A permanent reduction in inflation would
A)permanently reduce shoeleather costs and permanently lower unemployment
B)permanently reduce shoeleather costs and temporarily raise unemployment
C)temporarily reduce shoeleather costs and temporarily lower unemployment
D)temporarily reduce shoeleather costs and temporarily raise unemployment

Question

Quizplus · Accepted Answer

A permanent reduction in inflation reduces shoeleather costs permanently because people hold less cash when inflation is high. However, according to the Phillips curve, reducing inflation can temporarily raise unemployment due to the adjustment period in the economy.

A Permanent Reduction in Inflation Would