Economic-growth is contingent on a variety of factors, but the price-level and the level of unemployment are important because the Central-banks gauge these two variables to decide the course of monetary-policy which is responsible for credit-growth and trade-cycles. The relationship between economic-growth and unemployment is crucial because now, every economy tries to minimize unemployment or maximize employment in the process of economic-growth and development. Nonetheless, economists have now accepted prices as the major driving force of economic-growth. They have now acknowledged prices as a sign of economic-activity. In the present paper, we analyzed the effect of prices on the economic-growth and development of the U.S. economy. Almost all the prices in the economy move in the same direction at a time, except bond-prices, even the price of capital and price of labor. During booms, prices rise and in busts, they fall. Prices in the U.S. economy were high during up-cycle and crashed during recession, but interest rates were unexceptionally low, which pushed the economy in the “liquidity-trap,†which is responsible for low spending and low economic-growth. It is suggested that the U.S. economy may go for an internal-devaluation, which means lower-prices and higher demand for both domestic and external economies to achieve full-employment.

1. Acocella, N. (2011). The deflationary bias of exit strategies in the EMU countries. Review of Economic Conditions in Italy, 2-3, 471 - 493.
2. Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82 (6), 1095 - 1117. doi:10.1086/260266
3. Bernake, B. S. (2002). Deflation : Making sure "it" doesn't happen here. Remarks by Governor Ben S. Bernanke Before the National Economists Club, Washington, D.C. Retrieved from <a href=https://www.federalreserve.gov/boarddocs/speeches/2002/20021121/ target="_blank">https://www.federalreserve.gov/boarddocs/speeches/2002/20021121/</a>
4. Bordo, M. D., & Filardo, A. (2005). Deflation and monetary policy in a historical perspective: Remembering the past or being condemned to repeat it? Economic Policy, October 2005, 799 - 844. doi: 10.3386/w10833
5. Cassel, G. (1967). Capital and income in the money economy. The Theory of Social Economy (pp. 51- 63). New York : Augustus M. Kelley.
6. Domar, E. D. (1946). Capital expansion, rate of growth, and employment. Econometrica, 14 (2), 137 - 147. doi: 10.2307/1905364
7. Erber, G. (2003). The risk of deflation in Germany and the monetary policy of the ECB : Corporate disclosure in a global age : Next steps. CESifo Forum, 4 (3), 24 - 39.
8. Goodhart, C., & Hofmann, B. (2004). Deflation - current and historical perspectives. Cambridge : Cambridge University Press.
9. Green, J. R., Mas - Colell, A., & Whinston, M. (1995). Microeconomic theory. New York : Oxford University Press.
10. Hangemann, H., (2009). Solow's 1956 contribution in the context of the Harrod-Domar model. History of Political Economy, 41(Suppl 1), 67 - 87. doi:10.1215/00182702-2009-017.
11. Harrod, R. F. (1939). An essay in dynamic theory. The Economic Journal, 49(193), 14 -33.
12. Hough, L. (1955). An asset influence in the labor market. Journal of Political Economy, 63(3), 202 - 215.
13. International Monetary Fund. (2003). Deflation: Determinants, risks, and policy options - Findings of an independent task force. Washington D. C. : IMF.
14. International Monetary Fund. (2006). World economic outlook : Globalization and inflation. Washington D. C. : IMF.
15. Issing, O. (2002). The euro after four years: Is there a risk of deflation? 16th European Finance Convention, London, Europäische Zentralbank, Frankfurt am Main.
16. Kalecki, M. (1944). Professor pigou on the "classical stationary state" : A comment. The Economic Journal, 54(213), 131 - 132. doi:10.2307/2959845
17. Kamin, S. B., Marazzi, M., & Schindler, J. W. (2004). Is China "exporting deflation" ? (International Finance Discussion Papers No. 791). Washington D. C. : Board of Governors of the Federal Reserve System.
18. Krugman, P. R. (1998). Its Baaaaack: Japan's slump and the return of the liquidity trap. Brookings Papers on Economic Activity, 2, 137 - 205.
19. Krugman, P. R. (2009). The increasing returns revolution in trade and geography. The American Economic Review, 99(3), 561 - 571. doi: 10.1257/aer.99.3.561
20. McCullum, B. T. (1982). The liquidity-trap and the Pigou-effect : A dynamic analysis with rational expectations (NBER Working Paper No. 894).
21. Patinkin, D. (1948). Price flexibility and full employment. The American Economic Review, 38(4), 543 - 564.
22. Pigou, A. C. (1943). The classical stationary state. Economic Journal, 53(212), 343 -351. doi:10.2307/2226394
23. Ricardo, D. (1817). On the principles of political economy and taxation (1 ed.), London : John Murray.
24. Rittenberg, L., & Tregarthen, T. (1996). Principles of microeconomics. Washington, DC : Flat World Knowledge.
25. Sato, R. (1964). The Harrod-Domar model vs. the neo - classical growth model. The Economic Journal, 74 (294), 380 - 387. doi: 10.2307/2228485
26. Scarfe, B. L. (1977). The Harrod model and the 'Knife Edge' problem. Cycles, growth, and inflation : A survey of contemporary macrodynamics (pp. 63 - 66). New York: McGraw-Hill.
27. Solow, R. M. (1994). Perspectives on growth theory. Journal of Economic Perspectives, 8 (1), 45 - 54.doi:10.1257/jep.8.1.45
28. Takami, N. (2011). Managing the loss : How Pigou arrived at the Pigou effect (CHOPE Center Working Paper No. 2011-06). Retrieved from <a href=https://hope.econ.duke.edu/sites/hope.econ.duke.edu/files/takami-pigou-workingpaper1.pdf target="_blank">https://hope.econ.duke.edu/sites/hope.econ.duke.edu/files/takami-pigou-workingpaper1.pdf</a>
29. Tobin, J. (1975). Keynesian models of recession and depression. American Economic Review Papers and Proceedings, 75(2), 195-202.