Proponents of rational expectations argue that failing to account for people's revised expectations led to estimates of the sacrifice ratio that were too high.

Question

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Proponents of rational expectations argue that when people have the ability to revise their expectations based on new information, the cost of reducing inflation is lower than previously estimated. This means that estimates of the sacrifice ratio, which measures the short-term cost of reducing inflation, were too high when they did not account for rational expectations.

Proponents of Rational Expectations Argue That Failing to Account for People's