Which of the following contributed to high levels of inflation in the 1970s?
i. A Soviet invasion of Afghanistan
ii. Loose monetary policy
iii. A productivity slowdown
A) i only
B) ii only
C) iii only
D) i and iii
E) ii and iii

Question

Quizplus · Accepted Answer

Loose monetary policy, which involved the Federal Reserve keeping interest rates low and expanding the money supply, contributed to high inflation by increasing demand for goods and services. A productivity slowdown in the United States, which meant that the economy was producing less per unit of labor input, also contributed to inflationary pressures. The Soviet invasion of Afghanistan in 1979 had little direct impact on US inflation levels.

Which of the Following Contributed to High Levels of Inflation