Why was inflation so rampant during World War I?

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mkoren eNotes educator| Certified Educator

It is not uncommon for inflation to occur during a war. Because resources have to be allocated for the war effort, shortages of supplies at home become common. This will cause prices to rise. The government also encourages businesses to settle with labor unions during a war. It is important for workers to stay on the job and produce the materials needed for war. These wage increases could also encourage an inflationary period.

During World War I, the government created the National War Labor Board. This group pressured companies to settle with workers. This led to pay increases. Workers agreed not to do anything to interfere with the war effort in exchange for better conditions and pay. The War Industries Board and the Food Administration also regulated the supply of materials. While rationing didn’t have to be used, people voluntarily gave up meat and bread on certain days. There was a shortage of these and other items because the soldiers needed them. Even though business owners agreed to keep prices under control, inflation existed during World War I due to the shortages, the demand for supplies by the military, and the pay increases received by workers.

After World War I, there also was a big period of inflation. Business owners wanted to raise prices, and people wanted to buy items that were unavailable during the war. Business owners agreed to limit price increases during the war, but they agreed to pay the workers more during the war. As a result, businesses raised prices after World War I ended. The demand for products also increased. This led to even higher price increases after the war. After World War I ended, inflation was a major issue for our economy.

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