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INFLATION: In the 1970s the prices of most things Americans buy more than doubled. Such a general increase in prices is called inflation. Prices of selected goods may increase for reasons unrelated to inflation: the price of fresh lettuce may rise because unseasonably heavy rainfall in California has ruined the lettuce crop, or the price of gasoline may rise if the oil-producing countries set a higher price for oil. During inflation, however, all prices tend …

…put pressure on employers to raise wages, a factor that tends to force up prices still further. Those who lend money expect to be paid back in inflation-adjusted dollars. Retired people want their social security and other pension payments to increase with the cost of living. As inflation continues, people expect it to become even worse and try to compensate for it in advance. The simple expectation of inflation thus helps to keep it going.