Economists
A)agree that the costs of moderate inflation are small.The increase in unemployment from reducing inflation will be smaller if inflation expectations remain high.
B)agree that the costs of moderate inflation are small.The increase in unemployment from reducing inflation will be larger if inflation expectations remain high.
C)disagree about the costs of moderate inflation.The increase in unemployment from reducing inflation will be smaller if inflation expectations remain high.
D)disagree about the costs of moderate inflation.The increase in unemployment from reducing inflation will be larger if inflation expectations remain high.

Question

Quizplus · Accepted Answer

Economists have differing opinions on the costs of moderate inflation, so option C is not correct. However, it is generally agreed upon that reducing inflation can lead to an increase in unemployment. If inflation expectations remain high, this increase in unemployment will be larger, as people may demand higher wages to compensate for the perceived loss in purchasing power. Therefore, option D is the correct choice. Option A is also incorrect as it implies that economists universally agree on the costs of moderate inflation.