Examine the sequence showing the cause of the United States recession in the 1970s.

A sequence of three bubbles with arrows pointing downward showing the cause of the U S recession in the 1970's. The top bubble is labeled The high inflation caused businesses to have lowered profits. The middle bubble is blank. The bottom bubble is labeled The economy stalled.

Which statement belongs in the middle of the sequence?

Borrowing money was harder due to higher costs.
Prices of goods increased in order to increase profits.
Workers lost their jobs because businesses had less need for them.
More workers were hired as businesses increased production.

A recession is a significant decline in economic activity which spread across the economy and lasted more than a few months. It was normally visible in real GDP, real income, industrial production, employment and wholesale-retail sales.

How major was the United States recession in the 1970's?

The 1970s saw some of the highest rates of inflation in the United States in recent history. In turn, interest rates rose to nearly 20%.Fed policy, Keynesian economic policy, the abandonment of the gold window and market psychology all contributed to the high inflation.

The Great Inflation was blamed on oil prices, currency speculators, greedy businessmen and union leaders. However, it is clear that monetary policies that financed massive budget deficits and were supported by political leaders were the cause.

The U.S. Bureau of Labor Statistics estimates that 2.3 million jobs were lost during the recession, at the time, this was a post-war record. Although the recession ended in March 1975, the unemployment rate did not peak for several months.

What caused the US recession in the 1970s?

The US recession in the 1970's was caused by a period of economic stagflation. There were also other reasons which came about because of rocketing gas prices caused by OPEC's raising oil prices as well as embargoing oil exports to the U.S.

Other major factors included heavy government spending on the Vietnam War, and a Wall Street stock crash in 1973-74. All these causes led to the recession.

Hence, option B is correct.

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