Question

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment and quickly lower their inflation expectations, the sacrifice ratio could be as small as A. 5. B. 4. C. 1. D. 0.

Answer 1

The answer is zero or option D.

Explanation:

Proponents of rational expectations theory argued that, in the most extreme case, if policymakers are credibly committed to reducing inflation and rational people understand that commitment, and quickly lower their inflation expectations, the sacrifice ratio could be as small as 0.