A supply-side policy to cure stagflation would include
A)Reduced government spending.
B)Reduced government regulation.
C)The purchase of securities in the open market by the Fed.
D)A higher reserve requirement.

Question

Quizplus · Accepted Answer

Stagflation is a situation when inflation rises while economic growth slows down. In this case, a supply-side policy can be effective in dealing with stagflation. A supply-side policy involves reducing government regulations, lowering taxes, encouraging entrepreneurship and innovation, and increasing investment in infrastructure. By doing so, the government can increase the supply of goods and services in the economy, which can help stabilize prices while promoting economic growth. Therefore, option B (reduced government regulation) is the best choice as it can help increase the supply of goods and services and improve the overall economic performance. The other options, such as reduced government spending, the purchase of securities in the open market by the Fed, and a higher reserve requirement, would be more effective in dealing with other economic problems such as inflation, monetary policy, and banking-sector issues, respectively.

A Supply-Side Policy to Cure Stagflation Would Include