BPEA | 1978 No. 2

Slowing the Wage-Price Spiral: The Macroeconomic View

1978, No. 2

OVER A DECADE has passed since the standard remedy of demand restraint was first urged to combat inflation. By the mid-1960s, many economists, including those at the Council of Economic Advisers, believed war expenditures were pushing the economy into the inflationary, excess-demand zone and recommended tax increases to help restrain aggregate demand. We cannot know how different subsequent economic performance would have been if that advice had been heeded. But it was not.