THE NEW INFLATION: The Least of Three Evils?


To U.S. economists the biggest puzzle today is the "new inflation," so called because it flies in the face of all their classical theories about the sources of inflation. Traditionally, inflation is caused by excessive demand for goods in short supply. But many consumer prices today are rising in the face of softened demand and below-capacity production in such key industries as steel, autos, appliances. To describe this new phenomenon, economists have coined a new phrase: "cost-push" inflation. Some go on to contend that price boosts, such as the recent steel price rise, are caused primarily by the push...

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