Israel experienced a period of rapid growth followed by high inflation and slow growth from 1965 to 1982. This was due to supply shifts like changes in raw material prices and wages, as well as difficulties in managing demand. Israel couldn't borrow more money to boost growth due to a large foreign debt, leading to a trade-off between growth and price stability. The country's high inflation was worsened by a failed foreign exchange plan, locking the economy into low growth and high inflation.