The oil embargo of 1973 led the US economy into recession. True or False

The statement is TRUE. The oil embargo of 1973 led the US economy into recession.

Explanation:

With this crisis there was an increase in the price of oil. Taking into account the great dependence that the industrialized world has on this product, the embargo caused a strong inflationary effect and the economic activity in the United States was reduced.

In the United States, the price of gasoline sold to the public rose from 38.5 cents in May 1973 to 55.1 cents in June 1974. For this reason, the New York Stock Exchange lost 97 billion in six weeks. US oil imports from Arab countries decreased significantly: a reduction of 1.2 million barrels per day to 19,000 barrels per day was seen. During the summer of 1974, the first period of fuel shortage since World War II was lived in the United States.

This situation also affected wage controls. The situation forced companies to keep salaries high, which meant that many companies laid off workers to reduce costs. At the same time, they could not lower oil prices to stimulate demand.

At that time, interest rates rose so that companies could not plan for the future. As a result, companies kept prices high, which made inflation worse. They were afraid of hiring new workers, making the recession worse.