Following the lifting of price controls that had been implemented in the early 1970s, inflation skyrocketed. Economists' explanations for this acceleration in the price level include
A) the increase in the money supply that also occurred during the early 1970s.
B) increases in the federal government deficit, especially in 1971 and 1972.
C) supply-side shocks in oil and food.
D) the release of inflationary pressures that built up during the period of price controls.
E) All of the above.

Question

Following the lifting of price controls that had been implemented in the early 1970s, inflation skyrocketed.  Economists' explanations for this acceleration in the price level include
A) the increase in the money supply that also occurred during the early 1970s.
B) increases in the federal government deficit, especially in 1971 and 1972.
C) supply-side shocks in oil and food.
D) the release of inflationary pressures that built up during the period of price controls.
E) All of the above.

Quizplus · Accepted Answer

All of the choices provided are valid explanations for the acceleration in the price level following the lifting of price controls. The increase in the money supply, increases in the federal government deficit, supply-side shocks (especially in oil and food), and the release of inflationary pressures that had built up during the period of price controls all contributed to the skyrocketing inflation in the period mentioned.

Following the Lifting of Price Controls That Had Been Implemented