In which situation is a program to reduce inflation likely to have the lowest 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

If the sacrifice ratio is low, it means that reducing inflation will have a smaller cost in terms of output and employment. Additionally, if the reduction is expected, economic agents can adjust their behavior accordingly, minimizing any unwanted effects. Therefore, a program to reduce inflation is likely to have the lowest costs if the sacrifice ratio is low and the reduction is expected.

In Which Situation Is a Program to Reduce Inflation Likely