Some Countries Have Had High Inflation for a Long Time

question 89

Multiple Choice

Some countries have had high inflation for a long time. Others have had low or moderate inflation for a long time. Which statement, at least in theory, could explain why some countries would continue to have high inflation?

• A) High-inflation countries have relatively small sacrifice ratios and so see no need to reduce inflation.
• B) Inflation reduction works best when it is unexpected, and people in high-inflation countries would quickly anticipate any change in monetary policy.
• C) In a country where inflation has been high for a long time, people are likely to have found ways to limit the costs.
• D) Persistently low inflation has costs in terms of high unemployment.

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Definitions:

Direct Labour

Refers to the wages and salaries of employees who are directly involved in the manufacturing or production process of a company's products.

Direct Materials

The raw materials that can be directly attributed to the production of a product.

Manufacturing Overhead

All production costs other than direct materials and direct labor, including expenses such as maintenance, utilities, and depreciation on manufacturing facilities.

Capital Expenditure Budget

A budget for planning and controlling spending on long-term assets, including buildings, equipment, and technology, intended for future operations.