Correct/Complete Question:
If people's expectations of inflation are formed rationally rather than based on adaptive expectations and if policymakers make a credible policy move to reduce inflation, then the costs of reducing inflation will be ______ traditional estimates of the sacrifice ratio.
A) much higher than
B) much lower than
C) exactly equal to
D) approximately two percent greater than
Answer:
B, much lower than
Step-by-step explanation:
Inflation can be defined as the continuous increase in price of goods and services over a period of time.
Inflation can as much as possible affect the economy of a country or state, etc. This is because if policy makers listen to the rationally formed expectations and opinions of the people to make reduce inflation, it will be much lesser compared to the traditional estimates of the sacrifice ratio.
Cheers.