attack during. The israeli holiday of yom kippur, the most important day for jews. This aggression took the israeli army by surprise. But in a matter of a week, they prevailed against the aggressors of the arab coalition, thanks to the support of the us, france and the united kingdom.
Because the Former Ussr Supported
The arab side, the un imposed a ceasefire to prevent further escalation of clashes between the us and the ussr. This fact provoked outrage within the arab world and opec (organization of petroleum exporting countries) began an oil embargo on the us as revenge for helping the state of israel. The oil crisis the embargo caused oil to become a scarce and highly valued resource. The rise in oil prices affected most goods on the market, causing widespread inflation. Inflation caused the population to reduce consumption, thereby creating an economic crisis. We can see then that the origin of this type of crisis due to stagflation is due to the scarcity of a fundamental resource for the economy, such as oil or natural gas.