In the 1970s, the U.S. economy experienced both inflation and unemployment. This led economists to recognize that
I. stabilization was a much more difficult task than many economists anticipated.
II. the Keynesian doctrine correctly asserts that reducing inflation and unemployment can be addressed by fiscal policies.
III. shifts in aggregate demand could frustrate policymaking efforts whereas shifts in the short-run aggregate supply were more easily addressed.

Question

In the 1970s, the U.S. economy experienced both inflation and unemployment. This led economists to recognize that 
I. stabilization was a much more difficult task than many economists anticipated.
II. the Keynesian doctrine correctly asserts that reducing inflation and unemployment can be addressed by fiscal policies.
III. shifts in aggregate demand could frustrate policymaking efforts whereas shifts in the short-run aggregate supply were more easily addressed.

Quizplus · Accepted Answer

In the 1970s, the U.S. economy faced stagflation, which challenged the Keynesian view that fiscal policy could easily manage inflation and unemployment. This period highlighted the complexity of stabilization, as both inflation and unemployment rose simultaneously, making it clear that stabilization was more difficult than anticipated.