Figure 33-8

-In Figure 33-8, which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?
A)A to B to C
B)E to A to B
C)C to D to E
D)D to E to C

Question

Figure 33-8
​ 
-In Figure 33-8, which of the following movements reflects the Fed's anti-inflationary policy of the early 1980s and the following market adjustment?
A)A to B to C 
B)E to A to B 
C)C to D to E 
D)D to E to C

Quizplus · Accepted Answer

The movement from C to D to E reflects the Fed's anti-inflationary policy of the early 1980s and the resulting market adjustment. The Fed raised interest rates to combat inflation, which caused a recession in 1982-1983. This led to a decline in prices (as seen in the movement from C to D) and a subsequent recovery in the economy and stock market (as seen in the movement from D to E).

Figure 33-8 ​

Figure 33-8