In response to a rapid deceleration in the growth rate of nominal GDP in the early 1980s,
A)inflation declined slowly,thus giving empirical support to the proponents of the adaptive expectations approach.
B)inflation declined slower than the deceleration in nominal GDP and real output actually declined.
C)inflation declined slower than the deceleration in nominal GDP and the output ratio actually declined.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

All the statements correctly describe the economic conditions of the early 1980s, where inflation declined but at a slower pace compared to the deceleration in nominal GDP, and there was a decline in real output or the output ratio, supporting the adaptive expectations approach.

In Response to a Rapid Deceleration in the Growth Rate