In which of the following situations is a program to reduce inflation likely to have the lowest 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

A program to reduce inflation is likely to have the lowest costs when the sacrifice ratio is low and the reduction is expected, as this implies that less output is lost per percentage point reduction in inflation and that economic agents can adjust their expectations and behaviors accordingly.

In Which of the Following Situations Is a Program to Reduce