Some countries have had high inflation for a long time. Others have had low or moderate inflation for a long time. Which statement, at least in theory, could explain why some countries would continue to have high inflation?
A) High-inflation countries have relatively small sacrifice ratios and so see no need to reduce inflation.
B) Inflation reduction works best when it is unexpected, and people in high-inflation countries would quickly anticipate any change in monetary policy.
C) In a country where inflation has been high for a long time, people are likely to have found ways to limit the costs.
D) Persistently low inflation has costs in terms of high unemployment.

Question

Quizplus · Accepted Answer

In countries where inflation has been high for a long time, people may have adapted to it and found ways to limit the costs. This can create a cycle where high inflation persists because there is no urgency to reduce it.

Some Countries Have Had High Inflation for a Long Time