During the late 1960s,real GDP increased,unemployment fell,and the inflation rate started to rise.Which would have been the appropriate federal government policy combination to improve economic performance by lowering the inflation rate?

Question

Quizplus · Accepted Answer

To lower inflation, the appropriate policy combination is to reduce government spending, increase taxes, and decrease the quantity of money. This combination would decrease the aggregate demand, leading to lower prices and lower inflation. Option C is the only combination that includes these three policy options. Increasing government expenditures, decreasing taxes, or increasing the quantity of money would increase aggregate demand, leading to higher prices and inflation. Option E would also increase aggregate demand by increasing government spending and decreasing taxes, which would not help to lower the inflation rate.

During the Late 1960s,real GDP Increased,unemployment Fell,and the Inflation Rate