image of Introduction

A recovery in economic activity in the developed market economies began in mid-1975 and continued throughout 1976, though with increasing uncertainty as the year advanced. The hesitancy stemmed mainly from the lack of vigour in .fixed investment in the business sector. This reflected the persistence of serious imbalances, both internal and in the international economy. A substantial proportion of productive capacity remained under-utilized, and unemployment rates continued high by historical standards in most industrial countries. The rate at which prices were rising, though appreciably reduced in many countries, also remained uncomfortably high and, in the face of some supply difficulties and various wage negotiations and price determinations that seemed to anticipate further increases in costs, inflation continued to be regarded as the prime challenge to the formulation of economic policy as 1977 opened. As rates of price increase differed markedly from country to country, this internal imbalance was a major influence on the extent of external imbalance, which was not always overcome by currency depreciation, with its adverse impact on domestic costs.

Related Subject(s): Economic and Social Development
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