Which of the following most significantly contributed to the 1970s and early 1980s' stagflation?
A) appreciation of the dollar
B) a sharp drop in the prices of farm products
C) a dramatic increase in energy prices
D) rising productivity in manufacturing

Question

Quizplus · Accepted Answer

The dramatic increase in energy prices, specifically the OPEC oil embargo of 1973 and the Iranian Revolution in 1979, led to a significant increase in the cost of production and transportation. This contributed to a decrease in aggregate supply, leading to a combination of high inflation and slow economic growth known as stagflation. The appreciation of the dollar (A) and rising productivity in manufacturing (D) would typically lead to a decrease in inflation and an increase in economic growth. The sharp drop in the prices of farm products (B) would affect specific sectors of the economy but would not have a significant impact on overall economic conditions.

Which of the Following Most Significantly Contributed to the 1970s