The high rates of both unemployment and inflation that have prevailed virtually throughout the industrialised world in recent years, and the adverse effects that this has had, and is having, upon the rest of the world, presents the most serious economic situation since World War II. These problems remain scarcely less serious in the light of some degree of economic recovery in parts of the industrialised world; for the general level of unemployment has remained very high, and governments fear that if they introduce policies that succeed in greatly reducing unemployment this will make inflation rise sharply again. The policies employed in the industrialised world to handle this combination of unemployment and inflation have been manifestly unsuccessful in simultaneously reducing both inflation and unemployment to acceptably low levels, and there are few observers (if any) who appear able to suggest with confidence any consistent alternative policy that might reasonably be expected to succeed in that aim.
KeywordsExchange Rate Monetary Policy Price Level Government Outlay Budget Deficit
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