Which of the following was a reason for the decline in inflation during the first years of Reagan's presidency?
A) A decline in the value of the dollar on foreign exchange markets
B) The Federal Reserve's decision to raise interest rates on bank loans to an unprecedented level
C) The end of federal health and safety regulations on businesses
D) A substantial decline in the balance-of-trade deficit

Question

Quizplus · Accepted Answer

The Federal Reserve's decision to raise interest rates on bank loans to an unprecedented level helped to decrease inflation by increasing the cost of borrowing and decreasing demand for goods and services. This policy, known as tight monetary policy, was effective in reducing inflation during Reagan's presidency. A, C, and D are not correct as they are not directly related to the decline in inflation.

Which of the Following Was a Reason for the Decline