The 1973-1975 recession was due to the Organization of the Petroleum Exporting Countries (OPEC) raising gas prices and imposing an embargo against the United States. This quickly led to a dramatic reduction in oil production, leaving no choice but to increase the price of oil. This recession, I will identify the causes, the fiscal and monetary policy used by the government to help the economy slowly come out of the recession. I will also highlight the recovery and expansion of the recession. The causes of this recession were due to unemployment being too high and how it had increased even more over the years. The unemployment rate was 4.9% in the fourth quarter and increased significantly to 8.3% in the fourth quarter of 1975. This recession was quite severe since World War II. There must be a reason why the unemployment rate continues to rise and the reason for this recession is the decline in investment purchases. GDP continued to decline due to lower investment. This model shows the decrease in investment purchases, the decrease in aggregate demand, which shows that GDP is also decreasing. “Decreases in capital purchases were across all components of capital expenditures; production equipment, producer structures, residential structures and variation in business inventories. (The American recession from 1973 to 1975). The price of oil increases relative to OPEC, causing a decrease in overall supply because oil is a component of supply. Below is an AD/AS model to show the change in aggregate supply due to the increase in the price of oil. This graph shows that through the evolution of aggregate supply, this caused an increase in the price level and a decrease in GDP. By reducing investment...... middle of paper ......, economists can now walk away Knowing that house prices are falling, banks are tightening lending standards and that 'debt reduction' is underway, they know that the recovery could take a long time. Works Cited “The Economic Policy Institute”. Economic Policy Institute. Np, and Web. December 9, 2013. “Expansionary monetary policy vs. contractionary monetary policy. » About.com Economy. Np, and Web. December 7, 2013. “Get to work. » Get to work. Np, and Web. December 9, 2013. "Oil Embargo, 1973-1974 - 1969-1976 - Milestones - Office of the Historian." Oil embargo, 1973-1974 - 1969-1976 - Milestones - Office of the Historian. Np, and Web. December 8, 2013. “A recovery no better than the recession. » Pew Socio-Demographic Trends RSS. Np, and Web. December 9, 2013. “The American Recession of 1973-1975.” The American Recession of 1973-75. Np, and Web. Dec 08.. 2013.