Suppose policymakers are faced with ending a sustained inflation.They must weigh the future benefits of ________ against the immediate costs of ________.

Question

Quizplus · Accepted Answer

The question indicates that policymakers are trying to end sustained inflation, which means they want to reduce inflation, indicated by option A and D. However, option A only focuses on the immediate cost of administering the policy, and does not mention any future benefits. Therefore, option D is a better choice, as it balances the benefits of lower inflation with the immediate costs of reduced output and higher unemployment. Option B suggests that ending inflation will lead to higher economic growth, but this is not necessarily true, and it is not a direct trade-off with reducing inflation. Option C suggests a trade-off between lower economic growth and lower inflation, but policymakers may prioritize reducing inflation over maintaining a high rate of economic growth. Option E suggests a trade-off between higher real GDP and lower inflation, which also does not directly address the costs of reducing inflation.

Suppose Policymakers Are Faced with Ending a Sustained Inflation