6/29/09

If short term economic stimulus boosts economic growthwhat could some long termunintended consequences be?


Stagflation is an economic situation


in which inflation and economic stagnation


occur simultaneously


and remain unchecked for a period of time


 


…Stagflation has generally proven


to be difficult and costly to eradicate once it gets started


 


Stagflation can result when an economy is slowed


by an unfavorable supply shock


such as an increase in the price of oil


…which tends to raise prices


at the same time that it slows the economy


 


…Both stagnation and inflation can result


from inappropriate macroeconomic policies


 


…Central banks can cause inflation


by permitting excessive growth of the money supply


and the government can cause stagnation


by excessive regulation of goods markets and labor markets


 


…The global stagflation of the 1970s


began with a huge rise in oil prices


but then continued as central banks


used excessively stimulative monetary policy


to counteract the resulting recession


causing a runaway wage-price spiral


Wikipedia


 


Is the federal government stabilizing the economy


by borrowing from relatively younger voters and their children


who may not reap the prosperity of their parents?

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