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Phase II, prices no longer frozen
but controlled rigidly by government. Goal was price stability. limits placed on profit margins -
Nixon urges expansionary policies and social security benefits to win election
GNP increases, unemlpoyment declines. nixon reelected -
Phase III, gradual decontrol of economy
food, health care and construction still controlled but business and labor were expectred to comply with general wage and price standards. Phase III failed because prices only rose instead. -
Price Freeze
Raw foods were uncontrolled but this led to distributors cutting back on supply because could not raise prices to make up for costs. -
Phase IV
New controls that regulated price and set profit margins, followed by selective decontrol, sector by sector. Prices continued to increase at 12.2 CPI. Oil and crude materials also rose. -
End of Phase IV
Austerity approach was taken . Expenditure cut, taxes went up. Restrictive money policies as prices continued to rise. credit crunch > Franklin National Bank failure. -
Nixon resigns, Gerald Ford is president
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President Ford asks congress to place tight limit on spending
Temporary 5% tax surcharge on upper income families and corporations. "WIN" Whip Inflation Now. Real GNP declined, unemlpoyment rose. Inflation continued. Ford prioritized inflation over unemployment. Full emlpoyment level was lifted to 4.9%. Blamed extension of unemlpoyment insurance for unemlpoyment. -
Jimmy Carter administration
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Tax Reduction and Simplification Act
Encouraged economic expansion. Economy grew, unemployment went down, GNP expanded, but inflation accelerated. Problems were seen coming from the supply side. -
Double digit inflation
Interest rates rose, pushed economy into recession. High interest rate policy hlelped prevent fall in value of dollar – short term capital flowed in because higher than rest of the world. Stagflation persisted. -
Paul Volcker appointed chairman of Federal Reserve
in hopes that solution to stagflation and stability in international financial markets would be found. -
Inflation at 13.5 and employment at 7.1%
higher than any postwar year. Oil price went up since oil poducing exporting countries had bargaining power. less resources were available for domestic use in the US.