In the Late 1970s, Oil Prices Rose Sharply and at the Same

Multiple Choice

In the late 1970s, oil prices rose sharply and at the same time, U.S. policymakers pursued expansionary fiscal and monetary policies. As a result, real GDP stayed at potential output, while the implicit price deflator jumped 8.1%. If the Fed's goal was to reduce inflation, which of the following would also occur?

A) An increase in unemployment and a decrease in interest rates
B) A decrease in unemployment and an increase in interest rates
C) An increase in unemployment and an increase in interest rates
D) A decrease in unemployment and a decrease in interest rates