Which BEST describes U.S.economic conditions in the 1980s?
A) Deflation occurred because the Fed reacted too much to AD shocks.
B) High inflation occurred because the Fed reacted too little to AD shocks.
C) High real growth occurred because of the deliberate actions of the Fed.
D) Disinflation occurred because of the deliberate actions of the Fed.

Question

Quizplus · Accepted Answer

High inflation was a major economic problem in the 1970s, and disinflation was needed to reduce inflation in the 1980s. The Fed, under the leadership of Paul Volcker, pursued a deliberate policy of tight monetary policy to combat inflation, leading to a recession in the early 1980s. This policy was successful in reducing inflation to more manageable levels, but it also led to high interest rates and slowed economic growth. Therefore, option D, "Disinflation occurred because of the deliberate actions of the Fed," is the best choice that describes the economic conditions in the 1980s.

Which BEST Describes U.S.economic Conditions in the 1980s