Consider the period from 1995 to 1999.The U.S.economy:
A)Experienced the great productivity slowdown
B)Experienced increases in productivity that allowed the Fed the opportunity to raise the inflation rate
C)Experienced increases in productivity that allowed the Fed the opportunity to let the inflation rate fall
D)Saw its potential level of output decrease

Question

Quizplus · Accepted Answer

During the period from 1995 to 1999, the U.S. economy experienced increases in productivity, which allowed the Federal Reserve the opportunity to let the inflation rate fall. This was due to the fact that higher productivity means that firms are able to produce more goods and services with the same amount of inputs, which reduce costs and increase profitability. As a result, firms can afford to lower prices, and the Fed can allow the inflation rate to fall without worrying about reducing economic growth. Therefore, choice C is the best answer.

Consider the Period from 1995 to 1999.The U.S.economy