By the Time Paul Volcker Took Office as the New

Multiple Choice

By the time Paul Volcker took office as the new Federal Reserve chairman in 1979,both the inflation and unemployment rates were higher than during most of the 1950s,60s and early 70s.The Federal Reserve implemented an autonomous tightening of monetary policy that resulted in the famous Volker Disinflation which was successful in bringing both problems under control.What would have been a likely result had Mr.Volker conducted an expansionary monetary policy instead?

A) Inflation would have been made worse right away but unemployment would have been permanently lowered.
B) In the long run the unemployment problem would not have been fixed and the inflation problem would have been made much worse.
C) In the short-run both inflation and unemployment would have declined but in the long-run unemployment would have been worse than before the Fed's action.
D) In the short-run both inflation and unemployment would have been made worse but both would have been lowered in the long-run.
E) none of the above