In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap.The Nixon administration rationalized that through a combination of a government spending cuts and a decrease in the money growth rate, it could successfully

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The Nixon administration's goal was to reduce inflation, which was causing an inflationary gap, but they recognized that there would be a trade-off between reducing inflation and increasing unemployment. This is a classic example of the Phillips curve, which shows the inverse relationship between inflation and unemployment. By decreasing the money growth rate and cutting government spending, the administration hoped to shift the economy down along the Phillips curve, reducing inflation but also increasing unemployment.

In the Early 1970s, President Nixon Inherited an Economy That