Policy Alternatives for 1974
ECONOMISTS are accustomed to analyzing the effects of aggregate levels of activity on prices. In the past two years, they have had the unaccustomed task of analyzing the effects of price changes on the aggregate level of activity. The problems started in early 1973 with the food price runup, the switch to Phase III of the controls program, and the devaluation of the dollar, and accelerated with the quadrupling of world petroleum prices since the summer of 1973. Primarily as a result of these events, a ggregatedemand managemenht as had to contend with an explosion of prices that has been unprecedented for at least a generation in size and persistence and, more unusual, in redistributive effects on purchasing power.