Economic developments in any year are heavily influenced by actions taken in previous years. And the year 1974 was like a hangover, with current performance below potential as a result of previous excesses. Inflation intensified, production declined, and the unemployment rate rose. It was a year characterized by numerous adverse developments as well as one of adjustment following a prolonged expansionary spree beginning in the mid-1960s. Price increases in 1974, which were sizable indeed, resulted, in part, from previous actions which stimulated aggregate demand.