Answer to Question #309008 in Microeconomics for Kinza Tariq

Question

ment of these rates over this period more closely resemble those of the 1970s or those of the 1950s and 1960s?

Answer 1

These rates were so high in the years mentioned above because of the inflation that happened. High inflation led to a high amount of money floating in the economy. Therefore, to reduce the inflation rates, high interest rates and tax rates were employed in the economy to enable the government to reduce the money circulating in the economy. This is the reason behind the high rates in the economy.