Prior to 1958, most economists and lay-persons believed that there was a direct relationship between price level changes and output growth, so that the price level generally increased when demand for products was growing faster than the economy could supply them. Inflation was often characterized as being caused by too much money chasing too few goods. In 1958, however, the price level in the United States rose significantly while at the same time employment and gross domestic output fell. These facts did not match the conventional wisdom regarding inflation.
KeywordsMonetary Policy Price Level Unit Labour Cost Labour Productivity Growth Domestic Output
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