In a discussion of monetary policy in the United Kingdom, an article in the Econ
ID: 1211950 • Letter: I
Question
In a discussion of monetary policy in the United Kingdom, an article in the Economics magazine, quoted a publication of the British Institute for Economic Affairs as arguing that: "To try to use monetary policy to reduce unemployment when inflation is already above target is playing with fire and could lead us down the road that we followed in the 1970's."
When the author refers to "the road that we followed in the 1970's", he means the period when there was
a.) a silver standard
b.) stagflation
c.) depression
d.) a gold standard
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One risk of trying to reduce unemployment with loose monetary policy is
a.) higher inflation
b.) deflation
c.) commodity price deflation
d.) currency appreciation
Explanation / Answer
B is Correct Stagflation is High Unemployment coincided with High Infaltion.
A is Correct, Reducing Unemployment will increase inflation further which leads to more inflation...