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 involved a tightening of monetary policy which resulted in a substantial negative output gap. This was achieved by raising the federal funds rate to over 20%, which initially slowed the economy and caused a recession, but ultimately led to a reduction in inflation from 10% to 1.9%. Therefore, all of the above statements are true.

By the Time Paul Volcker Took Office as the New