In 1979, the Federal Reserve Decided to Tighten Monetary Policy

Multiple Choice

In 1979, the Federal Reserve decided to tighten monetary policy in order to reduce inflation, which had risen to double-digit levels. The AD/AS model framework suggests that the short-run effect of this policy was to reduce:

A) output primarily with little change in inflation.
B) inflation primarily with little change in output.
C) both inflation and output.
D) neither inflation nor output.