Use the following to answer question 142:
-(Figure: The Great Disinflation) Refer to Figure: The Great Disinflation. In the early 1980s, the inflation rate was beaten down by the Federal Reserve's tight monetary policy. In the short run this policy led to a _____ level of actual output and a _____ rate of unemployment.
A) high; high
B) low; high
C) low; low
D) high; low

Question

Use the following to answer question 142: 
-(Figure: The Great Disinflation) Refer to Figure: The Great Disinflation. In the early 1980s, the inflation rate was beaten down by the Federal Reserve's tight monetary policy. In the short run this policy led to a _____ level of actual output and a _____ rate of unemployment.
A) high; high 
B) low; high 
C) low; low 
D) high; low

Quizplus · Accepted Answer

The figure shows that the tight monetary policy caused a decrease in inflation starting in the early 1980s. This decrease in inflation was accompanied by a decrease in actual output in the short run (as shown by the leftward shift of the Phillips Curve). At the same time, this policy also led to an increase in the rate of unemployment (as shown by the upward movement along the Phillips Curve). Therefore, the best choice is B: low level of actual output and high rate of unemployment.

Use the Following to Answer Question 142