Inflation Analysis - of Economic Advisors for President...

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Inflation Analysis In February of 1974, U.S. inflation hit 10.02%, and continued to increase through December of 1974. The average inflation rate at that time was 11.03%. From 1979 to 1981, inflation was bad once again. During the ’70s, inflation averaged 7.1 percent per year. The unemployment rate averaged more than 6 percent, with periods when it was higher than 7 percent and 8 percent. The government also is part of the problem; government interference in the market is counterproductive. Back then, government controls capped the price on “old gas,” fuel that already had been discovered and refined, but that resulted in old gas being removed from the market, creating scarcity that resulted in rationing. The decade’s inflation was caused by the government printing too much money. The Federal Reserve pursued a tighter monetary policy which produced higher interest rates which reduced the level of investment purchases. Alan Greenspan who was head of the Council
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Unformatted text preview: of Economic Advisors for President Gerald Ford prepared an economic stimulus plan. The plan involved some tax cuts for households and businesses but it also involved some tax increases to discourage the importation of foreign petroleum. The government turned it down, and came out with their own tax rebate which was supposed to happen on April 15 th 1975. Series of events in 1974: • Worldwide Inflation helps to cause dramatic increases in the cost of fuel, food and manufacturing • Gasoline shortages and price increases throughout the world help to cause problems in most of the western world’s economies • Governments and people around the world spend more time debating the use of Nuclear Energy to combat problems with Oil Prices and Supply • The Global Recession Deepens http://www.sjsu.edu/faculty/watkins/rec1975.htm http://inflationdata.com/inflation/Inflation_Rate/HistoricalInflation.aspx? dsInflation_currentPage=2...
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This note was uploaded on 11/02/2011 for the course ECONOMY G123/EC100 taught by Professor Melissa during the Spring '10 term at Rasmussen College.

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