On the historical diagram with (Y/YN) on the horizontal axis, the disinflationary loop that began in 1981 contained an unusual movement almost straight downward during ________, attributable to ________.
A) 1983-84, an adverse supply shock
B) 1983-84, renewed disinflationary monetary policy
C) 1985-86, a beneficial supply shock
D) 1985-86, renewed disinflationary monetary policy
E) 1990-91, the catching-up of expected inflation

Question

Quizplus · Accepted Answer

The unusual movement almost straight downward during 1985-86 was due to a beneficial supply shock, such as a significant drop in oil prices, which helped reduce inflation without reducing output.

On the Historical Diagram with (Y/YN) on the Horizontal Axis