Recent estimates of prices, production, and employment show the worst of all possible worlds—high inflation, declining production, and rising unemployment.

•  The GNP deflator increased at an annual rate of 9.3 percent in the first half of the year.
•  Real GNP declined at an annual rate of 2.3 percent in the second quarter, after an increase of only 1.1 percent in the first.
•  The unemployment rate eased up to 6.0 percent in August, after months at or near 5.6 percent, and is expected to rise further.

These figures call into question one of the basic assumptions underlying decades of policy discussion—that there is an exploitable tradeoff between inflation and production (or unemployment).