In the 1920s, for instance, the stimulative effects of cheap money were used by Republican administrations to mask the adverse consequences of their high protectionist tariffs. As we shall find later in this subsection, such tariffs have a strong depressive impact on export industries. The authorities found it politically expedient to attempt to counteract this impact by ensuring that U. S. dollars would be cheaply available to foreign as well as domestic buyers.

Similarly, the stimulative effect of inflation upon wages helps to minimize discrepancies between wage floors imposed by minimum-wage laws and free-market equilibrium wages, minimizing the unemployment generated by such laws (cf. p. 4.11:32). For this reason, the notion of an inverse relationship between inflation and unemployment was popular for a long time, and inflation was even touted as a "cure" for unemployment. This approach, of course, would treat the symptoms of the latter disease while myopically overlooking its cause. The inverse-relationship theory has fallen into disfavor since the "stagflation" of the 1970s, when the U. S. economy featured soaring prices and high unemployment simultaneously.