ABSTRACT
During inflation, quite drastic changes in productivity may often be expected, brought about by the abnormal conditions which are behind an inflationary situation and also by the methods for repressing inflation. A decline in productivity is what usually occurs, as, for instance, in the Scandinavian countries during the first and the second World Wars. This chapter starts by the case of perfect competition and must begin by distinguishing between the two forms of decline in productivity which are different from one another in their duration, or rather, in their expected duration. Firstly there are declines in productivity which are permanent in the sense that when the entrepreneurs first experience them they expect them to continue into the following periods. Then, secondly, the chapter have the temporary declines in productivity, which the entrepreneurs do not expect to continue beyond the period in which they unexpectedly rise.
