During the 1970s,demand-management policy:

A) continued to be highly successful in curing the economy's economic problems.
B) was found to be highly unsuitable in periods of stagflation such as the decade of the 1970s.
C) was so unsuccessful that economists advised a return to the pre-World War II philosophy of fiscal policy.
D) was unsuccessful because automatic stabilizers no longer influenced the economy.
E) was unsuitable because it affected aggregate supply more than aggregate demand.

Question

Binter Tecson · Accepted Answer

Final Answer : B, Explanation :  Demand-management policy, which relied on manipulating aggregate demand through fiscal and monetary policy, was found to be highly unsuitable in periods of stagflation such as the decade of the 1970s. This was because the policy was unable to address the simultaneous occurrence of high inflation and high unemployment.

Definitions

Learning Objectives

Learning Objectives

Related questions