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

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