In the 1960s,the U.S.experienced ongoing inflation.What was the main cause of this inflation?
A) The economy's self-correcting mechanism was allowed to operate.
B) The Federal Reserve maintained an output target.
C) The Federal Reserve increased the money supply in response to positive demand shocks.
D) The Federal Reserve pursued an active monetary policy.
E) The Federal Reserve increased the money supply in response to negative demand shocks.

Question

Quizplus · Accepted Answer

The main cause of inflation in the 1960s was the Federal Reserve's decision to increase the money supply in response to positive demand shocks. This led to an increase in aggregate demand, which in turn led to higher prices and inflation.