Question

Effects of Inflation

When were T-bill rates at their highest over the period from 1926 through 2017? Why do you think they were so high during this period? What relationship underlies your answer?

Answer 1

The periods of highest inflation in the U.S. occurred after World Wars I and II, and in the 1970s. The lowest inflation, with deflation, was during the Great Depression of the 1930s.

Step-by-step explanation:

The periods of highest inflation in the United States in the twentieth century occurred during the years after World Wars I and II, and in the 1970s. The period of lowest inflation, actually with deflation, was the Great Depression of the 1930s.

During the years after both World Wars I and II, the government had to finance the war efforts, which led to increased government spending and increased demand for goods and services. This surge in demand caused prices to rise. In the 1970s, several factors such as rising oil prices, increased government spending, and wage-price spirals contributed to high inflation.

Deflation is the opposite of inflation. It refers to a decrease in the general price level of goods and services. During the Great Depression of the 1930s, the collapse of the stock market and subsequent economic downturn led to a decrease in consumer spending and a decrease in demand, causing prices to fall.