Which of the following factors contributed to the slowdown in trade growth after 1973? Question 3Answer a. Inflation and Oil Crises (price shocks) b. Technological Innovations c. Post World War II Reconstruction d. European Integration
The correct answer is a. Inflation and Oil Crises (price shocks).
Explanation
The period from 1945 to 1973 is often known as the "Golden Age of Capitalism," characterized by rapid global trade growth and economic reconstruction. This era came to an abrupt end in the early 1970s due to a combination of factors, most notably:
The 1973 Oil Crisis: In October 1973, OPEC (Organization of the Petroleum Exporting Countries) proclaimed an oil embargo.
This caused the price of oil to quadruple, leading to a massive supply shock for oil-dependent economies. Stagflation: The oil shock triggered "stagflation"—a toxic combination of high inflation and economic stagnation (slow growth and high unemployment).
This depressed global demand and significantly slowed the expansion of international trade. Collapse of Bretton Woods: Around the same time (1971-1973), the Bretton Woods system of fixed exchange rates collapsed, introducing currency volatility that further complicated international trade.
Why the other options are incorrect
b. Technological Innovations: Innovations (such as containerization and telecommunications) generally increase trade efficiency and volume rather than slow it down.
c. Post World War II Reconstruction: This was the primary driver of the boom (growth) in trade from 1945 to 1973, not the cause of the slowdown that followed.
d. European Integration: The formation of the European Economic Community (EEC) was designed to promote and facilitate trade between member states, contributing to growth rather than a slowdown.
