The cost of inflation reduction is less if people believe that the central bank will really reduce inflation.

Question

Quizplus · Accepted Answer

When people believe that the central bank will effectively reduce inflation, they are more likely to adjust their expectations and behaviors accordingly (e.g., in wage negotiations or price setting), which can make it easier and less costly for the central bank to achieve its inflation reduction goals.

The Cost of Inflation Reduction Is Less If People Believe