If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation, the short-run Phillips curve will remain far to the
A)left, and the sacrifice ratio will be low.
B)left, and the sacrifice ratio will be high.
C)right, and the sacrifice ratio will be low.
D)right, and the sacrifice ratio will be high.

Question

Quizplus · Accepted Answer

In countries with persistently high inflation, skepticism about efforts to reduce inflation can lead to higher wage demands and less willingness to accept lower inflation, which keeps the short-run Phillips curve to the right. This situation implies that reducing inflation would require significant economic sacrifices, such as higher unemployment or reduced economic output, hence a high sacrifice ratio.

If People in Countries That Have Had Persistently High Inflation