A Big Advantage of a Policy Designed to Gradually Reduce

question 33

Multiple Choice

A big advantage of a policy designed to gradually reduce the rate of inflation is that

• A)it gives the appearance of a reasoned and steady approach, which is important if inflationary expectations have to be lowered fast
• B)the unemployment rate does not increase significantly so there is little political pressure to abandon the policy
• C)it has great credibility
• D)prices are affected before real output
• E)it lowers inflationary expectations faster than the cold turkey approach

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Definitions:

Benchmarks

Standard points of reference by which something can be measured or judged, often used for comparison to assess performance or quality.