The year we are about to end has been very unusual in that it was characterized by one of the most rapid increases in the price level, and by one of the sharpest drops in reported real output in the post-World War II period. In order to understand the view we hold at the Federal Reserve Bank of St. Louis regarding the outlook for 1975, it is necessary to take time to develop, in some detail, the interpretation we apply to the events in 1974.