IN RECENT YEARS the standard view of the inflation process has become complicated by the realization that inflationary bursts can emanate from supply as well as from demand disturbances. Supply-side disturbances, reflected mainly in rising food and oil prices, generated sharp increases in general price levels in most countries of the world during the 1973-75 period. The impact in the United States was magnified by wage-price catch-ups after the ending of controls, the productivity slowdown, the decline in the dollar, and a number of legislative measures resulting in higher costs and prices. More recently, the decline of oil production in Iran and rising farm prices are kindling fears of new supply-shock inflation.
