ECON 202 Discussion 1March 7, 2018.

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Running Head: ECON 202 Discussion 1March 7, 2018Name:Student Number:Word count:Name of the course:Tutor name:Date of the assignment:“DISCUSSION-1ECONOMICHISTORYBYDECADE(1970’S)INUSA”1|P a g e
Running Head: ECON 202 Discussion 1March 7, 2018Hi Everyone,I am Tania Farhat and want to discuss on the most terrific economic decade of 1970’s in USA. Itis much interesting decade to me for discussing as it is the time of war and there is the greatinflation as well as the great recession. The stock market in this decade was in mess.In this era it has been observed that the economy as seemed to be trapped into new nightmarecalled “stagflation” because of the low economic growth along with high unemployment which isknown as “stagnation” in other words for the presence of high inflation rate. As per the “PhillipsCurve” which came in 1960’s, there is the stable inverse relationship between unemployment aswell as inflation. But in 1970’s this concept became totally wrong under the situation of recession.Under recession time, the policymakers had to lower the interest rates by increasing thegovernment spending. This in turn lower taxes for stimulating the demand as well as bring downthe unemployment rate through the process of lowering the inflation rate. But when they weredealing with inflation, there were two ways. One way was to raise the interest rates by loweringthe spending and the second way was to raise the taxes by reducing the demand for the purpose tocool off the economy through the cost of increasing in unemployment rate. In this way, the highinflation rate as well as the high unemployment rate situation has been appeared and that lack thesolution of the orthodox policy[ CITATION Hac08 \l 16393 ].In addition with this, I would like to discuss more about the political scenario of this decade as ithad a great impact on the economy of USA that time. The capitalistic United States governmenttook the encouragement for the reconstruction of economies belonging to Western Europe as wellas Japan in which the communism had got the superiority over capitalism. That had the greatimpact on the enhancement of the competition among the US firms especially within the “core”manufacturing industries such as steel as well as auto. The resistance worked upon the U.Ddominance within global South and those manufacturing companies has the access of cheapmaterials as well as energy resources. In 1973, the embargo of Western buyers through thepetroleum-producing countries as well as the oil-price hike has got coincided with the low pointwithin US for protecting the military and also the political power in international platform aftertheir defeat in Vietnam[ CITATION Hey18 \l 16393 ].Furthermore, as per the world gold reserve, US had acquired only 29.9% of total reserve in 1970swhereas it accumulation was 36.9% in European Community. Thereby, the position of the dollarin US became weak whereas the Deutsche mark as well as Japanese yen had risen in significantamount. There was total dollar crisis in the early of 1970’s and thus US had to suspend theexchange of dollars for gold in rest of the countries. Gradually, the system of floating exchange2|P a g e
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