In which of the following situations is a program to reduce inflation likely to have the highest costs?
A)if the sacrifice ratio is high and the reduction is unexpected
B)if the sacrifice ratio is high and the reduction is expected
C)if the sacrifice ratio is low and the reduction is unexpected
D)if the sacrifice ratio is low and the reduction is expected

Question

Quizplus · Accepted Answer

A high sacrifice ratio means that reducing inflation will come at a high cost to economic output and employment. If the reduction is also unexpected, it may lead to additional costs due to market volatility and uncertainty. Therefore, reducing inflation in a situation with a high sacrifice ratio and unexpected reduction is likely to have the highest costs.

In Which of the Following Situations Is a Program to Reduce