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15 July, 18:13

The passage suggests that the high inflation in the United States and many European countries in the 1980's differed from inflation elsewhere in which of the following ways? (A) It fit the rational expectations theory of inflation but not the inertia theory of inflation.

(B) It was possible to control without causing a recession.

(C) It was easier to control in those countries by applying tight monetary and fiscal policies than it would have been elsewhere.

(D) It was not caused by workers' and employers' expectations.

(E) It would not necessarily be considered high elsewhere.

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  1. 15 July, 18:33
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    E) It would not necessarily be considered high elsewhere.

    Explanation:

    The US inflation rate during 1979 was 11.26%, during 1980 it was 13.55%, and during 1981 it was 10.33%. These numbers may seem very high for American standards, but they aren't really high once you compare them to other nation's inflation rate.

    For example, if we look at what is happening in two South American countries right now; Currently Venezuela is facing a hyperinflation measured by millions, and Argentina's current inflation rate is around 60%.

    Back in the 1980s, hyperinflation rates were much more common. Argentina, Bolivia, Brazil, Mexico, Peru and Nicaragua, all suffered from hyperinflation (inflation rates in the 1,000s).

    The US dollar is considered a very stable currency, that is why an inflation rate of around 10% was considered extremely high for American standards, but not so high compared to the rest of the world.
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