ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Increase in producer and consumer prices
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Increased unemployment
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High oil prices
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Doubling of the federal deficit
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Detailed explanation-1: -Soaring energy prices fueled a wage-cost price spiral and widespread price hikes across the full spectrum of economic activity. Frequent recessions raised unemployment without cooling inflation. The Federal Reserve focused on propping up growth and was powerless to tame soaring prices.
Detailed explanation-2: -Through this graph of the Phillips Curve, it is quite evident that the inverse relationship between inflation and unemployment is a downward-sloping curve with inflation on the Y-axis and unemployment on the X-axis. In layman’s words, increasing inflation leads to decreasing unemployment and vice versa.
Detailed explanation-3: -Unemployment rates rose, while a combination of price increases and wage stagnation led to a period of economic doldrums known as stagflation. President Nixon tried to alleviate these problems by devaluing the dollar and declaring wage-and price-freezes.
Detailed explanation-4: -The period in the 1970s and extending into the early 1980s referred to as the Great Inflation was a time of rising inflation.