Question

Research an historical example of inflation (greater than 10% in the US or greater than 15% in any other country):

• Summarize the time-frame, duration and rate of inflation
• Analyze the root causes of the inflation
• Describe interest rates during the inflationary period
• Describe the major economic consequences of the inflation
• Explain how they were able to control the inflation (if they were)

Answer 1

In U.S. the highest period of inflation in the twentieth century occurred during the years after WW I and II, and in the 1970s. In 1973 the inflation tripled increasing from 3.4% to 9.6%; and from February 1974 through April 1975 remained between 10% and 12%. The high inflation was blamed on oil crisis, greedy businessmen, currency speculators, and avaricious union leaders. Among the root causes of inflation were the 1973 oil prices and the fall of the system Bretton Woods after the Nixon Shock The emergence of newly industrialized nations causes a rise competition in the industry of metal, triggering a steel crisis, where core industrial areas in North America and Europe were forced for re-structuring.

In the United States lasted the recession for the period from November 1973 (the presidency of Riachard Nixon) to March 1975 (the presidency of Gerald Ford), and its impact in the country were felt through the presidency of Jimmy Carter until the mid-term of first term of the president Ronald Reagan, characterized with low growth in economy. During the period from 973 - 1975 there were five quarters when the country's GDP was negative. Two months after the recession ended, in May 1975 the unemployment peaked at 9% . The pursuance of a tighter monetary policy by Federal Reserve produced higher interest rates which decreases the level of investment purchases