Question: During the early 1960s, wage and price ‘‘guidelines'' were in place that were supposed to limit the gains in wages to the increase in productivity, hence holding prices almost constant. Since the CPI rose at an average rate of only 1.1% from 1961 through 1964, the program was considered a big success by Kennedy Administration economists.
(A) What were the real reasons inflation was so low in the early 1960s?
(B) The guidelines remained in place under Johnson, but the rate of inflation gradually rose to almost 6%. What factors rendered the guidelines ineffective?