In a recent paper 1/ we examined the relationship between inflation and unemployment and the effect of these upon the poor. The purpose of that study was to suggest that neither a tax increase or a cutback in government spending in FY 1967 is desirable or necessary unless the 3% unemployment level is approached. The logic involves three steps. We cone hided that : 1. The acceleration of inflation may ·be both small and one-time only. There is neither a prior nor empirical justification for believing that price increases will enter a continuing spiral. 2. That further decreases in unemployment are very important to the poort and 3. That inflation hurts the poor only very little. This paper will discuss certain aspects of point 2 and then expand in detail and supplement the arguments underlying point 3. The discussion will be keyed less to the present condition of the economy than was the previous paper.


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