What did the government do to control wartime inflation during World War II?
2 Answers | Add Yours
The main thing that the government did to prevent this was to impose rationing using coupons rather than cash. By doing this, the government prevented people from bidding up the prices of whatever consumer goods were still available. Another thing that the government did was to borrow money. During the war, there were many war bond drives in which the government persuaded the people to lend money to the government. This soaked up much of the money that might otherwise have been the cause of inflation during the war. By reducing the money supply and by making it harder to buy goods using cash, the government prevented inflation.
The continuous increase in the general cost of goods and services over a period of time, usually a year, is defined as inflation. During World War II, economies experienced high levels of inflation. Subsequently, the governments of these countries enacted measures to curb the rising inflation rate.
1. Decreased local production and importation. Governments placed restrictions on the production and importation of some goods, for example, appliances and cars, so as to focus the country's resources on the importation and production of arms and weaponry. They also reduced the number of goods available to consumers, thereby decreasing spending and the money supply in the economy.
2. Imposition of maximum price controls. Governments passed price ceiling laws which stipulated that the price of some items should not pass a stated amount. Suppliers, therefore, lessened their production levels at this stipulated price resulting in shortages of goods and services on the market. This was successful in causing less access to goods and as such lessening the chances of an increased money supply in the economy by way of local consumption.
3. Rationing coupons. The combined effects of the previously listed measures lead to a scarcity of goods in the economy. But governments worsened this problem through the irregular distribution of rationing coupons which were made necessary for purchases as the pricing system was eradicated to ensure money was not utilized in the economy in order to eliminate any further chances of increased inflation.
Join to answer this question
Join a community of thousands of dedicated teachers and students.Join eNotes