Refer to the following figure when answering the next two questions.
Figure 12.11: Change in Inflation by Month (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-Consider Figure 12.11, which shows the change in inflation $( \Delta \pi )$ from 1977 to 1981, by quarter. You are Federal Reserve chairman Volcker and today's date is mid-1977. You suggest the appropriate policy would be to ________. You reevaluate your policy in mid-1979 and conclude that you ________; using the Phillips curve, you see the country is now in ________.
A) lower taxes; failed to tame inflation; debt
B) lower interest rates; failed at taming inflation; a recession
C) raise interest rates; failed in taming inflation; expansion
D) raise interest rates; succeeded in taming inflation; a recession
E) raise taxes; succeeded in taming inflation; debt

Question

Refer to the following figure when answering the next two questions.
Figure 12.11: Change in Inflation by Month  (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-Consider Figure 12.11, which shows the change in inflation $( \Delta \pi )$ from 1977 to 1981, by quarter. You are Federal Reserve chairman Volcker and today's date is mid-1977. You suggest the appropriate policy would be to ________. You reevaluate your policy in mid-1979 and conclude that you ________; using the Phillips curve, you see the country is now in ________.
A) lower taxes; failed to tame inflation; debt 
B) lower interest rates; failed at taming inflation; a recession 
C) raise interest rates; failed in taming inflation; expansion 
D) raise interest rates; succeeded in taming inflation; a recession 
E) raise taxes; succeeded in taming inflation; debt

Quizplus · Accepted Answer

Volcker is known for raising interest rates to combat inflation. By mid-1979, inflation was still high, indicating failure in taming it initially. The Phillips curve suggests that high inflation with low unemployment indicates an expansion.

Refer to the Following Figure When Answering the Next Two (Δπ)( \Delta \pi )(Δπ)

Refer to the Following Figure When Answering the Next Two $( \Delta \pi )$