If a rapid disinflation has a lower sacrifice ratio than a slow disinflation,then reducing inflation is best accomplished by
A)gradualism.
B)increasing money growth.
C)reducing interest rates.
D)a cold-turkey approach.

Question

Quizplus · Accepted Answer

A rapid disinflation has a lower sacrifice ratio than a slow disinflation. This means that the costs of reducing inflation quickly are lower than the costs of reducing inflation slowly. Therefore, a cold-turkey approach (reducing inflation quickly) is the best choice for reducing inflation. Gradualism (reducing inflation slowly) would result in higher costs and a higher sacrifice ratio. Increasing money growth would actually increase inflation, and reducing interest rates may not be effective in reducing inflation.

If a Rapid Disinflation Has a Lower Sacrifice Ratio Than