By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, the inflation rate exceeded 10%. By the end of 1986 the inflation rate had been brought down to 1.9%. Which of the following is true about the Volcker Disinflation?
A) lower inflation resulted from a tightening of monetary policy
B) by raising the federal funds rate to over 20%, the Federal Reserve stimulated the economy resulting in lower levels of both inflation and the unemployment rate by the early 1980s
C) the unemployment rate was brought down by 1982 but it took longer to reach lower inflation rates
D) all of the above
E) none of the above
A
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We would expect unions to have a more difficult time negotiating higher wages for their members when
A) labor represents a small portion of total costs. B) the product produced makes up a small portion of families' budgets. C) the product produced has several close substitutes. D) there are not good substitutes for labor in the production process.
Suppose an economy’s real GDP is $125 billion in year 1 and $130 billion in year 2. What is the growth rate of its GDP?
What will be an ideal response?