Question

Why did the oil price shocks of the $1970s$ affect the economy differently than the oil price shocks of $2007$?

Short answer

Inflation and unemployment contributed to the economic shock that began in 2007. Actual inflation and unemployment were lower than in previous crises in the 1970s.

Step-by-step solution

Content Introduction

$1970s$The energy crisis was a major factor in the $1$ economic collapse. Oil prices rose $350$ percent after the $1973$ OPEC oil embargo, and the higher costs spread across the economy.

Content Explanation

An oil shock might potentially cause a shift in the aggregate demand curve, resulting in a fall in aggregate demand. These extra demand-side consequences lower economic activity even more while keeping inflation in check.