In 1980,the inflation rate reached about 14 percent.The Federal Reserve __________ interest rates,sending the economy into a(n)__________.When doing so,the Federal Reserve knew this would be the case because of the __________.
A)raised;expansion;Phillips curve
B)raised;recession;Phillips curve
C)raised;recession;Okun relationship
D)decreased;recession;Phillips curve
E)decreased;expansion;Phillips curve

Question

Quizplus · Accepted Answer

The Federal Reserve raised interest rates, which caused a recession. This is because of the Phillips curve, which shows the inverse relationship between unemployment and inflation. By raising interest rates, the Fed was trying to reduce inflation, but this also led to higher unemployment and a recession.

In 1980,the Inflation Rate Reached About 14 Percent