ABSTRACT
Economic policy problems have always been influential in the development of macro theory. Keynes’s theory of aggregate demand, for example, grew out of a response to the Great Depression in the 1930s. Another strong and obvious influence on economic theory is the role played by various wars in enforcing the scientific study of inflation. A concrete example of this is given by the inflationary gap analysis which was undertaken during the Second World War. The inflationary gap is also connected with Keynes and his pamphlet How to Pay for the War (1940). There was, however, a very interesting discussion of the inflationary gap analysis in Sweden at the same time. This discussion was in many respects more sophisticated than the one that was developed in Britain and the US.
