In the early 1980s,U.S.economic policy was directed toward reducing inflation.What would you have expected to observe during this short period of time?
A)Inflation fell and unemployment fell.
B)Inflation and unemployment were both unaffected.
C)Inflation fell and unemployment increased.
D)Inflation fell and unemployment was unchanged.

Question

Quizplus · Accepted Answer

When economic policy is directed towards reducing inflation, the central bank typically raises interest rates to lower the amount of money in circulation and reduce demand. This will lead to a decrease in inflation, but it can also lead to increased unemployment as firms reduce their hiring and investment. Therefore, in the early 1980s, one would expect to observe a decrease in inflation and an increase in unemployment.

In the Early 1980s,U