Chapter 2 - What Is Stagflation?
2 WHAT IS STAGFLATION?
The term stagflation was first used by the United Kingdom’s Conservative MP and later Chancellor of the Exchequer Iain Macleod. He reputedly used the term in a speech to Parliament in 1965.
The term stagflation first rose to prominence in the early 1970s, during a time when the US economy was facing an unprecedented combination of economic stagnation and inflation. This ‘high-inflation/low-growth’ phenomenon had never been seen before, with most economists thinking these two things were mutually exclusive - leading many to assume that this was just a temporary aberration.
In reality though, stagflation was just the beginning of an ongoing trend that continues to shape economic conditions today. To understand why, it’s important to look at what contributed to its original emergence - namely, the oil crisis of 1973.
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