Question

In 1971, under President Richard Nixon, the federal government passed legislation that “froze” wages and the prices of consumer items. However, that did little to stop the increase in inflation or unemployment.

What can you infer was behind Nixon's decision to "freeze” wages and prices?

Workers would be willing to be paid less if it would help the economy.
Consumers would buy more if inflation continued to rise.
Inflation affects wages and prices, so freezing those would halt inflation.
Rising inflation would lead to improvements in unemployment.

Answer 1

"Inflation affects wages and prices, so freezing those would halt inflation."

Nixon's wage-and-price freeze was intended to break the wage–price spiral and stop inflationary expectations — i.e., if wages and prices stopped rising, inflation would be checked. The other choices misunderstand the policy or cause–effect: it didn't assume workers would willingly take pay cuts, it wasn't aimed at stimulating consumer buying, nor that rising inflation was desirable because it would reduce unemployment.