Refer to the Following Figure When Answering the Next Two $( \Delta \pi )$

question 49

Multiple Choice

Refer to the following figure when answering the next two questions.
Figure 12.11: Change in Inflation by Month (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-Consider Figure 12.11, which shows the change in inflation $( \Delta \pi )$ from 1977 to 1981, by quarter. You are Federal Reserve chairman Volcker and today's date is mid-1977. You suggest the appropriate policy would be to ________. You reevaluate your policy in mid-1979 and conclude that you ________; using the Phillips curve, you see the country is now in ________.

• A) lower taxes; failed to tame inflation; debt
• B) lower interest rates; failed at taming inflation; a recession
• C) raise interest rates; failed in taming inflation; expansion
• D) raise interest rates; succeeded in taming inflation; a recession
• E) raise taxes; succeeded in taming inflation; debt

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Definitions:

Journal entry

A record in accounting that documents a business transaction and its impact on the company's accounts, using debits and credits.

Cost of merchandise sold

The total expense incurred by a company to buy or manufacture the goods sold during a given period.

Specific identification inventory costing method

An inventory valuation method where costs are attributed to individual items of inventory, enabling precise matching of costs with revenues when the specific items are sold.

Companies

Legal entities formed by individuals, stockholders, or shareholders, with the purpose of engaging in commercial or industrial activities.