Conclusions : of A at a level that commands a real income of a in terms of general purchasing power so that they set a price Pat = aPt where P what they expect the general price level to be during period t. Suppose they expect the general level of prices to rise at the rate at which it rose in the last period, then

doi:10.4324/9780203814628-82

Chapter

ABSTRACT

Indexing by the sellers of A and B in these circumstances may make the inflationary explosion more certain and more rapid than it would otherwise have been. The rate of such an explosive inflation is bound sooner or later to reach the hyperinflationary heights at which the mere costs of high inflation become intolerable quite apart from the inefficiencies and injustices owing to the fact that the rate of inflation cannot in these circumstances be correctly anticipated.