The Bank of Canada in 1989 and U.S.Federal Reserve Chairman Paul Volcker in 1979 both successfully used deflationary monetary policy once the short-run Phillips curve had shifted down.

Question

Quizplus · Accepted Answer

Both the Bank of Canada in 1989 and U.S. Federal Reserve Chairman Paul Volcker in 1979 used contractionary (or tight) monetary policy to combat high inflation, not to induce deflation. Their policies aimed to reduce inflation by increasing interest rates, which can slow economic growth but does not necessarily shift the short-run Phillips curve down; instead, it moves the economy along the curve.