Question

During the 1970s the federal reserve allowed rapid credit expansion in order to combat unemployment. what was the most likely unintended result of this monetary policy action?

A) A drop in unemployment rates
B) A period of stagflation
C) The Oil Crisis of 1973
D) A period of deflation

Answer 1

the answer is b, a period of stagflation (:

Answer 2

The answer is: B) A period of stagflation

A period of stagflation refers to a situation when high inflation rate happen for a considerably long period along with slow economic growth.

During rapid credit expansion, the amount of money supply that given from the feds to the private sectors would be extremely high. The increasing amount of money circulated in the market would lower the value of its currency, and this is what caused the inflation.