Were the two oil crises in the 1970s associated with inflation or deflation?

The two oil crises of the 1970s, particularly the 1973 oil embargo and the 1979 energy crisis, were indeed associated with inflation. This period marked a significant rise in oil prices, which led to increased costs for goods and services across the economy. As oil is a fundamental input in production and transportation, the spike in prices resulted in higher production costs, which businesses passed on to consumers in the form of increased prices.

The resulting effect was stagflation, a unique economic condition where high inflation coincided with stagnant economic growth and high unemployment rates. This was unusual, as inflation is often expected to correlate with strong economic growth. However, during the 1970s, the oil price shocks contributed greatly to inflation, leading to widespread economic challenges. This scenario underlines why the correct answer is associated with inflation, rather than deflation or other options presented.