Sample Solution

potentialities after the end of the second World. For example, GDP per capita in Western Europe augmented by 4.08 per cent during 1950-1973, the growth and expansion were seen in centrally designed economies, such as Africa , Latin America, and Asia.
The “Peak” of unrivaled economic success finished after 1973, with the economic stagnation of the 1970s steering to the fall of Keynesianism. The 1970s stagnation was described by the rising rates of inflation and unemployment, and the cut-rate of economic growth. According to Keynesian criticizers, the economic stagnation credited to the erroneous expansionary strategies embraced under the disguise of Keynesian economy. For example, from 1960 until 2002, average unemployment and inflation rates were extremely low. During 1983 until 1993, the inflation decreased, but unemployment rates were up in most countries, specifically in Western Europe, which credited to hysteresis outcomes and rigidities in the labor market (Guillermo & Rodrigo 2008, 147). In the recent period of 1994-2002, it is obvious that inflation rates were minimal, but unemployment rates have raised in Western Europe and dropped in America. It is only around 1973-1983 that high inflation and high unemployment rates were recorded instantaneously. This was described as stagflation. According to Keynesianism criticizers stagflation was an inevitable inheritance of demand management policies associated with Keynesian economics (Baumol and Blinder, 2006)
Economists emphasize that there are two principal reasons of stagflation. First, a negative supply shock can decrease the productive ability of an economy. Examples of unfavorable shocks involve a raise in oil prices for an importing nation. Such shocks have an inclination of raising prices and slowing down the economy by the increasing costs of production and reducing lucrativeness at the same time (G