## Answers

Answer - Option C

Yes , the Fed could have done more and rising inflation to 3 or 4 percent would not have caused much damage to economy in long run.

This statement describes the though of the Keynsian school of economics. As per this some amount of inflation , if the rate is not too high is good for the economy. It leads to easy recovery of amount from debtors , and it prevents the economy from the paradox of thrift and the blockage of amount leading to the decrease in AD. Hence the inflation rate could have been raised a bit by the fed and this would have reduced the unemployment rate without causing much harm to the economy.

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