Chapter 13 Section 3: Stagflation
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I. Rising Unemployment and Inflation (At the Same Time)
Stagflation occurred in the 1970s
1. Stagflation is when an economy experience _____ and high ____ at the same time *
1 point
II. How Money Changes Affect the Economy
1. Most economists agree that changes in the money supply affect both ____ and the ___ of goods and services but that output is affected before prices *
1 point
2. For example, when the Fed increases the money supply, total spending in the economy ____ *
1 point
3. As a result, firms sell more goods. So they hire more workers and produce more ____ *
1 point
4. When firms begin to sell more, they do not know at first whether the increase is permanent or temporary. Firms wait to raise _____ because they think the increase may be _____ *
1 point
5. So given an increase in the money supply, ____ is likely to go up before ____ do. *
1 point
6. The opposite is also true. When the money supply ____, output is affected before prices are affected. *
1 point
III. What Causes Stagflation
1. Some economists believe that stagflation is the result of a _____, _____ monetary policy *
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2. The Fed _____ the money supply. This move by the Fed first ____ output and then _____ prices   *
1 point
3. The ____ money supply causes inflation *
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4. at the same time people are dealing with the ____ inflation, the Fed _____ the money supply. As a result, output falls. *
1 point
5. Because less output is being produced, ____ people are required to work in the factories. So unemployment _______ *
1 point
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