In order to reduce the high inflation of the late 1970s, Paul Volcker
A) increased the growth of the money supply, thereby decreasing interest rates.
B) decreased the growth of the money supply, thereby decreasing interest rates.
C) decreased the growth of the money supply, thereby increasing interest rates.
D) increased the growth of the money supply, thereby increasing interest rates.

Question

Quizplus · Accepted Answer

Paul Volcker decreased the growth of the money supply, which reduced the availability of credit and increased the demand for money. This decreased the inflation rate, but also increased interest rates. This was known as the "tight money" policy.

In Order to Reduce the High Inflation of the Late