Which of the following BEST explains why the Fed flirted with monetarism but then gave up?
A)The natural rate hypothesis failed to predict a worsening of the trade-off between inflation and unemployment.
B)A sharp rise in inflation during the 1970s broke the perceived trade-off between inflation and unemployment and discredited traditional Keynesianism.
C)Inflation started dropping off sharply in the 1980s, and this helped bolster the view that targeting the money supply no longer made sense.
D)It finally became evident that there was no longer a trade-off between inflation and unemployment.

Question

Quizplus · Accepted Answer

The sharp rise in inflation during the 1970s broke the perceived trade-off between inflation and unemployment and discredited traditional Keynesianism, which prompted the Fed to flirt with monetarism. However, ultimately they gave up on this approach as it became clear that there was no longer a simple trade-off between inflation and unemployment.

Which of the Following BEST Explains Why the Fed Flirted