In 2011, the Federal Reserve was facing:
A) hyperinflation, which can be reversed only with disinflationary policies.
B) stagflation, a combination of high inflation and high unemployment, which cannot be reversed easily.
C) the deepest recession since the Great Depression combined with rapidly falling prices.
D) a very severe deflation, rare in history, which was experienced only by Japan.

Question

Quizplus · Accepted Answer

The combination of high inflation and high unemployment, known as stagflation, is difficult to reverse as traditional policy tools such as lowering interest rates or increasing government spending may not be effective in combating both issues simultaneously.

In 2011, the Federal Reserve Was Facing