A big advantage of a policy designed to gradually reduce the rate of inflation is that
A)it gives the appearance of a reasoned and steady approach, which is important if inflationary expectations have to be lowered fast
B)the unemployment rate does not increase significantly so there is little political pressure to abandon the policy
C)it has great credibility
D)prices are affected before real output
E)it lowers inflationary expectations faster than the cold turkey approach

Question

Quizplus · Accepted Answer

Gradually reducing the rate of inflation tends to minimize the increase in unemployment, as it allows the economy to adjust more smoothly compared to abrupt changes, thus reducing political pressure to abandon the policy.

A Big Advantage of a Policy Designed to Gradually Reduce