If a central bank is to successfully end a sustained inflation,it is essential that it

Question

Quizplus · Accepted Answer

Inflation is fueled by the expectation that prices will continue to rise, and it becomes a self-fulfilling prophecy. To successfully end inflation, the central bank must change people's expectations of future inflation by implementing policies that demonstrate the bank's commitment to achieving low inflation. This can be achieved by maintaining a stable and predictable monetary policy, communicating effectively with the public, and ensuring accountability and transparency in the central bank's actions. Avoiding a loss in national income or avoiding an increase in unemployment may not be possible while trying to combat inflation, and a "cold-turkey" approach or maintaining a constant sacrifice ratio may not be effective or realistic solutions.

If a Central Bank Is to Successfully End a Sustained