[Solved] In the Early 1970s, President Nixon Inherited an Economy That

Question 35
Multiple Choice

In the early 1970s, President Nixon inherited an economy that was operating with an inflationary gap. As suggested by the Phillips curve hypothesis, policy makers instituted a combination of contractionary fiscal and monetary policies to eliminate the output gap. Which of the following occurred as a result?

A) The policies moved the economy from the stagflation phase to the Phillips phase.
B) The policies successfully reduced inflation and increased unemployment.
C) The outcome suggested by the Phillips phase did not occur, instead unemployment rose with virtually no change in inflation.
D) The policies moved the economy from a recovery phase to a stagflation phase.

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