In which situation does inflation reduction have the lowest cost?
A) when the efforts are credible, so that the sacrifice ratio is low
B) when the efforts are credible, so that the sacrifice ratio is high
C) when the efforts are unexpected, so that the sacrifice ratio is high
D) when the efforts are unexpected, so that the sacrifice ratio is low

Question

Quizplus · Accepted Answer

The cost of reducing inflation is lowest when the efforts to reduce it are credible, leading to a low sacrifice ratio. This means that people and businesses adjust their expectations about future inflation more quickly and with less economic disruption, resulting in a lower cost to the economy.

In Which Situation Does Inflation Reduction Have the Lowest Cost