Each of the Following Conditions Will Tend to Reduce the Sacrifice

question 49

Multiple Choice

Each of the following conditions will tend to reduce the sacrifice ratio except when:

• A) workers and firms set wages and prices based on rational expectations.
• B) policymakers make credible commitments to policy changes.
• C) announcements of policy changes are made before workers and firms have formed expectations.
• D) the concept of hysteresis accurately describes the impact of history on the natural rate of unemployment.

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