The government can lower inflation with a low sacrifice ratio if the:
A)money supply is reduced slowly.
B)public has adaptive expectations.
C)short-run aggregate supply schedule is relatively flat.
D)public rationally believe that policymakers are committed to reducing inflation.

Question

Quizplus · Accepted Answer

If the public rationally believes that policymakers are committed to reducing inflation, they will adjust their expectations accordingly, leading to a lower sacrifice ratio as inflation can be reduced with less impact on output and employment.

The Government Can Lower Inflation with a Low Sacrifice Ratio