Question

In what ways is the Volcker disinflation considered a success? In what ways is it considered a failure?

Short answer

The Paul Volcker was the chairman of the Federal Reserve, he was able to reduce the inflation rate down in the $1970$s, which was considered a success.

When unemployment peaked at almost $12$percent. It is regarded as a failure due to the rise in unemployment.

Step-by-step solution

Step 1. Concept of Aggregate demand 

Aggregate demand refers to the economy's overall demand for final goods and services at any one time. The total amount of final goods and services provided into an economy's market in a given period of time is known as aggregate supply.

Step 2. Explanation

When Paul Volcker was the chairman of the Federal Reserve, he was able to reduce the inflation rate down in the $1970$s, which was considered a success. He came with certain austerity policies to get the economy back on track. However, policies were implemented in response to recessions in the $1980$s, when unemployment peaked at almost $12$ percent. It is regarded as a failure due to the rise in unemployment.