What do many economists think contributed to the greater than 13% inflation rates experienced by the United States in the 1980s?
A) The Fed was inflexible in its rule of 3% growth.
B) The Fed did not do enough to increase money supply.
C) The Fed overstimulated the economy with too much money in the 1970s.
D) The Fed did not react to the oil shocks of the 1970s.

Question

Quizplus · Accepted Answer

Many economists believe that the Federal Reserve overstimulated the economy with too much money in the 1970s, which led to the inflation rates experienced in the 1980s. This was due to the Fed's policies of accommodating inflation and expansionary monetary policy during the 1970s, which led to excessive growth in the money supply and aggregate demand. This, coupled with supply shocks such as the oil crisis, led to high inflation rates in the 1980s. The Fed's policies during the 1970s are widely regarded as the key contributor to the inflationary pressures of the 1980s.

What Do Many Economists Think Contributed to the Greater Than