If the hypothesis of hysteresis is correct and output is lost even after a period of disinflation, the sacrifice ratio for an economy will:
A) increase.
B) decrease.
C) remain unchanged.
D) be zero.

Question

Quizplus · Accepted Answer

If hysteresis is present, the sacrifice ratio will increase because a larger policy shock will be required to bring output back to its original level after a period of disinflation.

If the Hypothesis of Hysteresis Is Correct and Output Is