What are the Causes of Stagflation and their Impacts?

What are the Main Causes of Stagflation?

What are the Impacts of Stagflation?

What are the Signs of Stagflation?

What are the Solutions to Control Stagflation?

FAQs About the Causes of Stagflation

What were the causes of stagflation in 1970?


The stagflation in 1970 was a result of the following factors:

  • High expenditure by the government (on the Vietnam war)
  • Suspension of the gold standard
  • High-interest rates
  • Oil price shocks

Which monetary policies can countries formulate to counter the causes of stagflation?

Governments can solve the recession problem by putting more money into the economy. This will reduce interest rates on loans and boost spending by consumers. Central banks can also buy and sell currency to increase the monetary supply.

What are some labour market reforms that will help fight stagflation?


Governments worldwide can take steps to bring reforms into the labour market, such as:

  • Contributing towards increasing production and productivity
  • Increasing employment opportunities
  • Protecting the rights of the workers

What are the ways to reduce the effects of oil price volatility on an economy?

Governments worldwide can reduce taxes on petroleum products to ensure that the rise in oil prices does not severely affect the other aspects of an economy. Also, investing in alternative energy sources is something economies worldwide should focus on. This will reduce the demand for oil and other petroleum-based fuels and decrease volatility in oil prices.