How would a permanent reduction in inflation impact shoe leather costs and unemployment?
A) It would permanently reduce shoe leather costs and permanently lower unemployment.
B) It would permanently reduce shoe leather costs and temporarily raise unemployment.
C) It would temporarily reduce shoe leather costs and temporarily lower unemployment.
D) It would temporarily reduce shoe leather costs and permanently raise unemployment.

Question

Quizplus · Accepted Answer

A permanent reduction in inflation would permanently reduce shoe leather costs, as people would not need to go to the bank as often to avoid holding devaluing currency. However, according to the Phillips curve, lower inflation is associated with higher unemployment, but this effect is generally considered temporary as the economy adjusts to the new inflation rate.

How Would a Permanent Reduction in Inflation Impact Shoe Leather