Refer to the following figure when answering the following questions.
Figure 12.9: Change in Inflation by Quarter
-Consider Figure 12.9. You are Federal Reserve chairman Greenspan and today's date is the first quarter of 1999 (1999.1). Given the information you have, using the Phillips curve, to stabilize the economy you would ________ interest rates, risking ________.
A) raise; inflation
B) raise; recession
C) lower; recession
D) lower; higher unemployment
E) Not enough information is given.

Question

Refer to the following figure when answering the following questions.
Figure 12.9: Change in Inflation by Quarter 
-Consider Figure 12.9. You are Federal Reserve chairman Greenspan and today's date is the first quarter of 1999 (1999.1). Given the information you have, using the Phillips curve, to stabilize the economy you would ________ interest rates, risking ________.
A) raise; inflation 
B) raise; recession 
C) lower; recession 
D) lower; higher unemployment 
E) Not enough information is given.

Quizplus · Accepted Answer

Raising interest rates can cool down an overheating economy, potentially reducing inflation but at the risk of slowing economic growth and possibly leading to a recession.

Refer to the Following Figure When Answering the Following Questions