Which statement BEST explains why the central bank 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, leading the central bank to flirt with monetarism. However, they eventually gave up this approach as it became clear that simply targeting the money supply was not sufficient to control inflation.

Which Statement BEST Explains Why the Central Bank Flirted with Monetarism