In which situation is a program to reduce inflation likely to have the highest costs?
A) if the sacrifice ratio is high and the reduction is unexpected
B) if the sacrifice ratio is high and the reduction is expected
C) if the sacrifice ratio is low and the reduction is unexpected
D) if the sacrifice ratio is low and the reduction is expected

Question

Quizplus · Accepted Answer

The sacrifice ratio measures the cost of reducing inflation in terms of lost output or increased unemployment. A high sacrifice ratio implies that reducing inflation will be costly. If the reduction is unexpected, it can lead to more significant disruptions in economic planning and contracts, increasing the costs associated with the inflation reduction program.

In Which Situation Is a Program to Reduce Inflation Likely