The existence of stagflation in the 1970s undermined the credibility of demand-management policies.

Question

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Stagflation, which is the combination of stagnant growth and high inflation, was unexpected and difficult to address through demand-management policies, which focused on stabilizing prices and output through adjusting aggregate demand. The failure of these policies to address stagflation undermined their credibility and led to the search for alternative approaches, such as supply-side policies and monetarism.

The Existence of Stagflation in the 1970s Undermined the Credibility