Disinflation in the 1980s would have been shorter if:
A) the Fed had more discretionary actions.
B) monetary policy had been more credible.
C) prices had been stickier.
D) the economy had been hit by more real shocks.

Question

Quizplus · Accepted Answer

If monetary policy had been more credible, people would have believed that the Fed was committed to reducing inflation and would have adjusted their expectations accordingly. This would have made it easier for the Fed to achieve its inflation goals and reduce inflation more quickly.

Disinflation in the 1980s Would Have Been Shorter If