Final answer:
Macroeconomic instability includes periods of inflation and deflation, which can occur during economic downturns like the Great Depression and growth periods like post-war booms. High inflation in the twentieth century was notable after both World Wars and in the 1970s, while deflation marked the deepest recessions like the one in 1920-21 and the 1930s.
Step-by-step explanation:
Macroeconomic Instability and Inflation
Macroeconomic instability can take many forms, including periods of inflation, deflation, recession, and rapid economic growth. Notable events of the twentieth century that fall under this category include the post-World War inflations, the Great Depression's deflation, and the 1970s inflation. During recessions such as those in 1920-1921, the 1930s Great Depression, 1980-1982, and the Great Recession of 2008-2009, inflation rates are typically lower. This is often due to high levels of unemployment and reduced demand for goods which lower the price level.
Conversely, periods of strong economic growth, like the post-war booms or the 1960s, often see a rise in the rate of inflation, though not invariably, as demand increases and price levels rise along with wages and employment levels. Comprehensive macroeconomic analysis helps in understanding why these trends occur, relating recession to higher unemployment and lower inflation, and strong growth to lower unemployment and higher inflation.
Specifically, the twentieth century saw waves of high inflation immediately after World Wars I and II, and again in the 1970s. Meanwhile, the greatest recessions, the one following 1920-21 and the Great Depression, also marked periods of deflation. Over time, these periods of inflation and deflation have nearly balanced out, except for higher average inflation rates beginning in the 1970s. While inflation can redistribute wealth from savers to borrowers, high levels of inflation or deflation can disrupt economic stability and complicate long-term economic planning.