Why has the Fed made low inflation a major goal in recent decades?
A)Because high inflation rates reduce the tax revenues collected by the federal government
B)Because they wish to avoid the rapid and sustained price increases that occurred during the 1970s
C)Because Congress passed a law in 1981 mandating the Fed to reduce the inflation rate to 2%
D)Because high inflation rates increase the value of the dollar and make U.S. goods less competitive in foreign markets

Question

Quizplus · Accepted Answer

The Fed made low inflation a major goal in recent decades because they wish to avoid the rapid and sustained price increases that occurred during the 1970s. High inflation rates can decrease consumer confidence and purchasing power, leading to an economic downturn. Additionally, inflation erodes the value of savings and fixed-income investments, leading to hardships for savers and retirees.

Why Has the Fed Made Low Inflation a Major Goal