Skip to main content
Return to Brookings Papers on Economic Activity
BPEA Article

Alternative Responses of Policy to External Supply Shocks

Abstract

DURING 1973 and 1974 reductions in supplies of food (through natural causes) and of oil (through unnatural causes) simultaneously lowered the real income of U.S. nonfarm workers and raised the rate of inflation. An inflation-cum-recession induced by lower supplies of raw materials may call for a policy response different from the traditional tonic of demand restriction called for by a "garden-variety" inflation generated by excess demand.

Author

Get daily updates from Brookings