By the time Paul Volcker took office as the new Federal Reserve chairman in 1979,the inflation rate exceeded 10%.By the end of 1986 the inflation rate had been brought down to 1.9%.Which of the following is true about the Volcker Disinflation?

Question

Quizplus · Accepted Answer

The Volcker Disinflation refers to the period when Paul Volcker was the Federal Reserve chairman and successfully lowered the high inflation rates of the late 1970s and early 1980s. This was achieved through a tightening of monetary policy, which included raising interest rates and reducing the money supply. Option A correctly states that the lower inflation resulted from a tightening of monetary policy, making it the best choice. Option B is incorrect as raising the federal funds rate would have the opposite effect of stimulating the economy. Option C is partly correct in that the unemployment rate was brought down by 1982, but it is not relevant to the question which asks about the cause of lower inflation. Therefore, the correct answer is A.

By the Time Paul Volcker Took Office as the New