Price Stability and Public Policy

Price stability also implies, in general terms, little or no price movement. Little or no movement is an imprecise criterion. Since the end of the Second World War, however, there have been but two time periods when this criterion can be said to have applied. During the 19521955 (inclusive) time period, annual inflation (consumer prices) did not exceed 0.9 percent, and consumer prices actually declined in 1954 (Council of Economic Advisers [CEA], 1988, p. 291). During that same time period, annual changes in producer prices ranges from 2.2 percent to +1.2 percent (p. 297). The rate of inflation was also quite low from 1958 through 1965, when annual price increases (consumer) did not exceed 1.9 percent (p. 291). Producer prices during that time period ranged from an annual decrease of 0.5 percent to an annual increase of 3.3 percent (p. 297).

Thus, in the contemporary American economy, price stability has co

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the nominal GNP for that year (CEA, 1986, pp. 1, 32). Additionally, there exists a reporting problem, with respect to the budget deficit or surplus. These reporting errors do not apply only the recent years, where data may be reasonably be expected to be incomplete. As examples, consider the data reported for the fiscal 19771980 time period (the Carter Administration years). These data are presented in Table 1, which may be found on the following page. For a single four year time period, reports five and seven years subsequent to the most recent of the four years reported varied by 25.3 percent, with respect to the total budget deficit for the four year period. Such latter day alterations do not lend confidence to the data reported for either current or past years. Unfortunately, the federal government is the only source of the required data. In addressing the question as to what is the magnitude of the federal budget deficit (when it is appropriately measured), determinations must be made as to which, if any, of the adjustments covered in the preceding discussions should be included, when computing budget deficits or surpluses. It is not an easy task. The Federal Budget Deficit & the Rate of Inflation The data em
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Approximate Word count = 4197
Approximate Pages = 17 (250 words per page)

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