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Research and Development, Productivity, and Inflation

R & D, through its effects on the rate of productivity increase, can significantly restrain the rate of inflation in the medium and long run. High rates of inflation damage the workings of the price system and impair the efficiency of practically all economic activities, including R & D. Findings suggest that the percentage increase between 1969 and 1979, in total real R & D expenditures, has been exaggerated due to the inadequacy of the gross national product deflator as applied to R & D.