Under Paul Volcker,the Fed reduced the inflation rate in the early 1980s by more than10 percentage points,causing:
A) unemployment to decrease.
B) housing prices to soar and interest rates to remain high.
C) GDP growth rise to 6% and consumer confidence to grow.
D) a severe recession to take place.

Question

Quizplus · Accepted Answer

The correct answer is D, a severe recession took place. Volcker's policies to combat inflation involved raising interest rates significantly, which led to a sharp reduction in borrowing and spending, resulting in a severe recession in the early 1980s. While inflation was successfully curbed, this came at the cost of a high unemployment rate and a downturn in economic activity. Neither A, B, nor C accurately reflects the outcome of Volcker's policies.

Under Paul Volcker,the Fed Reduced the Inflation Rate in the Early