Refer to the Following Figure to Answer the Following Questions

question 8

Multiple Choice

Refer to the following figure to answer the following questions:
-Based on the figure,one could correctly state that

• A) although U.S.inflation was generally higher in the 1970s and 1980s,that situation was reversed in the later years for the European Union.
• B) inflation in both the United States and the European Union was higher in the 1990s than it was in the 1970s and 1980s.
• C) deflation was a problem in the United States and the European Union in the 1990s,but inflation was a problem for both in the 1970s and 1980s.
• D) U.S.and E.U.inflation both tended to be higher in the 1970s and 1980s than in the 1990s.
• E) typically,while the European Union had inflation problems,the United States had deflation problems.

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Definitions:

Discretionary Policy

Economic policies based on judgment decisions by policymakers, as opposed to rules-based policies, to manage the economy.

Policy Tools

Policy tools are mechanisms used by government or monetary authorities to influence the economy, such as interest rates, taxation, and government spending.

Economy's Potential

The economy's potential refers to its maximum productive capacity when resources are fully employed, indicating a state where unemployment is at the natural rate and there is no demand-pull inflation.

Fiscal Policy

Policy made by the government which entails modifying how much it spends and adjusts tax rates to control and affect the economic health of a nation.