Most economists consider the case for jawboning to control inflation is strongest when this policy is used:
A) for an extended period of time.
B) in combination with a credible threat against a firm's profits.
C) by a president who has no credible threat against a firm's profits.
D) to increase the minimum wage.

Question

Quizplus · Accepted Answer

Using jawboning to control inflation is most effective when it is combined with a credible threat against a firm's profits. This is because when firms believe that their profits are at risk, they are more likely to take the jawboning seriously and adjust their pricing behavior accordingly. Additionally, using a credible threat increases the perceived potential cost of disobedience, which strengthens the effectiveness of the policy.

Most Economists Consider the Case for Jawboning to Control Inflation