Policy makers who believe that the costs of inflation are very high will tend to favor which of the following during an inflationary gap?

Question

Quizplus · Accepted Answer

Policy makers who believe that the costs of inflation are very high will tend to favor fiscal and monetary tightness during an inflationary gap. This means they will adopt policies that reduce government spending (fiscal policy) and decrease the money supply (monetary policy) to tackle inflation. This is because they believe that any expansionary policies would worsen inflation and make it harder to control in the long run. Therefore, option B is the best choice.

Policy Makers Who Believe That the Costs of Inflation Are